Financial Crime World

Central Bank of Bahrain Rulebook Volume 1: Conventional Banks

Risk-Based Approach

The Central Bank of Bahrain’s Rulebook emphasizes the importance of a risk-based approach in managing and mitigating Money Laundering/ Terrorist Financing (ML/TF) risks. This involves identifying, assessing, monitoring, managing, and mitigating ML/TF risks that a conventional bank licensee is exposed to.

Key Requirements

  • A conventional bank licensee must ensure that it takes measures to identify, assess, monitor, manage, and mitigate ML/TF risks.
  • The risk assessment must be properly documented, regularly updated, and communicated to senior management.
  • The licensee must consider quantitative and qualitative information from internal and external sources, including national risk assessments, crime statistics, typologies, risk indicators, red flags, and guidance issued by inter-governmental organizations.

Risk Assessment Categories

The rulebook identifies four key risk categories:

Country/Geographic Risk

  • The nature and complexity of business activities
  • Corporate governance arrangements
  • Products and services offered
  • Distribution channels used

Customer/Investor Risk

  • The nature and complexity of business activities
  • Corporate governance arrangements
  • Products and services offered
  • Distribution channels used

Product/Service/Transactions Risk

  • The nature and complexity of business activities
  • Corporate governance arrangements
  • Products and services offered
  • Distribution channels used

Distribution Channel Risk

  • The nature and complexity of business activities
  • Corporate governance arrangements
  • Products and services offered
  • Distribution channels used

Additional Requirements

  • A conventional bank licensee must assess country/geographic area risk, customer/investor risk, product/service/transactions risk, and distribution channel risk.
  • The risk assessment programme should consider individual or collective risk categories, including country/geographic risk, customer/investor risk, product/service/transactions risk, and distribution channel risk.