Financial Crime World

Bahrain’s Financial Sector Faces Challenges in Fight Against Money Laundering

Bahrain: A Major Financial Hub in the Middle East

Bahrain, a remote corner of the world, is a significant financial hub in the Middle East. However, its efforts to combat money laundering and terrorist financing are being hindered by inadequate resources and regulatory frameworks.

Weaknesses in Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT)

According to a recent assessment, Bahrain’s AML/CFT regime is plagued by weaknesses in supervisory resources, coordination mechanisms, and even the criminalization of certain financial activities. The assessment highlights the need for stronger legal frameworks and better enforcement measures to tackle money laundering and terrorist financing.

Challenges in Jurisprudence

As a senior official at the Central Bank of Bahrain notes, “Jurisprudence will need to be created to establish possibilities and boundaries of prosecution.” Courts require positive identification and/or proof of predicate offence, and there is a need to determine the extent of this requirement.

Overview of Bahrain’s Financial Sector

Bahrain’s financial sector consists of:

  • 360 institutions licensed by the Central Bank of Bahrain (BMA)
    • Banks
    • Securities firms
    • Insurance companies
    • Money changers
    • Money brokers

The BMA is responsible for licensing, supervision, and regulation of the financial sector. However, it has been criticized for inadequate resources and a lack of clear guidelines.

National Coordination Mechanisms

Effective communication among major players in the AML/CFT efforts is crucial for effective implementation. As another official at the BMA notes, “We need to work together to address these challenges.”

Financial Sector Categories

Bahrain’s banking system consists of three main categories:

  • Full commercial banks
  • Offshore banking units
  • Investment bank licensees

Commitment to Strengthen AML/CFT Regime

Despite the challenges, Bahrain is committed to strengthening its AML/CFT regime. As a senior official at the BMA notes, “We recognize the importance of strengthening our AML/CFT regime. We are committed to working with international partners to ensure the integrity of our financial sector.”