Capital Market Service Providers Must Implement Risk-Based Approach to Combat Money Laundering and Terrorist Financing
Strengthening Efforts Against Money Laundering and Terrorist Financing
The Central Bank of Bahrain has introduced new regulations requiring capital market service providers (CMSPs) to implement a risk-based approach (RBA) in their anti-money laundering (AML) and combating of financial crime (CFT) programs. This move aims to strengthen efforts against money laundering (ML) and terrorist financing (TF).
Risk-Based Approach
The RBA is designed to facilitate CMSPs in allocating their resources and internal structures to manage and mitigate ML/TF risks. It also provides an assessment of the threats and vulnerabilities of a CMSP from being used as a conduit for ML/TF activities.
Assessment of ML/TF Risks
CMSPs are required to have certain processes in place when assessing ML/TF risks, including:
- Documenting risk assessments and findings
- Considering all relevant risk factors before determining the level of overall risk profile
- Keeping the assessment up-to-date through periodic reviews
Additionally, CMSPs must conduct additional risk assessments as may be required by the Central Bank of Bahrain. These may include expanding relevant risk factors or increasing the frequency of reviews.
Customer Risk Assessment
CMSPs must implement and maintain appropriate policies and procedures to conduct risk assessments of customers during the establishment of business relationships and throughout the course of those relationships.
Key Risk Factors
The regulations emphasize the importance of establishing an appropriate set of risk factors that take into account:
- Country risks
- Customer risks
- Products and services risks
- Delivery and distribution channel risks
Compliance Deadline
CMSPs must comply with these new regulations by [insert deadline]. Failure to do so may result in penalties and fines. The Central Bank of Bahrain will closely monitor CMSPs’ compliance with these regulations and take necessary actions to ensure that they meet the required standards.
Training Program
In related news, the Central Bank of Bahrain has launched a training program for CMSPs to enhance their knowledge and skills in AML/CFT compliance. The program is designed to help CMSPs understand the new regulations and implement effective risk-based approaches to combat ML/TF activities.
By implementing these regulations, CMSPs can prevent the misuse of financial systems for ML/TF purposes and protect the integrity of the financial sector.