Risk-Based Approach to Managing Money Laundering and Terrorist Financing Risks
Summary
The Central Bank of Bahrain requires conventional bank licensees to implement a risk-based approach to managing money laundering (ML) and terrorist financing (TF) risks. This involves identifying, assessing, monitoring, managing, and mitigating ML/TF risks that the licensee is exposed to.
Key Points
Risk Assessment Requirements
- The licensee must ensure that its risk assessment is properly documented, regularly updated, and communicated to senior management.
- The risk assessment should be based on a comprehensive analysis of all relevant information available to the licensee.
Consideration of Internal and External Sources
- The licensee must consider quantitative and qualitative information from internal and external sources to identify, manage, and mitigate ML/TF risks.
- This includes considering factors such as customer behavior, transaction patterns, geographic location, and regulatory requirements.
Risk Categories
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Country/Geographic Risk: The licensee should assess the risk of money laundering or terrorist financing in countries or geographic areas where it operates.
- Factors that may indicate higher risk include:
- Countries or geographic areas identified as not having adequate AML/CFT systems.
- Countries or geographic areas providing funding or support for terrorist activities.
- Factors that may indicate higher risk include:
-
Customer/Investor Risk: The licensee should assess the risk of money laundering or terrorist financing associated with its customers and investors.
- Factors that may indicate higher risk include:
- Proportion of customers identified as high risk.
- Target markets exposed to higher levels of corruption or organized crime.
- Factors that may indicate higher risk include:
-
Product/Service/Transactions Risk: The licensee should assess the risk of money laundering or terrorist financing associated with its products, services, and transactions.
- Factors that may indicate higher risk include:
- Products or services that inherently provide more anonymity.
- Transactions that involve cash-based, face-to-face, non-face-to-face, domestic, or cross-border activities.
- Factors that may indicate higher risk include:
-
Distribution Channel Risk: The licensee should assess the risk of money laundering or terrorist financing associated with its distribution channels and intermediaries.
- Factors that may indicate higher risk include:
- Complexity of transaction chain.
- Types of distributors or intermediaries used.
- Factors that may indicate higher risk include:
Ongoing Review and Updates
- The licensee must review its risk assessment periodically and when circumstances change or relevant new threats emerge.