Financial Crime World

Title: Bahrain’s New Law against Financial Crimes: Stricter Penalties for Unlicensed Activities

By Saad Al Doseri, s.aldoseri@tamimi.com

January 2015

Bahrain’s financial services sector has a strong reputation for its regulatory framework that supports business growth and fosters investors’ trust. The Central Bank of Bahrain (CBB) meticulously supervises this sector, establishing a transparent and stable market. However, unlicensed financial activities have presented a challenge. A new law, which introduces stricter penalties for such activities, has recently been enacted. Below are the key impacts and insights regarding this legislative change.

Background

  • Bahrain’s regulatory framework in the financial sector
  • Renowned reputation for transparency and stability
  • Challenges posed by unlicensed financial activities
  • Central Bank of Bahrain’s supervision

Unauthorized Activities

  • Article 40 of the Central Bank of Bahrain and Financial Institutions Law No. 64/2006
  • Prohibition against conducting regulated services without a CBB license
  • Previous voidance of unlicensed financial services contracts

New Penalties

  • Criminalization of unlicensed activities
  • Prohibition against receiving third party funds for investments, management etc
  • Severe penalties, including imprisonment and fines up to double the amount of monies involved

Offender’s Leeway

  • Chance to avoid heavy penalties via early settlements
  • Returning the funds might prevent punishment

Comparison with Previous Law

  • Article 161 of the CBB Law
  • Previous fine-only penalty for unlicensed financial activities
  • Questions regarding which law the court will apply
  • Strictest punishment taking priority due to new law’s heavier penalties

Implications

  • Criminal offenses with potential imprisonment
  • Protecting investors and boosting confidence
  • Directors of corporate entities not discouraged from performing duties

Conclusion

Bahrain’s new law concerning financial crimes signifies a determined effort to preserve transparency and stability in the financial markets. By establishing criminal liability and making unlicensed activities a specific crime, Bahrain strengthens its regulatory framework and reinforces investor confidence.