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Financial Crime Prevention in Islamic Banks: A Guide for Licensees

Scope of Application

This module applies to all Islamic bank licensees, including branches and subsidiaries operating in Bahrain or foreign jurisdictions.

Risk-Based Approach

The Risk-Based Approach (RBA) is a framework for managing Money Laundering (ML) and Terrorist Financing (TF) risks. It involves identifying, assessing, and mitigating these risks through policies, procedures, tools, and systems.

Key Components of the RBA

• Identifying ML/TF risks
• Assessing ML/TF risks
• Mitigating ML/TF risks

Customer Due Diligence (CDD)

Islamic bank licensees must conduct CDD on all customers to:

• Identify and verify their identity
• Assess the risk of ML/TF
• Establish a relationship with them

Benefits of CDD

• Helps prevent ML/TF activities
• Ensures compliance with regulations
• Enhances reputation and trustworthiness

Overseas Subsidiaries and Branches

Licensees must apply the requirements in this module to all branches and subsidiaries operating in foreign jurisdictions, following local standards or higher if necessary.

Key Considerations for Overseas Operations

• Compliance with local regulations
• Implementation of group-wide programs
• Sharing of information within the group

Group-Wide Programs

Financial groups must implement group-wide programs against ML/TF, including policies, procedures, and controls for sharing information within the group.

Benefits of Group-Wide Programs

• Enhances risk management
• Improves compliance with regulations
• Fosters a culture of integrity and transparency