Financial Crime World

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Summary

Overview of Risk-Based Approach for Investment Firm Licensees

The Central Bank of Bahrain Rulebook Volume 4: Investment Business (FC: Financial Crime) outlines the requirements for investment firm licensees to conduct risk assessments under a Risk-Based Approach (RBA). The rule emphasizes the importance of identifying, managing, and mitigating Money Laundering/ Terrorism Financing/Proliferation Financing (ML/TF/PF) risks.

Key Points

1. Risk Assessment

Investment firm licensees must assess the following types of risk:

  • Country/geographic risk
  • Customer/investor risk
  • Product/service/transactions risk
  • Distribution channel risk

2. Country/Geographic Risk

The following factors indicate a higher country/geographic risk:

  • Countries with inadequate AML/CFT/CPF systems
  • Terrorist activities
  • Significant corruption or organized crime
  • Weak governance

3. Customer/Investor Risk

Customers in the following categories are considered high-risk:

  • Non-resident customers
  • Companies with nominee shareholders or bearer shares
  • Cash-intensive businesses
  • Customers residing in high-risk jurisdictions

4. Product/Service/Transactions Risk

The overall risk assessment should determine the potential risks presented by product, service, transaction, or delivery channel.

Conclusion

Effective Management of ML/TF/PF Risks

The Central Bank of Bahrain Rulebook emphasizes the importance of a Risk-Based Approach for investment firm licensees to identify and mitigate ML/TF/PF risks. By assessing country/geographic risk, customer/investor risk, product/service/transactions risk, and distribution channel risk, licensees can ensure effective management of these risks and maintain compliance with regulatory requirements.