Central Bank of Bahrain Introduces Risk-Based Approach to Combat Financial Crime

The Central Bank of Bahrain has issued a new rulebook volume on anti-money laundering (AML) and combating the financing of terrorism (CFT), aiming to strengthen the country’s financial system against illicit activities.

A New Era in AML/CFT Compliance: The Risk-Based Approach

The Risk-Based Approach (RBA) module, which forms part of the AML/CFT program, requires Capital Market Service Providers (CMSPs) to adopt a risk-based approach to identify, assess, monitor, manage and mitigate money laundering (ML) and terrorist financing (TF) risks.

Key Requirements of the RBA Module

• CMSPs must ensure that their policies and procedures are commensurate with the nature, scale, and complexities of their activities.
• Conduct regular risk assessments to identify potential ML/TF risks associated with:
  • Customers
  • Countries or jurisdictions
  • Products and services
  • Delivery channels
• Consider specific requirements when assessing ML/TF risks, including:
  • Country risk
  • Customer risk (e.g., type of customer, residence, occupation, PEP status)
  • Product risk
  • Delivery channel risk

Strengthening the AML/CFT Framework

The RBA module outlines specific requirements for CMSPs to maintain appropriate policies, controls, and procedures to enable them to manage and mitigate identified risks. This includes:

• Documenting risk assessments and findings
• Conducting periodic reviews
• Providing risk assessment information to the Central Bank of Bahrain

Enhancing Bahrain’s AML/CFT Framework

The introduction of the RBA module is aimed at enhancing Bahrain’s AML/CFT framework, which has been praised by international organizations such as the Financial Action Task Force (FATF). The new regulations are expected to strengthen the country’s financial system against ML/TF risks and improve its compliance with international standards.