Q&A: Money Laundering 2024 Bahrain
- What are the main laws governing money laundering in this jurisdiction?
In Bahrain, the primary legislation governing money laundering includes:
Legislative Decree No. 4 of 2001 regarding the Prohibition and Combating of Money Laundering and Terrorism Financing, as amended over time (“AML Law”). Amendments include:
- Law No. 54 of 2006
- Law No. 25 of 2013
- Legislative Decree No. 36 of 2017
- Legislative Decree No. 57 of 2018
- Legislative Decree No. 29 of 2020
Ministerial Order No. 173 of 2017 concerning Obligations related to the Procedures for the Prohibition of and Combating Money Laundering and Terrorism Financing in the Business of Persons Registered in the Commercial Register and the Audit Registry in Bahrain, as amended by Ministerial Order No. 108 of 2018.
- How is money laundering defined?
Money laundering is defined as any act aimed at concealing the illicit origin of funds. This includes disguising or making the proceeds of criminal activity appear legitimate, as well as transferring, converting or using such funds to avoid detection and legal consequences.
- What are the main differences between money laundering legislation in this jurisdiction and that in other major jurisdictions?
Bahrain is recognized as a leader in anti-money laundering practices within the Gulf Cooperation Council (GCC). It adheres to international standards through its full membership in the Financial Action Task Force (FATF) and is a founding member of the regional MENA-FATF, hosting its secretariat. Compared to other major jurisdictions, Bahrain aligns with FATF recommendations but may have specific regulatory nuances and enforcement practices unique to its legal and economic context.
- Are there any specific secondary regulations issued by agencies covering this area?
There are specific secondary regulations issued by the Central Bank of Bahrain (CBB). The CBB’s Rulebook provides detailed guidelines and requirements for financial institutions. In addition, Bahrain has the Financial Intelligence National Centre (FINC) which oversees compliance and enforcement of anti-money laundering regulations.
- Do particular professions and industries have any specific duties to guard against money laundering? Under what laws or regulations are they governed?
Financial Institutions: Governed by AML Law and the CBB Rulebooks.
Real Estate Agents: Governed by Resolution No. 3 of 2019 from the Real Estate Regulatory Authority (RERA) regarding the obligations for anti-money laundering in real estate activities.
Jewelry Dealers: Governed by the AML Law and Ministerial Order No. 173 of 2017 including specific guidelines issued by the Ministry of Industry and Commerce (MOIC).
Legal Professionals: Governed by Ministerial Order No. 14 of 2021 issued by the Ministry of Justice, Islamic Affairs, and Waqf, which outlines AML and combating financing terrorism obligations for legal offices.
Accountants and Auditors: Governed by AML Law.
- What are the penalties for money laundering? Are there any specific penalties for particular professions or industries?
Penalties for money laundering in Bahrain include imprisonment, fines and asset forfeiture. The severity of the penalties varies based on the nature and scale of the offence.
In accordance with the AML Law, penalties for crimes related to terrorism financing and money laundering are stringent. For terrorism-related offenses, individuals can face life imprisonment or at least ten years, plus fines between 100,000 and 500,000 Bahraini Dinars. The same penalties apply for receiving or managing property connected to terrorism. Attempting these crimes incurs the same punishment. Money laundering offenders may be imprisoned for up to seven years and fined up to 1,000,000 Bahraini Dinars. If the crime is committed through an organized group, using institutional power, or to disguise illicit funds as lawful, the minimum prison term is five years and fines no less than 100,000 Bahraini Dinars. Confiscation of property is also mandated. Legal entities are fined and face property confiscation, while minor offences related to these crimes result in imprisonment up to two years or fines up to 50,000 Bahraini Dinars. Violations of regulatory provisions incur up to three months’ imprisonment or fines up to 20,000 Bahraini Dinars. Exemptions from penalties apply for those who report crimes before authorities are aware.
- Are there specific offences for concealing, converting, or transferring criminal property? How is criminal property defined?
Yes, there are specific offences related to concealing, converting or transferring criminal property as outlined in Article 2(2)(b) of the AML Law. These actions are considered money laundering if they are undertaken to make the source of the property appear lawful. The law defines criminal property as any proceeds of crime whose nature, source, location, method of disposal, movement or ownership is concealed. This applies to individuals who know, believe, or have reason to believe that such proceeds were obtained from criminal activities or participation in such crimes.
Criminal property is defined as any asset derived from illegal activities, including funds obtained through crimes such as drug trafficking or fraud.
- What are the most common defences for money laundering?
Common defences against money laundering charges may include demonstrating a lack of knowledge or intent, showing that the accused did not know the funds were criminally derived, or proving adherence to due diligence procedures to prevent involvement in money laundering activities.
- What sort of practical checks would a business be expected to carry out to prove they are not an accomplice to a money laundering offence?
Financial Reports: Ensure audited reports are prepared by licensed auditing firms, especially for those with annual income exceeding 10,000 Bahraini Dinars.
Training: Participate in training programmes related to combating money laundering and terrorist financing.
Due Diligence: Implement robust KYC and due diligence procedures in relation to clients.
- Does the amount involved impact the offence?
Yes, the amount involved can impact the severity of the offence. Larger amounts may lead to more serious charges and penalties, reflecting the higher risk and potential impact of the illicit activity.
- Are specific checks required with businesses based or operating in specific jurisdictions?
Yes, it is mandatory for all legal persons holding CR to avoid dealings and relationships with individuals or entities listed on international or domestic sanction lists. Entities are also required to educate their staff on this subject. Any suspicion related to these individuals or entities must be reported immediately, including any suspicious transactions.
