Bahrain

1. Does Bahrain have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes. The principal AML/CFT law in Bahrain is Legislative Decree no. (4) of 2001 Concerning the Prohibition of and Combating Money Laundering. This law has been amended by Law No. 54 of 2006, which adds a specific prohibition on the financing of terrorist organisations or their members. These laws are supplemented by:

• Order No. 7 of 2001 of the Minister of Finance and National Economy concerning the Institutions’ Obligations in relation to the Prohibition of and Combating Money Laundering,
• Law No. 8 of 2004 with respect to Approving the Accession by the Kingdom of Bahrain to the United Nations Convention against Transnational Organized Crime,
• Legislative Decree no. 26 of 2002 with respect to Approving the Accession to the Treaty of the Islamic Conference Organisation for Combating International Terrorism
• Order No. 126 of 2011 of the Minister of Industry and Commerce promulgating the Obligations related to the Procedures of the Prohibition of and Combating Money Laundering and Terrorism Finance in the Business of the Persons Registered in the Commercial Register, amended by Order no. (6) of 2012
• Legislative Decree no (7) of 2017 approving the Arabian treaty for combating money laundering and terrorism financing

Ministerial Order no. 173 of 2017 Concerning the Obligations related to the Procedures of the Prohibition of and Combating Money Laundering and Terrorism Finance in the Business of the Persons Registered in the Commercial Register and the Audit Registry in the Kingdom of Bahrain as amended by Ministerial order (108) of 2018.

Decree-Law No. (29) of 2020 on Amending some Provisions of Decree-Law No. (4) of 2001 on Anti-Money Laundering/Combating the Financing of Terrorism.

2. To whom does the legislation apply?

Legislative Decree no. (4) of 2001 (as amended) applies to any person in the Kingdom of Bahrain, including companies and other institutions.

3. What does the legislation prohibit?

The law prohibits any dealing in, disposal of, receipt of, possession of, or hiding the source or nature of the proceeds of any criminal activity (as defined in Bahrain or abroad), and equally prohibits assisting a perpetrator to launder money or obstructing an investigation by the relevant authorities.

The amending legislation prohibits the raising, receipt, giving or appropriation of properties, funds or their revenues to or from a group that engages in a terrorist activity, or one of its members, whether based inside or outside the country.

Failing to keep adequate customer due diligence and operations/transactions records or to report knowledge or suspicion of money laundering is also punishable under the law.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

Money laundering is defined in Article 2 of the law, and includes any dealing whatsoever in the proceeds of crime, including the hiding thereof. Proceeds of crime is defined as “money acquired, whether directly or indirectly, in whole or in part, from any criminal activity” (as defined in Bahrain or abroad). Money includes both moveable and immovable, tangible and non-tangible proceeds.

5. What level of intent or knowledge is required to establish a violation?

The perpetrator of money laundering must have known or believed that he/she was dealing in/hiding/failing to report the proceeds of crime, or had reason to know or believe so.

The person engaging in the financing of terrorism must be aware the relevant organisation engages in terrorism, as defined in the law.

6. What are the potential penalties for infringing the legislation?

Pursuant to Article 2.3, a penalty for the crime of money laundering may be imposed even where no conviction has been handed down for the underlying criminal charge (i.e. the crime giving rise to the proceeds).

Any person who commits, attempts to commit, or partners in money laundering shall be sentenced to prison for seven years and to a fine not exceeding BHD 1,000,000. The proceeds of crime shall also be confiscated, and extra penalties are applicable should the perpetrator act through an organized gang, through misusing their powers or authority, or by obscuring the source of the proceeds.

Additionally, any person who assists a perpetrator to commit money laundering shall be sentenced to prison for up to two years and a fine not exceeding BHD 50,000.

Finally, any person who breaches the provisions of the associated ministerial orders and regulations shall be sentenced to prison or to a fine not exceeding BHD 100,000, or both.

If the relevant authorities suspect the proceeds of crime may be disposed of, they may freeze the funds pending investigation by the Court.

Importantly, the law provides that if a person reports the money laundering to the relevant authorities before the latter becomes aware of the same, such person shall be exempt from the above-referenced penalties.

The penalties for engaging in the financing of terrorism (including attempts) are more severe, with a prison term between ten years and life, and a fine of between BHD 100,000 and 500,000.

7. Does the legislation have extra-territorial reach?

Yes. Criminal activity is defined as “any activity constituting a punishable crime whether in the State of Bahrain or in any other country” and as such persons dealing in the proceeds of criminal activity committed abroad may be prosecuted in Bahrain.

The law also provides that the relevant authorities in Bahrain shall co-operate with investigations by foreign countries into money laundering in Bahrain and shall consider money laundering a crime in Bahrain where it is defined as such in ratified international agreements/by the principle of reciprocity.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Yes, all companies or individuals conducting any of the activities listed in Schedule 1 of the law (e.g. brokerage, lending, auditing, advocacy etc) are subject to additional obligations:

• keeping a record of identity documents in each transaction;
• reporting any suspicious transaction to the relevant authorities and assisting in any investigation thereof;
• following all directives, protocols, and regulations which supplement the law and applying policies and internal controls to ensure compliance with the law;
• prohibiting the opening of any fake, confidential or anonymous account.

Additionally, it is prohibited to use the confidentiality of accounts and clients’ identity as a pretext or failing to comply with the law.

9. What are the potential penalties for failing to comply with these obligations?

Imprisonment for a term not exceeding two years and to a fine not exceeding BHD 50,000 (for companies), as well as confiscation of any proceeds.

10. Who are the relevant enforcement authorities in Bahrain and what are their contact details?

The relevant enforcement authority in Bahrain is the Anti-Money Laundering Department of the Ministry of Industry, Commerce and Tourism.

T: +973 171 113 51 / +973 171 113 60 / +973 171 113 38

F: +973 175 508 36

aml_awareness@moic.gov.bh