Regulatory Alerts2025-01-01
Circular No. 35: Results of the National Risk Assessment for Money Laundering and Terrorist Financing
The Central Bank of Bahrain issued Circular No. 35 to present the results of the 2017-2023 National Risk Assessment for Money Laundering and Terrorist Financing. The assessment determines that the overall national risk for both Money Laundering and Terrorist Financing is Low to Medium, driven by low inherent vulnerabilities in the financial sector and specific threat profiles. The document details risk ratings for 11 supervised sectors, noting that the financial sector remains Low to Medium risk while highlighting emerging threats such as increased electronic fraud.
Results of the National Risk Assessment for Money Laundering and Terrorist Financing
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The following summarizes the results of the National Risk Assessment for Money Laundering and Terrorist Financing for the State of Bahrain:
Article One: Summary of Money Laundering Risk Assessment Results at the National Level.
Money Laundering Threats in the State of Bahrain (Assessed as Low to Medium): It should be noted that these are generic threats, and the following table assesses the specific threats to the underlying sectors:
| Sector | Details | Sector Risk Assessment |
|---|---|---|
| Sectors | Details | Sector Risk Assessment |
| High Risk Sectors (at least): Real estate, embezzlement, fraud, bribery, corruption, poor banking practices, poor credit management, and insider trading. | High | High |
| High Risk Sectors: Underlying sectors with high volume and value transactions, including: securities and futures, precious metals and stones, dealers in precious metals and stones, dealers in cars, dealers in art, dealers in antiques, and dealers in high-value goods. | High | High |
| High Risk Sectors: Entities subject to high-volume transactions, including: banks, insurance companies, investment companies, securities companies, money exchange companies, and payment institutions. | High | High |
| Fraud | Fraud is a fundamental element in deception (a common and significant risk), and fraud is less common in the public sector. | Low |
| Credit Misuse | Credit misuse in the banking sector is related to its operations. | Low |
It should be noted that the overall national risk assessment for Money Laundering (National Level: Low to Medium) is influenced by two main factors: The first is the low risk assessment for the underlying sectors (National Level: Low to Medium), which contributes to lowering the overall Money Laundering risk assessment for the 11 sectors detailed below. The second factor is the reliance on the overall national Money Laundering risk assessment (National Level: Low to Medium).
An important observation: The threat of electronic fraud has increased, especially since the beginning of 2024, which has not yet been reflected in the National Risk Assessment covering the period 2017-2023.
Results of the National Risk Assessment for Money Laundering and Terrorist Financing
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Article Two: Summary of Money Laundering Risk Assessment Results at the Sectoral Level.
The assessment of Money Laundering risks for each sector is based on threat levels, vulnerability, and inherent risk:
Article Three: Summary of Money Laundering Risk Assessment Results for the Financial Sector.
The Money Laundering risk assessment in the Financial Sector (Assessed as Low to Medium) includes the following: (Assessed as Low to Medium for entities subject to mandatory supervision, and Low to Medium for entities subject to voluntary supervision).
This is based on the results of Money Laundering threat assessments in this sector (Assessed as Low to Medium for entities subject to mandatory supervision, and Low to Medium for entities subject to voluntary supervision), alongside the assessment of vulnerabilities to Money Laundering in the supervised sector (Assessed as Low).
The overall and inherent vulnerabilities in the supervised sectors are assessed as follows:
| Sector | Inherent Vulnerability | Overall Vulnerability | Risk Assessment |
|---|---|---|---|
| Supervised Entities | Low | Low | Low to Medium |
| Mandatory Supervised Entities | Low | Low | Low to Medium |
| Voluntary Supervised Entities | Low | Low | Low to Medium |
| Insurance Sector | Low | Low | Low to Medium |
| Real Estate Sector | Low | Low | Low to Medium |
| Precious Metals and Stones Dealers | Low | Low | Low to Medium |
| Dealers in Art and Antiques | Low | Low | Low to Medium |
| Real Estate Agents | Low | Low | Low to Medium |
| Real Estate Companies and Property Management | Low | Low | Low to Medium |
Article Four: Summary of Terrorist Financing Risk Assessment Results at the National Level.
The assessment of the risk of Terrorist Financing at the National Level (Assessed as Low to Medium) indicates that Terrorist Financing Threats in the State of Bahrain are assessed as (Low to Medium).
The following are the specific Terrorist Financing Threats:
| Sector | Details | Risk Assessment |
|---|---|---|
| High Risk Sectors | Entities with high volume and value transactions. | Low to Medium |
| High Risk Sectors | Entities with low volume and value transactions. | Low to Medium |
| High Risk Sectors | Terrorist entities. | Low to Medium |
The assessment of vulnerabilities to Terrorist Financing at the National Level (Assessed as Low to Medium) is a result of the reliance on the overall national Terrorist Financing risk assessment (Assessed as Low to Medium). Furthermore, the overall vulnerability assessment for the underlying sectors is assessed as (Low to Medium).
Article Five: Summary of Terrorist Financing Risk Assessment Results at the Sectoral Level.
The results of the Terrorist Financing risk assessment for sectors range from "Low" to "Low to Medium", according to the following:
| Sector | Inherent Vulnerability | Overall Vulnerability | Risk Assessment |
|---|---|---|---|
| Financial Sector | Low to Medium | Low to Medium | Low to Medium |
| Non-Financial Sector | Low to Medium | Low to Medium | Low to Medium |
| Insurance Sector | Low | Low | Low to Medium |
| Public Sector | Low | Low | Low to Medium |
| Securities (Securities Market) | Low | Low | Low to Medium |
| Precious Metals | Low | Low | Low to Medium |
| Precious Stones | Low | Low | Low to Medium |
| Dealers in Art and Antiques | Low to Medium | Low | Low to Medium |
| Real Estate Agents | Low to Medium | Low | Low to Medium |
| Real Estate Sector | Low to Medium | Low | Low to Medium |
| Real Estate Companies | Low | Low | Low to Medium |
Results of the National Risk Assessment for Money Laundering and Terrorist Financing
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The following clarifies the criteria for assessing Terrorist Financing threats for supervised entities:
| Supervised Entity | Threats Related to Terrorist Financing (Assessed as Low to Medium) |
|---|---|
| Threats | Assessment |
| Threats related to Terrorist Financing in the State (Low to Medium) | Low to Medium |
| Threats related to Terrorist Financing on the Global Level (Low to Medium) | Low to Medium |
| Threats related to Domestic and Foreign Factors (Low to Medium) | Low to Medium |
| Domestic Factors (especially the Sector) on Existing Entities | Low to Medium |
| Foreign Factors (especially the Sector) on Existing Entities | Low to Medium |
| Some Entities with Terrorist Financing Threats at the National Level (Low to Medium) | Low to Medium |
| Terrorist Financing Threats Issued on the National Level (Low to Medium) | Low to Medium |
| Terrorist Financing Threats Received on the National Level (Low to Medium) | Low to Medium |
| Terrorist Financing Threats Transiting through the National Level (Not Existing) | Low to Medium |
The assessment of overall vulnerabilities to Terrorist Financing in the supervised sector (Assessed as Low to Medium) is based on the following criteria:
| Supervised Entity | Criteria / Sector Turnover | Assessment |
|---|---|---|
| Supervised Entities | Criteria | Assessment |
| Supervised Entities | Sector Turnover | Low to Medium |
| Supervised Entities | Issued National Regulations on Entities | Low to Medium |
| Supervised Entities | Issued/Received Regulations on Foreign Locations (Mostly Existing) | Low to Medium |
| Supervised Entities | Received National Regulations on Entities | Low to Medium |
| Supervised Entities | Received National Regulations on Foreign Locations (Mostly Existing) | Low to Medium |
| Supervised Entities | Sector File | Low to Medium |
| Supervised Entities | Global Value of Transactions | High |
| Supervised Entities | Misuse of Ownership and Transactions and Other Means | Low to Medium |
| Supervised Entities | Suitability/Effectiveness for Terrorist Financing | Low to Medium |
Results of the National Risk Assessment for Money Laundering and Terrorist Financing
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| Supervised Entity | Criteria / Sector Turnover | Assessment |
|---|---|---|
| Supervised Entities | Sector Turnover | Low to Medium |
| Supervised Entities | Issued National Regulations on Entities | Low to Medium |
| Supervised Entities | Issued/Received Regulations on Foreign Locations (Mostly Existing) | Low to Medium |
| Supervised Entities | Received National Regulations on Entities | Low to Medium |
| Supervised Entities | Received National Regulations on Foreign Locations (Mostly Existing) | Low to Medium |
| Supervised Entities | Sector File | Low to Medium |
| Supervised Entities | Global Value of Transactions | High |
| Supervised Entities | Misuse of Ownership and Transactions and Other Means | Low to Medium |
| Supervised Entities | Suitability/Effectiveness for Terrorist Financing | Low to Medium |