Verification of Identity and Source of Funds

Verification of Third Parties

Anonymous and Nominee Accounts

Timing of Verification

Companies under Formation

New Arrivals

Incomplete Customer Due Diligence

Non-Resident Accounts

Natural Persons

Legal Entities or Legal Arrangements (such as trusts)

FC-1.3.1

Enhanced customer due diligence must be performed on those customers identified as having a higher risk profile, and additional inquiries made or information obtained in respect of those customers.

FC-1.3.2

Licensees should examine, as far as reasonably possible, the background and purpose of all complex, unusual large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. Where the risks of money laundering or terrorist financing are higher, licensees should conduct enhanced CDD measures, consistent with the risks identified. In particular, they should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious. The additional inquiries or information referred to in Paragraph FC-1.3.1 include:

FC-1.3.3

In addition to the general rule contained in Paragraph FC-1.3.1 above, special care is required in the circumstances specified in Sections FC-1.4 to FC-1.9 inclusive.

FC-1.3.4

Additional enhanced due diligence measures for non-resident account holders may include the following:

FC-1.4.1

Conventional bank licensees must establish specific procedures for verifying customer identity where no face-to-face contact takes place.

FC-1.4.2

Where no face-to-face contact takes place, conventional bank licensees must take additional measures (to those specified in Section FC-1.2), in order to mitigate the potentially higher risk associated with such business. In particular, conventional bank licensees must take measures:

FC-1.4.3

There are a number of checks that can provide a conventional bank licensee with a reasonable degree of assurance as to the authenticity of the applicant. They include:

FC-1.4.4

Financial services provided using digital channels or internet pose greater challenges for customer identification and AML/CFT purposes. Conventional bank licensees must identify and assess the money laundering or terrorist financing risks relevant to any new technology or channel and establish procedures to prevent the misuse of technological developments in money laundering or terrorist financing schemes. Specifically, licensees which provide electronic and internet banking services to their customers, must establish systems or programmes to monitor, detect and highlight unusual transactions. The risk assessments must be consistent with the requirements in Section FC-C-2.

FC-1.4.5

Conventional bank licensees must identify and assess the money laundering or terrorist financing risks that may arise in relation to:

FC-1.4.6

For purposes of Paragraph FC-1.4.5, such a risk assessment consistent with the requirements in Section FC-C.2 and must take place prior to the launch of the new products, business practices or the use of new or developing technologies. Conventional bank licensees must take appropriate measures to manage and mitigate those risks.

Enhanced Monitoring

Licensee’s digital ID applications

Overseas branches

FC-1.5.1

Conventional bank licensees must have appropriate risk management systems to determine whether a customer or beneficial owner is a Politically Exposed Person ('PEP'), both at the time of establishing business relations and thereafter on a periodic basis. Conventional bank licensees must utilise publicly available databases and information to establish whether a customer is a PEP.

FC-1.5.2

Conventional bank licensees must establish a client acceptance policy with regard to PEPs, taking into account the reputational and other risks involved. Senior management approval must be obtained before a PEP is accepted as a customer. Licensees must not accept a non-Bahraini PEP as a customer based on customer due diligence undertaken using digital ID applications.

FC-1.5.3

Where an existing customer is a PEP, or subsequently becomes a PEP, enhanced monitoring and customer due diligence measures must include:

FC-1.5.3A

In cases of higher risk business relationships with such persons, mentioned in Paragraph FC-1.5.1, conventional bank licensees must apply, at a minimum, the measures referred to in (b), (d) and (e) of Paragraph FC-1.5.3.

FC-1.5.3B

The requirements for all types of PEP must also apply to family or close associates of such PEPs.

FC-1.5.3C

For the purpose of Paragraph FC-1.5.3B, 'family' means spouse, father, mother, sons, daughters, sisters and brothers. 'Associates' are persons associated with a PEP whether such association is due to the person being an employee or partner of the PEP or of a firm represented or owned by the PEP, or family links or otherwise.

FC-1.5.4

[This Paragraph was deleted in July 2016 and the definition moved to the Glossary under Part B.]

FC-1.6.1

Financial services must not be provided to charitable funds and religious, sporting, social, cooperative and professional and other societies, until an original certificate authenticated by the relevant Ministry confirming the identities of those purporting to act on their behalf (and authorising them to obtain the said service) has been obtained.

FC-1.6.1A

For the purpose of Paragraph FC-1.6.1, for clubs and societies registered with the Ministry of Youth and Sport Affairs, conventional bank licensees must contact the Ministry to clarify whether the account may be opened in accordance with the rules of the Ministry. In addition, in the case of sport associations registered with the Bahrain Olympic Committee (BOC), conventional bank licensees must contact BOC to clarify whether the account may be opened in accordance with the rules of BOC.

FC-1.6.2

Conventional bank licensees are reminded that clubs and societies registered with the Ministry of Youth and Sport Affairs may only have one account with banks in Bahrain.

FC-1.6.2A

Pursuant to Article (20) of the Consolidated Financial Regulations for Sports Clubs issued in 2005, Conventional bank licensees must not change or open additional bank accounts for Clubs and Youth Centres without obtaining the prior approval of the Ministry of Youth and Sport Affairs.

FC-1.6.3

Charities should be subject to enhanced transaction monitoring by banks. Conventional bank licensees should develop a profile of anticipated account activity (in terms of payee countries and recipient organisations in particular).

FC-1.6.4

Conventional bank licensees must provide a monthly report of all payments and transfers of BD3,000 (or equivalent in foreign currencies) and above, from accounts held by charities registered in Bahrain. The report must be submitted to the CBB's Compliance Directorate Unit (see FC-5.3 for contact address), giving details of the amount transferred, account name, number and beneficiary name account and bank details. Conventional bank licensees must ensure that such transfers are in accordance with the spending plans of the charity (in terms of amount, recipient and country).

FC-1.6.5

Article 20 of Decree Law No. 21 of 1989 (issuing the Law of Social and Cultural Societies and Clubs and Private Organizations Operating in the Area of Youth and Sport and Private Institutions) provides that Conventional bank licensees must not accept or process any incoming or outgoing fund transfers in any form (wire transfer, cheques, etc.) from or to any foreign association on behalf of charity and non-profit organisations, societies and clubs licensed by the Ministry of Labour and Social Development or the Ministry of Youth and Sport Affairs without the prior approval of the relevant Ministry.

FC-1.6.6

The receipt of a Ministry letter mentioned in FC-1.6.5 above does not exempt the concerned bank from conducting normal CDD measures as outlined in other parts of this Module.

FC-1.7.1

Where conventional bank licensees receive pooled funds managed by professional intermediaries (such as investment and pension fund managers, stockbrokers and lawyers or authorised money transferors), they must apply CDD measures contained in Section FC-1.9 to the professional intermediary. In addition, conventional bank licensees must verify the identity of the beneficial owners of the funds where required as shown in Paragraphs FC-1.7.2 or FC-1.7.3 below.

FC-1.7.2

Where funds pooled in an account are not co-mingled (i.e. where there are 'sub-accounts' attributable to each beneficiary), all beneficial owners must be identified by the conventional bank licensee, and their identity verified in accordance with the requirements in Section FC-1.2.

FC-1.7.3

For accounts held by intermediaries resident in Bahrain, where such funds are co-mingled, the conventional bank licensee must make a reasonable effort (in the context of the nature and amount of the funds received) to look beyond the intermediary and determine the identity of the beneficial owners or underlying clients, particularly where funds are banked and then transferred onward to other financial institutions (e.g. in the case of accounts held on behalf of authorised money transferors). Where, however, the intermediary is subject to equivalent regulatory and money laundering regulation and procedures (and, in particular, is subject to the same due diligence standards in respect of its client base) the CBB will not insist upon all beneficial owners being identified provided the conventional bank licensee has undertaken reasonable measures to determine that the intermediary has engaged in a sound customer due diligence process, consistent with the requirements in Section FC-1.8.

FC-1.7.4

For accounts held by intermediaries from foreign jurisdictions, the intermediary must be subject to requirements to combat money laundering and terrorist financing consistent with the FATF Recommendations and the intermediary must be supervised for compliance with those requirements. The bank must obtain documentary evidence to support the case for not carrying out customer due diligence measures beyond identifying the intermediary. The bank must satisfy itself that the intermediary has identified the underlying beneficiaries and has the systems and controls to allocate the assets in the pooled accounts to the relevant beneficiaries. The due diligence process contained in Section FC-1.8 must be followed.

FC-1.7.5

Where the intermediary is not empowered to provide the required information on beneficial owners (e.g. lawyers bound by professional confidentiality rules) or where the intermediary is not subject to the same due diligence standards referred to above, a bank must not permit the intermediary to open an account or allow the account to continue to operate, unless specific permission has been obtained in writing from the CBB.

FC-1.8.1

Conventional bank licensees which intend to act as correspondent banks must gather sufficient information (e.g. through a questionnaire) about their respondent banks to understand the nature of the respondent's business. Factors to consider to provide assurance that satisfactory measures are in place at the respondent bank include:

FC-1.8.2

Conventional bank licensees must implement the following additional measures, prior to opening a correspondent banking relationship:

FC-1.8.3

Conventional bank licensees must refuse to enter into or continue a correspondent banking relationship with a bank incorporated in a jurisdiction in which it has no physical presence and which is unaffiliated with a regulated financial group (i.e. 'shell banks', see Section FC-1.10). Banks must pay particular attention when entering into or continuing relationships with respondent banks located in jurisdictions that have poor KYC standards or have been identified by the FATF as being 'non-cooperative' in the fight against money laundering/terrorist financing.

FC-1.9.1

A conventional bank licensee may only accept customers introduced to it by other financial institutions or intermediaries, if it has satisfied itself that the financial institution or intermediary concerned is subject to FATF-equivalent measures and customer due diligence measures. Where conventional bank licensees delegate part of the customer due diligence measures to another financial institution or intermediary, the responsibility for meeting the requirements of Chapters 1 and 2 remains with the conventional bank licensee, not the third party.

FC-1.9.2

Conventional bank licensees may only accept introduced business if all of the following conditions are satisfied:

FC-1.9.3

The conventional bank licensee must perform periodic reviews ensuring that any introducer on which it relies is in compliance with the FATF Recommendations. Where the introducer is resident in another jurisdiction, the conventional bank licensee must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF Recommendations.

FC-1.9.4

Should the conventional bank licensee not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, the licensee must conduct its own customer due diligence on introduced business, or not accept further introductions, or discontinue the business relationship with the introducer.

FC-1.10.1

Conventional bank licensees must not establish business relations with banks, which have no physical presence or 'mind and management' in the jurisdiction in which they are licensed and which is unaffiliated with a regulated financial group ('shell banks'). Banks must not knowingly establish relations with banks that have relations with shell banks.

FC-1.10.2

Conventional bank licensees must make a suspicious transaction report to the Anti-Money Laundering Unit and the Compliance Directorate if they are approached by a shell bank or an institution they suspect of being a shell bank.

FC-1.10A.1

The cross-border movement of cash funds warrants special attention under the FATF Recommendations where transactions are large in value (Recommendation 12), in addition to the general requirement under Recommendation 32 to verify monitor, declare and keep records of all cross-border transfers of cash. Cash shipments are therefore subject to inspection and investigation procedures by the Customs Directorate of the Kingdom of Bahrain. There are also certain specific legal measures mentioned below which are relevant to cross-border cash shipments. Under Article 4 of Decree Law No. 4 of 2001, licensees of the CBB are required to comply with the CBB's Rules and Regulations concerning the prevention and prohibition of money laundering, which include regulations concerning the cross-border movement of cash. Also, licensees' attention is drawn to the disclosure provisions of Decree Law No 54 of 2006 and Ministerial Order No 6 of 2008 with respect to cross-border transportation of funds (see Part B of the Rulebook for Decree Law No 54). Licensees are also reminded of the rules of the unified customs arrangements of the Gulf Cooperation Council as laid out in Decree Law No 10 of 2002. With respect to the above Law No. 4 of 2001 and the concerned parts of other legislation mentioned above, all money changers must implement the enhanced measures below in respect of all cash received from foreign countries or sold/transferred to foreign countries.

FC-1.10A.2

Cash coming into Bahrain via courier (whether a representative of a Bahrain money changer or a foreign institution) must be accompanied by original documentation stating the source of funds and identity of the originator of the funds. Furthermore, the documentation must state the full name and address of the beneficiary of the funds. This documentation must be signed in original by (a representative) of the originator of the cash. This means that where a courier is importing cash via any customs point of entry (e.g. via the Causeway or the Airport), the aforementioned courier must carry original documentation which clearly shows the source of funds and identity of the originator of the funds and the intended beneficiaries' names and address.

FC-1.10A.3

In the case of incoming cash, the courier must carry original documentation signed by the originator stating whether the cash shipment is for local use or for onward transmission.

FC-1.10A.4

If the imported cash is for onward transmission, the original documentation must provide the full name and address of the final beneficiaries, as well as the local recipient (e.g. the bank).

FC-1.10A.5

Failure to provide complete and detailed original signed documentation by the originator of the funds referred to in Paragraph FC-1.10A.2 may cause the cash shipment to be blocked, whereupon the blocking costs will be borne by the concerned money changer in Bahrain. Licensees are also reminded of the penalties and enforcement measures in Law No. 4 of 2001, Decree Law No. 54 of 2006, Ministerial Order No. 7 of 2001 issued by the Minister of Finance and National Economy, the rules of the unified customs arrangements of the Gulf Cooperation Council as laid out in Decree Law No. 10 of 2002 and the CBB Law No. 64 of 2006.

FC-1.11.1

Conventional bank licensees may apply simplified customer due diligence measures, as described in Paragraphs FC-1.11.2 to FC-1.11.7, if:

FC-1.11.2

For customers falling under categories a-f specified in Paragraph FC-1.11.1, the information required under Paragraph FC-1.2.1 (for natural persons) or FC-1.2.7 (for legal entities or legal arrangements such as trusts) must be obtained. However, the verification and certification requirements in Paragraphs FC-1.2.3 and FC-1.2.8, and the due diligence requirements in Paragraph FC-1.2.11, may be dispensed with. Where the account is a correspondent banking relationship, enhanced due diligence applies. Refer to Section FC-1.8.

FC-1.11.3

[This Paragraph was deleted in July 2018.]

FC-1.11.4

Conventional bank licensees wishing to apply simplified due diligence measures as allowed for under Paragraph FC-1.11.1 must retain documentary evidence supporting their categorisation of the customer.

FC-1.11.5

Examples of such documentary evidence may include a printout from a regulator's website, confirming the licensed status of an institution, and internal papers attesting to a review of the AML/CFT measures applied in a jurisdiction.

FC-1.11.6

Conventional bank licensees may use authenticated SWIFT messages as a basis for confirmation of the identity of a financial institution under FC-1.11.1 (d) and (e) where it is dealing as principal. For customers coming under Paragraph FC-1.11.1 (d) and (e), conventional bank licensees must also obtain and retain a written statement from the parent institution of the subsidiary concerned, confirming that the subsidiary is subject to the same AML/CFT measures as its parent.

FC-1.11.7

Simplified customer due diligence measures must not be applied where a conventional bank licensee knows, suspects, or has reason to suspect, that the applicant is engaged in money laundering or terrorism financing or that the transaction is carried out on behalf of another person engaged in money laundering or terrorism financing.

FC-1.11.7A

Simplified customer due diligence measures must not be applied in situations where the licensee has identified high ML/TF/PF risks.

FC-1.11.8

[This Paragraph was deleted in July 2018.]

General Requirements

Face to Face Business

Non Face To Face Business and Technologies

FC-1.13.1

Licensees are permitted to rely on third parties to perform elements of CDD measures and recordkeeping requirements stipulated in Chapter FC-1 related to customer and beneficial owner identity, verification of their identity and information on the purpose and intended nature of the business relationship with the licensee, subject to complying with the below:

FC-1.13.2

Where a licensee relies on a third-party that is part of the same financial group, the licensee can consider that:

FC-1.13.3

This Section does not apply to outsourcing or agency arrangements in which the outsourced entity applies the CDD measures on behalf of the delegating licensee, in accordance with its procedures.