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  • LR-1A LR-1A Approved Persons

    • LR-1A.1 LR-1A.1 CBB Notification and Approval

      • General Requirement

        • LR-1A.1.1

          Conventional bank licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function in a conventional bank licensee. The approval from the CBB must be obtained by the CBB prior to their appointment (subject to the variations contained in Rule LR-1A.1.3).

          Amended: January 2016
          Added: October 2010

        • LR-1A.1.2

          Controlled functions are those functions occupied by board members and persons in executive positions and include:

          (a) Board Member;
          (b) Chief Executive or General Manager and their Deputies;
          (c) Chief Financial Officer and/or Financial Controller;
          (d) Head of Risk Management;
          (e) Head of Internal Audit;
          (f) Head of Shari'a Review;
          (g) Compliance Officer;
          (h) Money Laundering Reporting Officer;
          (i) Deputy Money Laundering Reporting Officer; and
          (j) Heads of other Functions.
          Amended: January 2016
          Amended: October 2013
          Added: October 2010

        • LR-1A.1.3

          Prior approval is required for all controlled functions in relation to Bahrain operations. Controlled functions (g) and (h) may be combined, however (see also FC-4.1, regarding the MLRO function).

          Amended: January 2014
          Amended: October 2013
          Amended: January 2013
          Added: October 2010

      • Basis for Approval

        • LR-1A.1.4

          Approval under Rule LR-1A.1.1 is only granted by the CBB, if it is satisfied that the person is fit and proper to hold the particular position in the licensee concerned. 'Fit and proper' is determined by the CBB on a case-by-case basis. The definition of 'fit and proper' and associated guidance is provided in Sections LR-1A.2 and LR-1A.3 respectively.

          Added: October 2010

      • Definitions

        • LR-1A.1.5

          Board members collectively are responsible for the business performance and strategy of the conventional bank licensee, as outlined in more details in Section HC-1.2.

          Amended: October 2013
          Added: October 2010

        • LR-1A.1.6

          When taken as a whole, the board of directors of a conventional bank licensee must be able to demonstrate that it has the necessary skills and expertise, as outlined in Paragraph HC-1.2.10.

          Amended: October 2013
          Added: October 2010

        • LR-1A.1.7

          The Chief Executive or General Manager means a person who is responsible for the conduct of the licensee (regardless of actual title). The Chief Executive or General Manager must be resident in Bahrain. The scope of authority of the CEO and his deputies is outlined in more detail in Subparagraph HC-6.3.2 (a).

          Amended: July 2017
          Amended: October 2013
          Added: October 2010

        • LR-1A.1.8

          The head of risk management is responsible for the management and control of all risk exposures arising from the activities of the conventional bank licensee.

          Amended: October 2013
          Added: October 2010

        • LR-1A.1.9

          The head of internal audit is responsible for providing independent and objective review on the adequacy and effectiveness of the holistic internal control environment within the conventional bank licensee. The duties of the head of internal audit are outlined in more detail in Subparagraph HC-6.3.2 (d).

          Amended: October 2013
          Added: October 2010

        • LR-1A.1.9A

          The head of Shari'a review in a conventional bank licensee, dealing with Islamic products and services, is responsible for the examination of the extent of a conventional bank licensee's compliance, in all its activities, with the Shari'a. This examination includes contracts, agreements, policies, products, transactions memorandum and articles of association, financial statements, reports (especially internal audit and central bank inspection), circulars, etc. The objective of the Shari'a review is to ensure that the activities carried out by a conventional bank licensee do not contravene the Shari'a.

          Added: October 2013

      • Compliance Officer

        • LR-1A.1.10

          All banks must appoint a senior member of staff with responsibility for the management of compliance risk as their Compliance Officer/Manager.

          Added: October 2010

        • LR-1A.1.11

          The compliance function must be independent (i.e. it must not be placed in a position where its other duties or responsibilities may cause a conflict of interest with its compliance risk management responsibilities). Therefore the compliance function must be separate from the internal audit function. The compliance officer or manager may however, perform other limited related compliance roles (e.g. the MLRO or legal advisor), subject to the CBB's prior approval.

          Added: October 2010

        • LR-1A.1.12

          The compliance function must have adequate resources to carry out its functions effectively.

          Amended: January 2016
          Added: October 2010

        • LR-1A.1.13

          The bank must also outline how the compliance function fits into the bank's senior management reporting structure, and must give details of relevant reporting lines within the bank.

          Amended: January 2016
          Added: October 2010

        • LR-1A.1.14

          In the case of locally incorporated banks, the compliance officer/manager must have access to the Board of Directors in addition to the senior management.

          Added: October 2010

        • LR-1A.1.15

          Heads of other functions, where risk acquisition or control is involved, are responsible for tracking specific functional performance goals in addition to identifying, managing, and reporting critical organisational issues upstream. Certain functions require dealing directly with clients while others do not. Both categories of functions, however, require specific qualifications and experience to meet the objectives as well as compliance requirements of the conventional bank licensee.

          Amended: October 2013
          Added: October 2010

        • LR-1A.1.16

          Where a firm is in doubt as to whether a function should be considered a controlled function it must discuss the case with the CBB.

          Added: October 2010

      • Prior Approval Requirements and Process

        • LR-1A.1.17

          Conventional bank licensees must obtain CBB's prior written approval before a person is formally appointed to a controlled function; the request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in Form 3, including previous experience, is accurate. Conventional bank licensees must fill in the Application Form 3 (Application for Approved Person status) online, available on the CBB website under E-services/online Forms and must upload scanned copies of supporting documents listed in Paragraph LR-1A.1.18A, unless otherwise directed by the CBB.

          Amended: July 2020
          Amended: January 2016
          Amended: January 2014
          Added: October 2010

        • LR-1A.1.18

          When the request for approved person status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled function is in relation to an existing conventional bank licensee, the Form 3 must be marked for the attention of either the Director, Retail Banks Supervision or the Director, Wholesale Banks Supervision, as appropriate. In the case of the MLRO or DMLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

          Amended: April 2018
          Amended: January 2016
          Added: October 2010

        • LR-1A.1.18A

          When submitting Form 3, conventional bank licensees must ensure that the Form 3 is:

          (a) Submitted to the CBB with a covering letter signed by an authorised representative of the conventional bank licensee, seeking approval for the proposed controlled function;
          (b) Submitted online on the CBB website under E-services/online Forms;
          (c) Submitted with a certified copy of the applicant's passport, certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
          (d) Signed by an authorised representative of the conventional bank licensee and all pages stamped on with the conventional bank licensee's seal.
          Amended: July 2020
          Added: January 2016

        • LR-1A.1.18B

          Conventional bank licensees seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

          Added: January 2016

        • LR-1A-1.18C

          For existing conventional bank licensees applying for the appointment of a Board Director or the Chief Executive/General Manager, the authorised representative should be the Chairman of the Board or a Director signing on behalf of the Board. For all other controlled functions, the authorised representative should be the Chief Executive/General Manager, or a suitably senior representative of the bank.

          Amended: July 2016
          Added: January 2016

        • LR-1A.1.19

          [This Paragraph was deleted in January 2016.]

          Deleted: January 2016
          Added: October 2010

        • LR-1A.1.20

          [This Paragraph was moved to Paragraph LR-1A.1.18B in January 2016.]

          Amended: January 2016
          Amended: July 2012
          Added: October 2010

      • Assessment of Application

        • LR-1A.1.20A

          The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph LR-1A.2.6 and the criteria outlined in Paragraph LR-1A.2.7.

          Added: January 2016

        • LR-1A.1.20B

          For purposes of Paragraph LR-1A.1.20A, conventional bank licensees should give the CBB a reasonable amount of notice in order for an application to be reviewed. The CBB shall respond within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, as well as verifying references and interviewing the applicant. The CBB will advise the conventional bank licensee once the application is considered complete.

          Amended: April 2016
          Added: January 2016

        • LR-1A.1.20C

          The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph LR-1A.2.6 and does not satisfy the CBB criteria in Paragraph LR-1A.2.7. A notice of such refusal is issued by registered mail to the conventional bank licensee concerned, setting out the basis for the decision.

          Added: January 2016

      • Appeal Process

        • LR-1A.1.21

          Conventional bank licensees or the nominated approved persons may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved person status. The CBB shall decide on the appeal and notify the conventional bank licensees of its decision within 30 calendar days from the date of submitting the appeal.

          Amended: January 2016
          Added: October 2010

        • LR-1A.1.21A

          When notification of the CBB's decision to grant a person approved person status is not issued within 15 business days from the date of meeting all required conditions and regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, conventional bank licensees or the nominated approved person may appeal to the Executive Director, Banking Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the conventional bank licensees of its decision within 30 calendar days from the date of submitting the appeal.

          Added: January 2016

      • Notification Requirements and Process

        • LR-1A.1.22

          Conventional bank licensees must immediately notify the CBB when an approved person, for whatever reason, ceases to hold the controlled function for which they have been approved (i.e. transferred to another function within the bank, or to another group entity, or else has resigned, been suspended or dismissed). The notification must include the reasons for the action taken.

          Amended: April 2014
          Added: October 2010

        • LR-1A.1.23

          [Rule moved to Paragraph BR-5.1.17 in April 2014.]

          Amended: April 2014
          Amended: April 2012
          Added: October 2010

        • LR-1A.1.24

          [This Paragraph was deleted in April 2014].

          Deleted: April 2014
          Added: October 2010

        • LR-1A.1.25

          If a controlled function falls vacant, the conventional bank licensee must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the conventional bank licensee must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled function affected. These interim arrangements must be approved by the CBB.

          Added: October 2010

        • LR-1A-1.26

          Conventional bank licensees must immediately notify the CBB should they become aware of information that could reasonably be viewed as calling into question an approved person's compliance with CBB's 'fit and proper' requirement (see LR-1A.2).

          Added: October 2010

    • LR-1A.2 LR-1A.2 Approved Persons Conditions: 'Fit and proper' Requirement

      • LR-1A.2.1

        Conventional bank licensees seeking an approved person authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled function in question.

        Amended: January 2016
        Added: October 2010

      • LR-1A.2.2

        Each applicant applying for approved person status and those individuals occupying approved person positions must comply with the following conditions:

        (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
        (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
        (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
        (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
        (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
        (f) Must have personal integrity, good conduct and reputation;
        (g) Has appropriate professional and other qualifications for the controlled function in question (see Appendix TC-1 in Module TC (Training and Competency)); and
        (h) Has sufficient experience to perform the duties of the controlled function (see Appendix TC-1 in Module TC (Training and Competency)).
        Amended: January 2016
        Added: October 2010

      • LR-1A.2.3

        In assessing the conditions prescribed in Rule LR-1A.2.2, the CBB will take into account the criteria contained in Paragraph LR-1A.2.4. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled function but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled function in one conventional bank licensee may not be considered to have sufficient expertise and experience to undertake nominally the same controlled function but in a much bigger licensee.

        Amended: January 2016
        Added: October 2010

      • LR-1A.2.4

        In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

        (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
        (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
        (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
        (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
        (e) The contravention of any financial services legislation;
        (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
        (g) Dismissal or a request to resign from any office or employment;
        (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
        (i) The extent to which the person has been truthful and open with supervisors; and
        (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.
        Added: January 2016

      • LR-1A.2.5

        With respect to Paragraph LR-1A.2.4, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

        Amended: January 2016
        Added: October 2010

      • LR-1A.2.6

        Approved persons undertaking a controlled function must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking a controlled function (refer to Chapter HC-2).

        Amended: January 2016
        Amended: July 2012
        Added: October 2010

      • LR-1A.2.7

        In determining whether a conflict of interest may arise, factors that may be considered include whether:

        (a) A person has breached any fiduciary obligations to the company or terms of employment;
        (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licensee; and
        (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licensee.
        Amended: January 2016
        Added: October 2010

      • LR-1A.2.8

        Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-5.

        Amended: January 2016
        Amended: July 2012
        Added: October 2010

    • LR-1A.3 LR-1A.3 [This Section was deleted in January 2016.]

      Deleted: January 2016

      • LR-1A.3.1

        [This Paragraph was deleted in January 2016.]

        Deleted: January 2016
        Added: October 2010