EN-7 EN-7 Investigations
EN-7.1 EN-7.1 Legal source
EN-7.1.1
Article 82 of the BMA Decree — Law No. 23 of 1973 ("BMA Law") empowers the Agency to order investigations of licensees, in order to help it assess a licensee's compliance with the provisions of the BMA Law. Such investigations may be carried out either by its own officials or auditors appointed for such a purpose by the Agency. Article 83 requires licensees to make available to the Agency's inspectors its books and other records, and to provide all relevant information within the time limits deemed reasonable by the inspectors.
EN-7.1.2
Article 87 of the BMA Law provides for criminal sanctions where false or misleading statements are made to the Agency, or an investigation by the Agency is otherwise obstructed (see section EN-10.3).
EN-7.2 EN-7.2 BMA Policy
EN-7.2.1
The BMA uses its own inspectors to undertake on-site examinations of licensees as an integral part of its regular supervisory efforts. In addition, the BMA may commission special investigations of licensees in order to help it assess their compliance with BMA requirements. Such investigations may be carried out either by the BMA's own officials, by duly qualified experts appointed for the purpose by the BMA ("
Appointed Experts "), or a combination of the two.EN-7.2.2
Failure by licensees to cooperate fully with the BMA's inspectors, or to respond to their examination reports within the time limits specified, will be treated as demonstrating a material lack of cooperation with the Agency which will result in other enforcement measures being considered, as described elsewhere in this module.
EN-7.2.3
The BMA may appoint an individual or a firm as an
Appointed Expert . Examples ofAppointed Experts are reporting accountants, lawyers and expert witnesses. The appointment ofAppointed Experts is not necessarily indicative of a contravention of BMA requirements or suspicion of such a contravention. For instance, anAppointed Expert may be commissioned to provide an expert opinion on a technical matter.EN-7.2.4
Appointed Experts report in a form and within a scope defined by the BMA, and are solely responsible to the BMA for the work they undertake in relation to the investigation concerned. The report produced by theAppointed Experts is the property of the BMA (but is usually shared by the BMA with the firm concerned). The cost of theAppointed Experts' work must be borne by the licensee concerned.EN-7.2.5
In selecting an
Appointed Expert , the BMA will take into account the level of fees proposed and aim to limit these to the lowest level consistent with an adequate review of the matters at hand, given the qualifications, track record and independence of the persons concerned. Because the cost of such investigations are met by the licensee, the BMA makes only selective use ofAppointed Experts , when essential to supplement BMA's other supervisory tools and resources.EN-7.2.6
The BMA will not, as a matter of general policy, publicise the appointment of
Appointed Experts , although it reserves the right to do so where this would help achieve its supervisory objectives. Both theAppointed Experts and the BMA are bound to confidentiality provisions restricting the disclosure of confidential information with regards to any such information obtained in the course of the investigation.EN-7.2.7
Unless the Agency otherwise permits, Appointed Experts may not be the same firm appointed as external auditors of the bank.
EN-7.2.8
Compliance by Appointed Experts with the contents of this chapter will not, of itself, constitute a breach of any other duty owed by them to a particular bank (i.e. create a
conflict of interest ).EN-7.2.9
The Agency may commission reports, which require Appointed Experts to review information from another company within the reporting bank's group even where that other company is not itself subject to any Agency requirements.
EN-7.2.10
Banks must provide all relevant information and assistance to Appointed Experts on demand.
EN-7.2.11
The Agency may appoint one or more of its officials to work on the Appointed Experts' team for a particular bank.
EN-7.3 EN-7.3 The required report
EN-7.3.1
The scope of the required report will be determined and detailed by the Agency in the appointment letter. Commissioned Appointed Experts will normally be required to report on one or more of the following aspects of a bank's business:
(a) accounting and other records;(b) internal control systems;(c) returns of information provided to the Agency;(d) operations of certain departments; and/or(e) other matters specified by the Agency.EN-7.3.2
Appointed Experts will be required to form an opinion on whether, during the period examined, the bank is in compliance with the relevant provisions of the BMA Law and the Agency's relevant requirements, as well as other requirements of Bahrain Law and, where relevant, industry best practice locally and/or internationally.
EN-7.3.3
The Appointed Experts report must follow the format set out in Appendix EN 1.
EN-7.3.4
Unless otherwise directed by the Agency or unless the circumstances described in section EN-7.3 apply, the report should be discussed with Board of Directors and/or senior management in advance of it being sent to the Agency.
EN-7.3.5
Where the report is qualified by exception, the report must clearly set out the risks which the bank runs by not correcting the weakness, with an indication of the severity of the weakness should it not be corrected. Appointed Experts will be expected to report on the type, nature and extent of any weaknesses found during their work, as well as the implications of a failure to address and resolve such weaknesses.
EN-7.3.6
If the Appointed Experts conclude, after discussing the matter with the bank, that they will give a negative opinion (as opposed to one qualified by exception) or that the issue of the report will be delayed, they must immediately inform the Agency in writing giving an explanation in this regard.
EN-7.3.7
The report must be completed, dated and submitted, together with any comments by Directors or management (including any proposed timeframe within which the bank has committed to resolving any issues highlighted by the report), to the Agency within the timeframe applicable.
EN-7.4 EN-7.4 Other notifications to the Agency
EN-7.4.1
Appointed Experts must communicate to the Agency, during the conduct of their duties, any reasonable belief or concern they may have that any of the requirements of the Agency, including the criteria for licensing a bank (see Module LR), are not or have not been fulfilled, or that there has been a material loss or there exists a significant risk of material loss in the concerned bank, or that the interests of customers are at risk because of adverse changes in the financial position or in the management or other resources of a bank. Notwithstanding the above, it is primarily the bank's responsibility to report such matters to the Agency.
EN-7.4.2
The Agency recognises that Appointed Experts cannot be expected to be aware of all circumstances which, had they known of them, would have led them to make a communication to the Agency as outlined above. It is only when Appointed Experts, in carrying out their duties, become aware of such a circumstance that they should make detailed inquiries with the above specific duty in mind.
EN-7.4.3
If Appointed Experts decide to communicate directly with the Agency in the circumstances set out in paragraph EN-7.4.1 above, they may wish to consider whether the matter should be reported at an appropriate senior level in the bank at the same time and whether an appropriate senior representative of the bank should be invited to attend the meeting with the Agency.
