Verification of Identity and Source of Funds

Verification of Third Parties

Anonymous and Nominee Accounts

Timing of Verification

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-1.4.1

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, 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, licensees must take measures:

FC-1.4.3

There are a number of checks that can provide a 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. 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. The risk assessments must be consistent with the requirements in Section FC-C.2.

Enhanced Monitoring

Licensee’s digital ID applications

Overseas branches

FC-1.5.1

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

FC-1.5.2

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-1.5.4

[This Paragraph was deleted in July 2016 as the definition is included under Part B in the Glossary.]

FC-1.6.1

Financial services must not be provided to charitable funds and religious, sporting, social, cooperative and professional societies, before 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. Money changers are allowed to conduct business with charities without a certificate where payment is made by a cheque drawn on a bank licensed in Bahrain.

FC-1.6.2

Charities should be subject to enhanced transaction monitoring. Money changers should develop a profile of anticipated activity (in terms of payee countries and recipient organisations in particular).

FC-1.6.3

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

FC-1.6.4

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 money changer licensees and payment service providers must not accept or process any incoming or outgoing fund transfers in any form (wire transfer, drafts, etc.) from or to any foreign person or foreign association on behalf of societies and clubs licensed by the Ministry of Youth and Sport Affairs without prior written approval of the Ministry.

FC-1.6.5

The receipt of a Ministry letter mentioned in Paragraph FC-1.6.4 above does not exempt the concerned money changer from conducting normal CDD measures as outlined in other parts of this Module.

FC-1.7.1

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

FC-1.7.2

Licensees may only accept introduced business if all of the following conditions are satisfied:

FC-1.7.3

The licensee must perform periodic reviews ensuring that any introducer on which it relies is in compliance with the FATF 40 + 9 Recommendations. Where the introducer is resident in another jurisdiction, the licensee must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF 40 + 9 Recommendations.

FC-1.7.4

Should the licensee not be satisfied that the introducer is in compliance with the requirements of the FATF 40 + 9 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-1.8.1

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 are unaffiliated with a regulated financial group ("shell banks"). Licensees must not knowingly establish relations with financial institutions that have relations with shell banks.

FC-1.8.2

Licensees must make a suspicious transaction report to the Financial Intelligence Directorate and the Compliance Directorate if they are approached by a shell bank or an institution they suspect of being a shell bank.

FC-1.9.1

The cross-border movement of cash funds warrants special attention under the FATF 40 Recommendations where transactions are large in value (Recommendation 6), in addition to the general requirement under Recommendation 19 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-1.9.2

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-1.9.3

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-1.9.4

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 money changer).

FC-1.9.5

Failure to provide complete and detailed original signed documentation by the originator of the funds referred to in Paragraph FC-1.9.2 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-1.10.1

Licensees may apply simplified customer due diligence measures, as described in Paragraphs FC-1.10.2 to FC-1.10.7, if:

FC-1.10.2

For customers falling under categories (c) to (g) specified in Paragraph FC-1.10.1, the information required under Paragraph FC-1.2.1 (for natural persons) or FC-1.2.7 (for legal entities) must be obtained. However, the verification, certification and due diligence requirements in Paragraphs FC-1.2.3, FC-1.2.5, FC-1.2.8, FC-1.2.9 and FC-1.2.11, may be dispensed with.

FC-1.10.3

[This Paragraph was deleted in July 2018].

FC-1.10.4

Licensees wishing to apply simplified due diligence measures as allowed for under categories (c) to (g) of Paragraph FC-1.10.1 must retain documentary evidence supporting their categorisation of the customer.

FC-1.10.5

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-1.10.6

Licensees may use authenticated SWIFT messages as a basis for confirmation of the identity of a financial institution under Subparagraphs FC-1.10.1 (d) and (e) where it is dealing as principal. For customers coming under Subparagraphs FC-1.10.1 (d) and (e), 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-1.10.7

Simplified customer due diligence measures must not be applied where a 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-1.10.7A

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

FC-1.10.8

[This Paragraph was deleted in July 2018].

FC-1.11.1

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-1.11.2

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

FC-1.11.3

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.