AU-A.1.1

The executive summary only provides an overview. For detailed rules, reference must be made to the individual Rules outlined in the remainder of this Module.

AU-A.1.2

Module AU sets out the Central Bank of Bahrain's ('CBB's) approach to licensing providers of regulated ancillary services in the Kingdom of Bahrain. It also sets out CBB requirements for approving persons undertaking key functions in those providers.

AU-A.1.3

Licensed providers of regulated ancillary services fall into the following categories: third party administrators, card processing services, operating a credit reference bureau, payment service providers, Shari'a advisory/review services, operating a crowdfunding platform, account information service providers and payment initiation service providers and carrying out services in accordance with the CBB Law. These licensees are referred to as financial sector support institutions under Article (1) of the CBB Law and its amendments.

AU-A.1.4

Regulated ancillary services are defined in Paragraph AU-1.2.1.

AU-A.1.5

Persons undertaking certain functions in relation to ancillary service provider licensees require prior CBB approval. These functions (called 'controlled functions') include members of the board of directors and members of senior management. The controlled functions regime supplements the licensing regime by ensuring that key persons involved in the running of ancillary service provider licensees are fit and proper. Those authorised by the CBB to undertake controlled functions are called approved persons.

AU-A.1.6

The requirements set out in Chapters AU-2 and AU-3 represent the minimum conditions that have to be met in each case, both at the point of authorisation and on an on-going basis thereafter, in order for authorised status to be retained.

AU-A.1.7

This Module contains the CBB's Directive incorporating the relevant Regulations and Resolutions (as amended from time to time) applicable to all ancillary service provider licensees (including their approved persons) regarding authorisation under CBB Rulebook Volume 5: Specialised Licensees and is issued under the powers available to the CBB under Articles 37 to 42, 44 to 48 and 180 of the Central Bank of Bahrain and Financial Institutions Law 2006 and its amendments ('CBB Law'). It includes:

AU-A.1.8

For an explanation of the CBB's rule-making powers and different regulatory instruments, see Section UG-1.1.

AU-A.1.9

Persons wishing to undertake regulated ancillary services are required to be licensed by the CBB as an ancillary service provider licensee.

AU-A.1.10

Ancillary service provider licensees are subject to 8 licensing conditions, mostly specified at a high-level in Module AU, and further expanded in underlying subject Modules (such as Module BR). These licensing conditions are broadly equivalent to the standards applied in other Volumes of the CBB Rulebook, to other license categories, and are consistent with international good practice.

AU-A.1.11

Chapter AU-3 specifies the processes and information requirements that have to be followed for applicants seeking an ancillary service provider license. It also covers the voluntary surrender of a license, or its cancellation by the CBB.

AU-A.2.1

This Module was first issued in April 2016. All subsequent changes to this Module are annotated with the end-calendar quarter date in which the change was made. Chapter UG-3 provides further details on Rulebook maintenance and version control.

AU-A.2.2

A list of recent changes made to this Module is provided below:

AU-A.2.3

This Module supersedes the following provisions contained in circulars or other regulatory instruments:

AU-1.1.1

No person may:

AU-1.1.2

In accordance with Resolution No.(16) for the year 2012 and for the purpose of Subparagraph AU-1.1.1(c), the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration.

AU-1.1.3

Persons in breach of Subparagraph AU-1.1.1(c) are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law (see also Section EN-9.3).

AU-1.1.4

Persons wishing to be licensed to undertake any of the regulated ancillary services within or from the Kingdom of Bahrain must apply in writing to the CBB. An application for a license must be in the form prescribed by the CBB as indicated in Chapter AU-4.

AU-1.1.5

An application for a license must be in the form prescribed by the CBB (Form 1) and must contain:

AU-1.1.6

The CBB will review the application and duly advise the applicant in writing when it has:

AU-1.1.7

Detailed rules and guidance regarding information requirements and processes for license applications can be found in Section AU-4.1. As specified in Paragraph AU-4.1.14, the CBB will provide a formal decision on license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB.

AU-1.1.8

In granting new licenses, the CBB will specify the specific categories of regulated ancillary service for which a license has been granted.

AU-1.1.9

All applicants for ancillary service provider license must satisfy the CBB that they meet, by the date of their license, the minimum conditions for licensing, as specified in Chapter AU-2. Once licensed, licensees must be in compliance with these criteria on an on-going basis.

AU-1.2.1A

Where licensees are undertaking regulated activities in accordance with Shari'a, all transactions and contracts concluded by licensees must comply with Sharia standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). The validity of the contract or transaction is not impacted, if at a later date, the relevant AAOIFI Sharia standards are amended.

AU-1.2.3

While Paragraph AU-1.2.1 covers different activities under regulated ancillary services, only the license itself will specify the list of activities the licensee has been authorised to carry out. For existing ancillary service providers at April 2016, no new license will be issued.

Third Party Administrators (TPAs)

Card Processing

Credit Reference Bureau

Payment Service Provider ("PSP")

Shari'a Advisory/Review Services

Crowdfunding Platform Operator

Account Information Service Provider (AISP)

Payment Initiation Service Provider (PISP)

Insurance Cover

AU-1.3.1

Licensees must obtain the CBB's prior written approval for any person wishing to undertake a controlled function at a licensee. The approval from the CBB must be obtained prior to their appointment.

AU-1.3.2

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

AU-1.3.3

Combination of the above controlled functions is subject to the requirements contained in Module HC.

AU-1.3.4

Approval under Paragraph AU-1.3.1 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 Section AU-3.1.

AU-1.3.5

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. This person is responsible for the conduct of the whole of the firm.

AU-1.3.6

Head of function means a person who exercises major managerial responsibilities, is responsible for a significant business or operating unit, or has senior managerial responsibility for maintaining accounts or other records of the licensee.

AU-1.3.7

Whether a person is a head of function will depend on the facts in each case and is not determined by the presence or absence of the word in their job title. Examples of head of function might include, depending on the scale, nature and complexity of the business, a deputy chief executive; heads of departments such as risk management, compliance or internal audit; the chief financial officer; head of business department, etc..

AU-1.3.8

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

AU-1.3.9

All licensees must designate an employee, of appropriate standing and resident in Bahrain, as compliance officer. The compliance officer must report to senior management and must have access to the board of directors. The duties of the compliance officer include:

AU-2.5.1

Licensees must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. A greater amount of capital than specified in this Section may be required by the CBB on a case-by-case basis.

AU-2.5.2

Where a licensee undertakes more than one activity outlined under Paragraph AU-1.2.1, the licensee must maintain the highest level of core capital required amongst all categories of activities which it provides.

AU-2.5.3

For third party administrators, licensees must maintain a minimum core capital of BD25,000 and adequate liquid funds representing 25% of operating expenses incurred in the preceding financial year at all times in the form of cash or liquid assets that can be converted to cash in the short-term to cover its operating expenses.

AU-2.5.4

For card processing and payment service providers, licensees must maintain a minimum core capital of BD 250,000.

AU-2.5.5

Licensees must maintain a minimum core capital of BD 2 million.

AU-2.5.6

Licensees must maintain a minimum core capital of BD 30,000.

AU-2.5.6A

Licensees must maintain a minimum core capital of BD 25,000.

AU-2.5.6B

Licensees must maintain a minimum core capital of BD 25,000.

AU-2.5.6C

Licensees must maintain a minimum core capital of BD 30,000.

AU-2.5.7

Licensees must maintain sufficient liquid assets to meet their obligations as they fall due in the normal course of their business.

AU-2.8.1

Article 59 of the CBB Law requires that licensees must maintain comprehensive books of accounts and other records, and satisfy the minimum record-keeping requirements contained in Article 60 of the pre-mentioned Law and Module GR. Books of accounts must comply with the financial accounting standards issued by the International Financial Reporting Standards (IFRS)/International Accounting Standards (IAS) or the applicable AAOIFI standards for Islamic licensees.

AU-2.8.2

Articles 58, 111, 114 and 163 of the CBB Law require that licensees and their staff must act in an open and cooperative manner with the CBB. Licensees must meet the regulatory reporting and disclosure requirements contained in Module BR. As per Article 62 of the CBB Law, audited financial statements must be submitted to the CBB within 3 months of the licensee's financial year-end.

AU-2.8.3

Licensees must conduct their activities in a professional and orderly manner, in keeping with good market practice. Licensees must comply with the general standards of business conduct contained in Modules PB and GR.

AU-2.8.4

Licensees must comply with any other specific requirements or restrictions imposed by the CBB on the scope of their license.

AU-2.8.5

Licensees are subject to the provisions of the CBB Law. These include the right of the CBB to impose such terms and conditions, as it may deem necessary when issuing a license, as specified in Article 45 of the CBB Law. Thus, when granting a license, the CBB specifies the regulated ancillary services that the licensee may undertake. Licensees must respect the scope of their license.

AU-2.8.6

In addition, the CBB may impose additional restrictions or requirements, beyond those already specified in Volume 5, to address specific risks. For instance, a license may be granted subject to strict limitations on intra-group transactions.

AU-3.2.6

The CBB shall review and assess the application for approved person status to ensure that it satisfies all the conditions required in Paragraph AU-3.1.3 and the criteria outlined in Paragraph AU-3.1.5

AU-3.2.7

For purposes of Paragraph AU-3.2.6, 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 regulatory requirements, including but not limited to receiving the application complete with all the required information and documents, as well as verifying references.

AU-3.2.8

The CBB reserves the right to refuse an application for approved person status if it does not satisfy the conditions provided for in Paragraph AU-3.1.3 and does not satisfy the CBB criteria in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to the licensee concerned, setting out the basis for the decision.

AU-3.2.9

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 licensee of its decision within 30 calendar days from submitting the appeal.

AU-3.2.10

Where 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 regulatory requirements, including but not limited to, receiving the application complete with all the required information and documents, licensees or the nominated approved personsmay appeal to the concerned Executive Director of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licensee of its decision within 30 calendar days from the date of submitting the appeal.

AU-3.2.11

Licensees must immediately notify the CBB when an approved person ceases to hold a controlled function together with an explanation as to the reasons why (see Paragraph AU-4.4.9). In such cases, their approved person status is automatically withdrawn by the CBB.

AU-3.2.12

Licensees must immediately notify the CBB in case of any material change to the information provided in a Form 3 submitted for an approved person.

AU-3.2.13

Licensees must immediately notify the CBB when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of their approved persons.

AU-3.2.13A

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 AU3.1).

AU-3.2.14

Licensees must seek prior CBB approval before an approved person may move from one controlled function to another within the same licensee.

AU-3.2.15

In such instances, a new Form 3 (Application for Approved Person status) should be completed and submitted to the CBB. Note that a person may be considered 'fit and proper' for one controlled function, but not for another, if for instance the new role requires a different set of skills and experience. Where an approved person is moving to a controlled function in another licensee, the first licensee should notify the CBB of that person's departure (see Rule AU-4.4.9), and the new licensee should submit a request for approval under Rule AU-1.3.1.

AU-4.1.1

Applicants for a license must fill in the Application Form 1 (Application for a License) online, available on the CBB website under Eservices/online Forms. The applicant must upload scanned copies of supporting documents listed in Paragraph AU-4.1.4, unless otherwise directed by the CBB.

AU-4.1.2

Articles 44 to 47 of the CBB Law govern the licensing process. This prescribes a single stage process, with the CBB required to take a decision within 60 calendar days of an application being deemed complete (i.e. containing all required information and documents). See below, for further details on the licensing process and timelines.

AU-4.1.3

References to applicant mean the proposed licensee seeking authorisation. An applicant may appoint a representative — such as a law firm or professional consultancy — to prepare and submit the application. However, the applicant retains full responsibility for the accuracy and completeness of the application, and is required to certify the application form accordingly. The CBB also expects to be able to liaise directly with the applicant during the authorisation process, when seeking clarification of any issues.

AU-4.1.4

Unless otherwise directed by the CBB, the following documents must be provided together with the covering letter referred in Paragraph AU-4.1.1 above in support of a license application:

AU-4.1.5

The CBB may require that an acceptably worded letter of guarantee be provided in support of the application for a license. Where the application for the license is for an incorporated entity, the CBB may seek a letter of guarantee from controllers. Where the application is for an overseas licensee, the CBB may seek a letter of guarantee from the parent company.

AU-4.1.6

The business plan submitted in support of an application should include:

AU-4.1.7

The applicant's (and where applicable, its parent's) memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the licensed application, and must preclude the applicant from undertaking other commercial activities, unless these arise out of its activities or are incidental to those.

AU-4.1.8

All documentation provided to the CBB as part of an application for a license must be in either Arabic or English language. Any documentation in a language other than English or Arabic must be accompanied by a certified English or Arabic translation thereof.

AU-4.1.9

Any material changes or proposed changes to the information provided to the CBB in support of an authorisation application that occurs prior to authorisation must be reported to the CBB.

AU-4.1.10

Failure to inform the CBB of the changes specified in AU-4.1.9 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition AU-2.8.2.

AU-4.1.11

As part of the application process, the CBB will provide a formal decision on a license application within 60 calendar days of all required documentation having been submitted in a form acceptable to the CBB, as specified in Article 44 (e) of the CBB Law. The applicant must submit within 6 months of the application date, all remaining requirements or otherwise has to submit a new application to the CBB. Applicants are encouraged to approach the CBB to discuss their application at an early stage, so that any specific questions can be dealt with prior to the finalisation of the application.

AU-4.1.12

Before the final approval is granted to a licensee, confirmation from a retail bank addressed to the CBB that the licensee's capital (injected funds) — as specified in the business plan submitted under Rule AU-4.1.4 — has been paid in must be provided to the CBB. In addition, for payment services providers and card processing companies, a bank guarantee of BD50,000 must be provided.

AU-4.1.13

To be granted a license, an applicant should demonstrate compliance with the applicable requirements of the CBB Law and this Module. Should a license be granted, the CBB will notify the applicant in writing of the fact; the CBB will also publish its decision to grant a license in the Official Gazette and in two local newspapers (one published in Arabic, the other in English). The license may be subject to such terms and conditions as the CBB deems necessary for the additional conditions being met.

AU-4.1.14

The CBB may refuse to grant a license if in its opinion:

AU-4.1.15

Where the CBB proposes to refuse an application for a license, it will give the applicant a written notice to that effect. Applicants will be given a minimum of 30 calendar days from the date of the written notice to appeal the decision, as per the appeal procedures specified in the notice; these procedures will comply with the provisions contained in Article 46 of the CBB Law.

AU-4.1.16

Within 6 months of the license being issued, the new licensee must provide to the CBB:

AU-4.1.17

Applicants issued new licenses by the CBB must start operations within 6 months of the license being issued, as per Article 48 (c) of the CBB Law. Failure to comply with this rule may lead to enforcement action being taken against the licensee concerned, as specified in Article 128 of the CBB Law. A licensee must at all times keep an approved copy of the license displayed in a visible place on the licensee's premises in the Kingdom, as per Article 47 (b) of the CBB Law.

AU-4.1.18

Applicants may not publicise in any way the application for a licence for, or formation of, an ancillary service provider before the formal decision referred to in Paragraph AU-4.1.11 is provided to the applicant or the concerned agent.

AU-4.3.6

[This Paragraph was moved to AU-3.2.6 in October 2017].

AU-4.3.7

[This Paragraph was moved to AU-3.2.7 in October 2017].

AU-4.3.8

[This Paragraph was moved to AU-3.2.8 in October 2017].

AU-4.3.9

[This Paragraph was moved to AU-3.2.9 in October 2017].

AU-4.3.10

[This Paragraph was moved to AU-3.2.10 in October 2017].

AU-4.3.11

[This Paragraph was moved to AU-3.2.11 in October 2017].

AU-4.3.12

[This Paragraph was moved to AU-3.2.12 in October 2017].

AU-4.3.13

[This Paragraph was moved to AU-3.2.13 in October 2017].

AU-4.3.14

[This Paragraph was moved to AU-3.2.14 in October 2017].

AU-4.3.15

[This Paragraph was moved to AU-3.2.15 in October 2017].

Voluntary Surrender

Cancellation

Cancellation of Approved Person Status

AU-4.7.1

The business plan must include an indication of and a description of the type and expected volume of the activities for the next three years. The business plan to be provided by the applicant must contain:

AU-4.7.2

The programme of operations to be provided by the applicant must contain the following information:

AU-4.7.3

The applicant must provide a description of the governance arrangement and the internal control mechanisms consisting of:

Governance arrangements and internal control mechanisms

AU-4.7.5

The applicant must establish a description of the internal control mechanisms containing, where applicable, the following information:

AU-4.7.6

The applicant should provide a procedure for monitoring, handling and following up on security incidents and security-related customer complaints, containing, but not limited to, the following information:

AU-4.7.7

The PISP and PSP should provide a description of the process in place to file, monitor, track and restrict access to sensitive payment data consisting of, but not limited to, the following:

AU-4.7.8

The applicant should provide a security policy document containing the following information:

AU-4.7.9

AISPs/PISPs must submit a report of an independent review undertaken by a third-party expert confirming compliance with the Bahrain Open Banking Framework prior to going live. The detailed scope and procedures for such review and the appointment of the third party expert must be approved by CBB.