Verification of Identity and Source of Funds

Verification of Third Parties

Anonymous and Nominee Accounts

Timing of Verification

Incomplete Customer Due Diligence

Suspicious Wallet Addresses

Non-Resident Accounts

Natural Persons

Legal Entities or Legal Arrangements (such as trusts)

AML-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.

AML-1.3.2

Capital Market 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, capital Market 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 AML-1.3.1 include:

AML-1.3.3

In addition to the general rule contained in rule AML-1.3.1 above, special care is required in the circumstances specified in sections AML-1.4 to AML-1.8 inclusive.

AML-1.3.4

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

AML-1.4.1

Capital Market Licensees must establish specific procedures for verifying customer identity where no face-to-face contact takes place.

AML-1.4.2

Where no face-to-face contact takes place, Capital Market Licensees must take additional measures (to those specified in section AML-1.2), in order to mitigate the potentially higher risk associated with such business. In particular, Capital Market Licensees must take measures:

AML-1.4.3

There are a number of checks that can provide a Capital Market Licensees with a reasonable degree of assurance as to the authenticity of the applicant. They include:

AML-1.4.4

Capital market services provided using digital channels or internet pose greater challenges for customer identification and AML/CFT purposes. Capital Market 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 AML-C.2. Capital Market Licensees which provide screen based trading or online services to their customers must set-up programmes or systems to highlight unusual transactions to enable the Capital Market Licensees to report all such transactions.

New Products, Practices and Technologies

Enhanced Monitoring

Licensee’s digital ID applications

Overseas branches

AML-1.5.1

Capital Market 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. Capital Market Licensees must utilise publicly available databases and information to establish whether a customer is a PEP.

AML-1.5.2

Capital Market 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. Capital Market Licensees must not accept a non-Bahraini PEP as a customer based on customer due diligence undertaken using digital ID applications.

AML-1.5.3

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

AML-1.5.3A

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

AML-1.5.3B

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

AML-1.5.3C

For the purpose of Paragraph AML-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.

AML-1.5.4

[This Paragraph was deleted in January 2020].

AML-1.6.1

Capital market 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. For clubs and societies registered with the General Organisation for Youth and Sports (GOYS), Capital Market Licensees must contact GOYS to clarify whether the account may be opened in accordance with the rules of GOYS.

AML-1.6.2

Capital Market Licensees are reminded that clubs and societies registered with GOYS may only have one account with banks in Bahrain.

AML-1.6.3

Charities should be subject to enhanced transaction monitoring by Capital Market Licensees. Capital Market Licensees should develop a profile of anticipated account activity (in terms of payee countries and recipient organizations in particular).

AML-1.6.4

Capital Market 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 Unit (see section AML-4.4 for contact address), giving details of the amount transferred, account name, number and beneficiary name account and bank details. Capital Market Licensees must ensure that such transfers are in accordance with the spending plans of the charity (in terms of amount, recipient and country).

AML-1.6.5

Article 20 of Decree Law No. 21 of 1989 (issuing the Law of Social and Cultural Societies and Clubs and Private Organisations Operating in the Area of Youth and Sport and Private Institutions) provides that Capital Market Licensees may not accept or process any incoming or outgoing wire transfers from or to any foreign country on behalf of charity and non-profit organisations licensed by the Ministry of Social Development, until an official letter by the Ministry authorising the receipt or remittance of the funds has been obtained by the concerned Capital Market Licensees.

AML-1.6.6

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

AML-1.7.1

Where Capital Market Licensees receive pooled funds managed by professional intermediaries (such as investment and pension fund managers, stockbrokers and lawyers or authorized money transferors), they must apply CDD measures contained in section AML-1.8 to the professional intermediary. In addition, Capital Market Licensees must verify the identity of the beneficial owners of the funds where required as shown in rules AML-1.7.2 and AML-1.7.3 below.

AML-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 Capital Market Licensees and their identity verified in accordance with the requirements in section AML-1.2.

AML-1.7.3

For accounts held by intermediaries, where such funds are co-mingled, the Capital Market Licensees 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 authorized 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 bank has undertaken reasonable measures to determine that the intermediary has engaged in a sound customer due diligence process, consistent with the requirements in section AML-1.8.

AML-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 Capital Market Licensees must obtain documentary evidence to support the case for not carrying out customer due diligence measures beyond identifying the intermediary. The Capital Market Licensees 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.

AML-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 Capital Market Licensees 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.

AML-1.8.1

A Capital Market Licensees must only accept customers introduced to it by other Capital Market Licensees, 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 Capital Market 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 Capital Market Licensee, not the introducer.

AML-1.8.2

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

AML-1.8.3

The Capital Market Licensees 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 Capital Market Licensees must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF Recommendations.

AML-1.8.4

Should the Capital Market Licensees not be satisfied that the introducer is in compliance with the requirements of the FATF Recommendations, the Capital Market Licensees must not accept further introductions or discontinue the business relationship with the introducer.

Accounts with Shell Financial Institutions

AML-1.10.1

Capital Market Licensees may apply simplified customer due diligence measures, as described in paragraphs AML-1.10.2 to AML-1.10.8, if:

AML-1.10.2

For customers falling under category (b) in rule AML-1.10.1, the customer's name and contact information must be recorded. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.

AML-1.10.3

[This Paragraph was deleted in July 2018].

AML-1.10.4

For customers falling under categories (c) to (g) in rule AML-1.10.1, the information required under rule AML-1.2.7 (for legal entities) must be obtained. However, the verification, certification and due diligence requirements (contained in rules AML-1.2.3, AML-1.2.5, AML-1.2.6, AML-1.2.8, AML-1.2.9 and AML-1.2.11), may be dispensed with.

AML-1.10.5

Capital Market Licensees wishing to apply simplified due diligence measures as allowed for under categories (c) to (g) of rule AML-1.10.1 must retain documentary evidence supporting their categorization of the customer.

AML-1.10.6

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.

AML-1.10.7

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

AML-1.10.8

Simplified customer due diligence measures must not be applied where a Capital Market 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.

AML-1.10.8A

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

AML-1.10.9

[This Paragraph was deleted in July 2018].

AML-1.11.1

This Section, AML1.11, applies to a Capital Market Licensee when it provides correspondent account services or characteristic similar to correspondent account services.

AML-1.11.2

When providing correspondent account services, Capital Market Licensee, must gather sufficient information (e.g. through a questionnaire) about their respondent financial institution to understand the nature of the respondent's business. Factors to consider to provide assurance that satisfactory measures are in place at the respondent financial institution includes:

AML-1.11.3

Capital Market Licensees must implement the following additional measures, prior to opening a correspondent account:

AML-1.11.4

Where the correspondent account services involve a payable through account, Capital Market Licensees must be satisfied that:

AML-1.11.5

Capital Market Licensees must document the basis for their satisfaction that the requirements in Paragraphs AML-1.11.2, AML-1.11.3 and AML-1.11.4 are met.

AML-1.11.6

Capital Market Licensees must not enter into or continue correspondent account services relationship with another financial institution that does not have adequate controls against money laundering or terrorism financing activities, is not effectively supervised by the relevant authorities or is a shell financial institution. Capital Market Licensees must pay particular attention when entering into or continuing relationships with respondents 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.

AML-1.11.7

Capital Market Licensees must also take appropriate measures when establishing a correspondent account services relationship, to satisfy themselves that their respondent financial institutions do not permit their accounts to be used by shell financial institutions.

AML-1.11.8

In the case of correspondent account services relationships, the Capital Market Licensee generally does not have direct relationships with the customers of the respondent financial institution. Therefore, there is no expectation or requirement for the Capital Market Licensee to apply CDD on a respondent financial institution’s customer, which is, instead the responsibility of the respondent financial institution. Nonetheless, it is consistent with the risk-based approach for the Capital Market Licensee to have some general sense of the respondent financial institution’s customer base as part of ascertaining the risks associated with the respondent financial institution itself.

AML-1.12.1

Licensees are permitted to rely on third parties to perform elements of CDD measures and recordkeeping requirements stipulated in Chapter AML-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:

AML-1.12.2

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

AML-1.12.3

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.