Site Title

Bahrain



CENTRAL AUTHORITY FOR REPORTING

The Anti-Money Laundering Unit (AMLU), established within the General Directorate of Criminal Investigation at the Ministry of the Interior

ARE LAWYERS COVERED BY MONEY LAUNDERING LEGISLATION?

Lawyers are covered by Decree Law No. (4) of 2001 with Respect to the Prevention and Prohibition of the Laundering of Money

NAME LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES

IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?

Anti-Money Laundering Guidelines (AML Guidelines) 2003, adopted by the Ministry of Commerce of the Kingdom of Bahrain

MO7/2001 issued by the Ministry of Finance apply to lawyers as it applies to all persons who are listed in the schedule to DL 4/2001. No other ministry has issued any secondary legislation pertaining to lawyers. It is clear that lawyers are not uniformly aware that either DL 4/2001 or MO 7/2001 applies to them. Some lawyers were not undertaking verification of customer identity or record keeping.

UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT?

The provisions of the AML Guidelines imply that all suspicious transactions, no matter what their value are subject to the reporting requirement.

The AML Guidelines provide for a list of common and industry-specific indicators which may be helpful to the institutions, including lawyers, when assessing whether there are reasonable grounds for assessing a transaction as suspicious or unusual. The industry-specific indicators for lawyers can be found in the AML Guidelines on pages 18 and 19.

LAWYER RESPONSIBILITY/LIABILITY

Lawyers are subject to the provisions of DL 4/2001 as "legal practice and advocacy" is listed in the activities of institutions to be covered by the law. The provisions of the law go beyond the international requirements in that all aspects of legal practice are subject to the provision of DL 4/2001 and not simply the required ones of:

  • Buying and selling of real estate;
  • Managing of client money, securities or other assets ;
  • Managing bank, savings or securities accounts;
  • Organizing contributions for the creation, operation or management of companies;
  • Creating, operating or managing legal persons or arrangements, and buying and selling of business entities.

This means, for example, that all clients of a lawyer should be identified and not merely the clients for whom the lawyer is performing the above activities. In practice, lawyers do not engage in buying and selling of real estate as all land transactions must be conducted through notaries who are part of the land registry department of the Ministry of Justice. Lawyers also do not take part in management of client money or bank, savings or securities accounts save for cases of non-Bahrainis who come to lawyers to create companies for them. In this case, a Bahraini bank account is required and the lawyer may open an account in the name of the corporation and arrange for money to be placed in the account on behalf of the client as an opening balance.

Under Article 5 of the AML Law, all institutions (including lawyers) shall:

  1. Keep for a period of 5 years after the relationship has ended a copy of the evidence of identity of each client as may be provided for in the regulations made pursuant to this Law;
  2. Keep a transaction record of any new or unrelated transaction for a period of 5 years after the termination of the transaction so recorded;
  3. Report to the Enforcement Unit and the relevant entities any transactions suspected by the relevant officer by reason of the identity of the persons involved, the nature of the transaction or any other circumstances;
  4. Provide the Enforcement Unit with such further information or assistance as the Enforcement Unit may request;
  5. Comply with the instructions of the relevant entities regarding developing and applying internal policies, procedures and controls including the designation of compliance officers at management level to combat money laundering and develop audit functions to evaluate such policies, procedures and controls;
  6. Cooperate with any Government entity including the Enforcement Unit;
  7. Develop and apply a procedure to audit compliance with the provisions of this Article;
  8. Not open or keep any secret, fictious, or anonymous accounts.

Under Article 3.4 of the AML Law, “[A]ny person who commits any of the offences related to money laundering shall be liable to imprisonment for a period not exceeding two (2) years and/or a fine not exceeding Bahrain Dinars Fifty Thousand (BD 50,000/-) or both.”

In addition, under Article 3.5 of the AML Law, “[A]ny person who contravenes the provisions of Regulations and Ministerial Regulations issued under this Law shall be liable to imprisonment for a period not exceeding three (3) months or a fine not exceeding Bahrain Dinars Twenty Thousand (BD 20,000/-) or both.”

Under Article 2.6 of the AML Law, an offence related to money laundering constitutes:

  1. Failure to disclose to the Enforcement Unit any information or suspicion acquired in the course of that person’s trade, business, profession, employment or otherwise regarding the offence of money laundering;
  2. Failure or refusal to follow or obstruction or hindering of any order issued by the Enforcement Unit or issued at its request by the Investigation Magistrate pursuant to investigation of the offence of money laundering;
  3. Disclosure of any information or suspicion acquired in the course of that person’s trade, business, profession, employment or otherwise regarding the issue of an investigation order or attachment order in a money laundering offence, where such disclosure is likely to prejudice the investigation (Article 2.6 of the AML Law)

CLIENTS’ IDENTIFICATION AND VERIFICATION

The Ministerial Order No. 23 of 2002 with Respect to the Prevention and Prohibition of the Laundering of Money requires establishing the identity details in the records of customers.

With regard to customers who are natural persons, the identity details should be as follows:

  1. Customer’s full name;
  2. Date of birth;
  3. Nationality;
  4. Full details of the identity card or passport;
  5. CPR Card number (if any);
  6. Occupation;
  7. Usual residence address;
  8. Employer’s name and address

In the case of a corporate client, the details required to be maintained are:

  1. Customer’s full name;
  2. Legal status;
  3. Registration number and place;
  4. Objects;
  5. Address of the head office and branches (if any);
  6. Names of board members;
  7. Legal representatives of the corporate person and his ID

In addition, the Memorandum & Article’s of Association and the power of attorney must also be verified.

LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES

"The country's parliament and the council have reportedly backed amendments that include the doubling of the prison sentence, from five years to ten, for money laundering in support of terrorist activities." 1

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Sources

MENAFATF, Mutual Evaluation Report of Bahrain, November 2006, www.menafatf.org

Bahrain Anti-Money Laundering website

Bahrain Monetary Agency website

  1. Marcus Simpson, “Terrorist financing: Bahrain backs new law with fatal flaw”, 28 June 2006, www.complinet.com.
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