COLLEGE OF BUSINESS AND FINANCE
DEPARTMENT OF ACCOUNTING & ECONOMICS
First Semester 2017-2018
ACCT 402 (Contemporary Issues in Accounting)
Case Study 1
Anti-money laundering controls at
Central Bank of Bahrain
Noor A.Rahim Ali – 201410168
Mariam Yousif Abdulla – 201410138
COMPANY NAME: Central Bank of Bahrain (CBB)
HEADQUARTERS: Manama, Bahrain
SECTOR: Financial Sector
NUMBER OF EMPLOYEES: 350 employees
ANNUAL GROSS REVENUE: BD 25,651,000 – 2016
NAME OF THE COMPANY EXECUTIVE INTERVIEWED:
Manal Rasheed Ashoor
POSITION: Head – Investment Business & Specialized Licensees
E-MAIL: [email protected]
PHONE NUMMBER: (+973) 17547948
DATE OF INTERVIEW: 20th of October 2017
v Company Description
The Central Bank of Bahrain (CBB) was established in 1973 as the Bahrain Monetary Agency, which it is considers as a public corporate entity by the financial institutions and central bank of Bahrain 2006 law. Its responsible for maintaining and controlling the budgetary, monetary and financial performance in the Kingdom of Bahrain. The CBB execute monetary and issues the national currency of the Kingdom. However, manages the government’s reserves and debt issuance and foreign exchange rate policies. Furthermore, it is the only regulatory of Kingdom of Bahrain’s financial sector which covers the insurance and the full scope of banking.
v Description of the Integrity-related practice
Anti-Money Laundering & Combating the Financing of Terrorization
Bahrain is one of the membership of the Gulf Cooperation Council in the Financial Action Task Force. However, it is also member of the regional MENAFATF to fight the against money laundering and combating the financing of terrorism.
In order to ensure the effectives of anti-money laundering and combating the financing of terrorism in the kingdom of Bahrain, the scope of the Compliance Directorate in CBB is to receive the complaints from the public and receiving information of financial crimes and frauds.
Ø The Compliance Directorate
Some of the activates that the Compliance Directorate doing is increasing the awareness of financial crime risk, evaluating the financial crimes trends. Also, they handling public complaints. In addition, issuing anti-money laundering and Combating the Financing of Terrorization policies and regulations.
Ø Anti-Money Laundering (AML) / Combating the Financing of Terrorization (CFT) Legislation
The main law of Bahrain that relevant to AML/CFT are:
· Decree Law No. 4 of 2001 with Respect to the Prevention and Prohibition of the Laundering of Money.
· Decree Law No. 54 of 2006 with Respect to Amending Certain Provisions of Legislative Decree No. 4 of 2001 with Respect to the Prevention and Prohibition of the Laundering of Money.
· Decree Law No. 58 of 2006 with Respect to the Protection of Society from Terrorism Activities.
Ø AML/CFT Committee
Its founded in 2001. However, the chairmanship of the Committee has moved from the Ministry of Finance to the Deputy Governor of the CBB in early 2006. The Committee doing quarterly meeting to agree on the policies and monitored them. In 2007, The committee generated two sub-committees.
· UN Sub-Committee:
To ensure that the Kingdom of Bahrain is fully complies with all United Nation policies and regulations. However, it is going to discover the all individual and organizations suspected in terrorist financing.
· Legal Sub-Committee:
Formulating all AML/CFT laws and forwarded them to the Parliament for approval.
Ø AML/CFT Black List
From time to time, the government of Bahrain may name certain organizations of individuals that are involved to financing of terrorism. For example, when the United Nations mentions any name of any organizations or individuals, these names will have circulated to the Central Bank of Bahrain.
Ø International AML/CFT standards
The Financial Action Task Force has making efforts to develop measures that deals with the financing of terrorism since it is formation in 1989. The Gulf Cooperation Council is considering as a one of the Financial Action Task Force (FATF) 33 members. However, the most basis commonly documented standards of the FATF for the Government of Bahrain is 9 Special Recommendations on financing of terrorism and 40 Recommendations on money laundering.
v Policy Development
The Central Bank of Bahrain has obligation to discuss officially before issuing any policies or regulations according to the Financial Institution and the Central Bank of Bahrain law of 2006. However, the stakeholders and organizations can involve on these discussions.
At the start of each year, The CBB’s policies are changes and improves plans in the policy statements. Moreover, these plans may be complemented from time to time.
v Process for Embedding the practice within the organization
One of the Central Bank of Bahrain priorities is to reinforce their employee’s awareness of money laundering and financing of terrorism. However, the anti-money laundering practices. They enhancing them by giving them training courses which are prepared by the Compliance Directorate and the Human Resource Department. They using different methods of presenting these courses, such as face-to-face meetings, workshops and E-learning. The latest course was “FINANCIAL CRIME MODULE 2010” and “ANTI-MONEY LAUNDERING AND COMBATING OF FINANCIAL CRIME MODULE 2010”.
v Identification and reporting of issue
Ø Appointment of Money Laundering Reporting Officer (MLRO)
Managers must appoint specific a “MLRO” which it must be accepted by the Central Bank of Bahrain before its selection. The MLRO is a standard approved person which has controlled function position. The position of Money Laundering Reporting Office “MLRO” must not be clash with jobs that may conflicts of interests of other positions. For example, an internal auditor within the organization. The position of “MLRO” shouldn’t be from outside the organization. The resident of “MLRO” agent must be in the Kingdom of Bahrain unless they have reasons which are accepted by the CBB. In addition, the “MLRO” must ensure that they are able to observe the day-to-day process of its procedures and policies that related to their work and they are responsible to any respond of information request by the Central Bank of Bahrain or any Financial Intelligence Unit. If there is reduction of the “MLRO” position, they must employ a permanent replacement; to ensure that the functions of the “MLRO” are continuity performance. The CBB must accepted these changes before they do the arrangement.
Ø Responsibilities of the MLRO
· Forming and providing the Anti-Money Laundering and Combating the Financing of Terrorism.
· They have to make sure that whatever they have licensees on are applicable with the AML/CFT law.
· Preparing annual reports of the usefulness of the AML/CFT regulators by considerations of the senior management.
· Providing all required transactions, STR and CDD records for the necessary periods.
The Main goal of CBB in key enforcement is to sustain the integrity of the market as well as to provide help, support and confidence to the investors. Their framework needs to attain the lost cases of non-compliance to sustain that in case of conflict of similar cases are addressed:
· Don’t cause possible losses to any of the investing public.
· Don’t deactivate the financial sector. However, the capital market in specific.
· Don’t unethically harm the participants in the market who fulfil with all rules and regulations.
There are 3 main steps for procedures of enhancing the regulations and law:
· Market Surveillance: Identifying the possibility breach of law, policies and regulations which lead to identify those who responsible for the breach.
· Investigation: Ones there is case of a breach of the law and regulation, the Central Bank of Bahrain will investigate to find out who does these breaches and if there is any evidence on that.
· Enforcement: To protect the public interest, they will be taking important steps to punish those who responsible for the breach of law.
v Lessons Learned
· In order to identify any problem, you have to investigate and get evidence on that.
· Know your customs and your employees, to prevent any frauds or money laundering in the future.
· Always go back to the law to find solution to any problems which can be faced on the organization.
· Profile. (n.d.) Retrieved October21, 2017, from http://www.cbb.gov.bh/page-p-profile.htm
· CBB. (2017). Http://ljournal.ru/wp-content/uploads/2017/03/a-2017-023.pdf. Annual Report. dio:10.18411/a-2017-023
· Bahrain, C.B. (1992). Http://poetica.pro/1992.htm Anti-money laundering & combating the financing of terrorism, (2). dio:10.15393/j9.art.1992.70
· Http://ljournal.ru/wp-content/uploads/2017/03/a-2017-023.pdf. (2017).Financial Crime Module. dio:10.18411/a-2017-023
· Find a Country:. (n.d.) Retrieved October 30, 2017, from http://www.fatf-gafi.org/countries/#Bahrain
· The CBB’s Enforcement Responsibilities. (n.d.) Retrieved November 10, 2017, from http://cbb.complinet.com/cbb/display/display.html?rbid=2176=2109
· Consultations. (n.d.). Retrieved November 1, 2017, from http://www.cbb.gov.bh/page-p-consultations.htm