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Location: Central Bank of Bahrain Volume 5—Specialised Licensees
  • Central Bank of Bahrain Volume 5—Specialised Licensees


    Table of Contents
             
    Common Modules (Applicable to all Specialised Licensees)
      Module Title Module
    Code
    Date last
    changed
     
    Introduction User's Guide UG Oct 16 PDF Version
    Executive Summary ES (to be issued)  
    High Level Standards Principles of Business PB Jan 11 PDF Version
    Auditors and Accounting Standards AA Oct 16 PDF Version
    Business Standards Financial Crime FC Jan 19 PDF Version
    Enforcement & Redress Enforcement EN Apr 19 PDF Version
    Specific Modules (By Type of Licensee)
    Type 1: Money Changers Licensees Type 2: Representative Office Licensees Type 3: Financing Companies Type 4: Administrators Type 5: Trust Service Providers Type 6: Microfinance Institutions Type 7: Ancillary Service Providers
    Authorisation Module (AU)

    PDF Version

    Updated: Oct 18
    Authorisation Module (AU)

    PDF Version

    Updated: Apr 18
    Authorisation Module (AU)

    PDF Version

    Updated: July 17
    Authorisation Module (AU)

    PDF Version

    Updated: Apr 18
      Authorisation Module (AU)

    PDF Version

    Updated: Apr 19
    Authorisation Module (AU)

    PDF Version

    Updated: Apr 19
    Business Conduct Module (BC)

    PDF Version
      Business Conduct Module (BC)

    PDF Version

    Updated: Jan 19
        Business Conduct Module (BC)

    PDF Version

    Added: Jan 14
     
    CBB Reporting Requirements Module (BR)

    PDF Version

    Updated: Oct 18
      CBB Reporting Requirements Module (BR)

    PDF Version

    Updated: Apr 17
    CBB Reporting Requirements Module (BR)

    PDF Version

    Updated: Jul 13
      CBB Reporting Requirements Module (BR)

    PDF Version

    Updated: July 17
    CBB Reporting Requirements Module (BR)

    PDF Version

    Updated: Dec 18
    Capital Adequacy Module (CA)

    PDF Version

    Updated: Jul 11
      Capital Adequacy Module (CA)

    PDF Version

    Updated: Oct 14
    Capital Adequacy Module (CA)

    PDF Version
      Capital Adequacy and Liquidity Requirements Module (CA)

    PDF Version

    Updated: Apr 19
     
    General Requirements Module (GR)

    PDF Version

    Updated: Apr 19
    General Requirements Module (GR)

    PDF Version

    Updated: Oct 18
    General Requirements Module (GR)

    PDF Version

    Updated: Apr 19
    General Requirements Module (GR)

    PDF Version

    Updated: Apr 19
      General Requirements Module (GR)

    PDF Version

    Updated: Apr 19
    General Requirements Module (GR)

    PDF Version

    Updated: Apr 19
    High-level Control Module (HC)

    PDF Version

    Updated: Jul 16
      High-level Control Module (HC)

    PDF Version

    Updated: July 17
    High-level Control Module (HC)

    PDF Version

    Updated: Jan 13
      High-Level Controls Module (HC)

    PDF Version

    Updated: Oct 14
     
    Risk Management Module (RM)

    PDF Version

    Updated: Oct 17
      Credit Risk Management Module (CM)

    (to be issued)
        Risk Management Module (RM)

    PDF Version

    Added: Oct 17
     
        Operational Risk Management (OM)

    PDF Version

    Updated: Jul 18
           
        Liquidity Risk Management Module (LM)

    PDF Version

    Updated: Jul 14
           
    Training and Competency Module (TC)

    PDF Version
      Training and Competency Module (TC)

    PDF Version

    Updated: Apr 17
           
        Public Disclosure (PD)

    PDF Version

    Updated: Apr 14
        Public Disclosure Module (PD)

    PDF Version

    Updated: Jul 18
     
            Open Banking

    PDF Version

    Added: Dec 18
    Part B
    Glossary
    CBB Authorisation Forms
    CBB Reporting Forms
    Supplementary Information
    To be developed: pending the issuance of the remaining Modules for Volume 5, the standard conditions and licensing criteria applicable to specialised licensees can be accessed below:
    Leasing Companies (Conventional) PDF Version
    Leasing Companies (Islamic) SEC Complaint ing%20Companies_%20Islamic.pdf" target="_blank">PDF Version

    • Common Modules (Applicable to all Specialised Licensees)

      • Part A

        • Introduction

          • UG User's Guide

            • UG-A Introduction

              • UG-A.1 Purpose

                • Executive Summary

                  • UG-A.1.1

                    The Central Bank of Bahrain ('the CBB'), in its capacity as the regulatory and supervisory authority for all financial institutions in Bahrain, issues regulatory instruments that licensees and other specified persons are legally obliged to comply with. These regulatory instruments are contained in the CBB Rulebook. Much of the Rulebook's substantive content was previously issued by the Bahrain Monetary Agency ('the BMA'), and was carried forward when the CBB replaced the BMA in September 2006.

                    October 2010

                  • UG-A.1.2

                    The Rulebook is divided into 7 Volumes, covering different areas of financial services activity. These Volumes are being progressively issued. Volumes 1 and 2, covering conventional bank licenseesG and Islamic bank licenseesG respectively, were issued in July 2004 and January 2005; Volume 3, covering insurance licenseesG , was issued in April 2005; Volume 4, covering investment firm licenseesG was issued in April 2006. This Volume, Volume 5 specialised licenseesG is issued in 2010. Volume 6 (capital markets) is gradually being issued. Volume 7 on collective investment undertakings (CIUs) was issued in May 2012.

                    Amended: October 2012
                    October 2010

                  • UG-A.1.3

                    This User's Guide provides guidance on (i) the status and application of the Rulebook, with specific reference to Volume 5 (Specialised licensees); (ii) the structure and design of the Rulebook; and (iii) its maintenance and version control.

                    October 2010

                  • UG-A.1.4

                    Volume 5 (Specialised Licensees) covers specialised licenseesG , i.e. those CBB licensees that undertake regulated specialised activitiesG that do not fall under any other Volume (1-4,6, 7) of the CBB Rulebook. It contains prudential requirements (such as rules on minimum capital and risk management); and conduct of business requirements (such as rules on the giving of advice and the treatment of customer money). Collectively, these requirements are aimed at ensuring the safety and soundness of CBB-licensed companies, and providing an appropriate level of protection to the customers of such companies.

                    Amended: October 2012
                    October 2010

                • Legal Basis

                  • UG-A.1.6

                    This Module contains the CBB's Directive (as amended from time to time) regarding the User's Guide for Volume 5 of the CBB Rulebook, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all specialised licenseesG (including their approved personsG ).

                    Amended: January 2011
                    October 2010

                  • UG-A.1.7

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

                    October 2010

              • UG-A.2 Module History

                • Evolution of Module

                  • UG-A.2.1

                    This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    October 2010

                  • UG-A.2.2

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

                    Module Ref. Change Date Description of Changes
                    UG-A.1.6 01/2011 Clarified legal basis.
                    UG-2.1.2 01/2011 Amended defined term.
                    UG-A.1.2, UG-A.1.4, UG-1.2.1, UG-1.2.2, UG-1.2.7, UG-2.1.1, UG-2.1.2, UG-2.1.5 and UG-2.2.2 10/2012 Various minor corrections to reflect structure of Rulebook, including issuance of Volume 7.
                    UG-3.2 and Annex 01/2013 Amended as CBB Rulebook only now available on CBB Website.
                    UG-1.3.4 10/2016 Added a Paragraph to clarify reference to 'he' 'his' 'she' and 'her'.
                         

            • UG-1 Rulebook Status and Application

              • UG-1.1 Legal Basis

                • General

                  • UG-1.1.1

                    Volume 5 (Specialised Licensees) of the CBB Rulebook is issued by the CBB pursuant to the Central Bank of Bahrain and Financial Institutions Law 2006 ('the CBB Law'). The CBB Law provides for two formal rulemaking instruments: Regulations (made pursuant to Article 37) and Directives (made pursuant to Article 38). Other articles in the CBB Law also prescribe various specific requirements (for example, requirements relating to licensing (Articles 44 to 49), or the notification and approval of controllers of licensees (Articles 52 to 56)).

                    October 2010

                  • UG-1.1.2

                    The Purpose Section of each Module specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.

                    October 2010

                • CBB’s Rulemaking Instruments

                  • UG-1.1.4

                    Regulations are made pursuant to Article 37 of the CBB Law. These instruments have general application throughout the Kingdom and bind all persons ordinarily affected by Bahraini legislative measures (i.e. residents and/or Bahraini persons wherever situated).

                    October 2010

                  • UG-1.1.5

                    Because Regulations have wide general application, they are subject to two important safeguards: (i) the CBB is under a duty to consult with interested parties and to review and consider their comments; and (ii) the finalised Regulations only become effective after they are published in the Official Gazette.

                    October 2010

                  • UG-1.1.6

                    Directives are made pursuant to Article 38 of the CBB Law. These instruments do not have general application in the Kingdom, but are rather addressed to specific licenseesG (or categories of licenseesG ) or approved personsG . Directives are binding on those to whom they are addressed.

                    October 2010

                  • UG-1.1.7

                    Unlike Regulations, there is no duty on the CBB to either consult with addressees or publicise a Directive by publishing it in the Official Gazette (save that an addressee must obviously have actual or constructive notice of a Directive). However, as a matter of general policy, the CBB also consults on Rulebook content issued by way of a Directive.

                    October 2010

                  • UG-1.1.8

                    All of the content of the CBB Rulebook has the legal status of at least a Directive, issued pursuant to Article 38 of the CBB Law. Certain of the requirements contained in the CBB Rulebook may also have the status of a Regulation, in which case they are also separately issued pursuant to Article 37 of the CBB Law and published in the Official Gazette. Where this is the case, then the Rulebook cross-refers to the Regulation in question and specifies the requirements concerned.

                    October 2010

                  • UG-1.1.9

                    In keeping with the nature of these regulatory instruments, Regulations are used to supplement the CBB Rulebook, either where explicitly required under the CBB Law, or where a particular requirement needs to have general applicability, in addition to being applied to licenseesG or approved personsG .

                    October 2010

              • UG-1.2 Status of Provisions

                • UG-1.2.1

                  The contents of the CBB Rulebook are categorised either as Rules or as Guidance. Rules have a binding effect. If a licensee breaches a Rule to which it is subject, it is liable to enforcement action by the CBB and, in certain cases, criminal proceedings by the Office of the Public Prosecutor.

                  Amended: October 2012
                  October 2010

                • UG-1.2.2

                  Guidance is not binding: rather, it is material that helps inform a particular Rule or set of Rules, or provides other general information. Where relevant, compliance with Guidance will generally lead the CBB to assess that the rule(s) to which the Guidance relates has been complied with. Conversely, failure to comply with Guidance will generally be viewed by the CBB as tending to suggest breach of a Rule.

                  Amended: October 2012
                  October 2010

                • UG-1.2.3

                  The status of each Paragraph within the Rulebook is identified by its text format, as follows:

                  •   Rules are in bold, font size 12. The Paragraph reference number is also highlighted in a coloured box.
                  •   Guidance is in normal type, font size 11.
                  October 2010

                • UG-1.2.4

                  Where there are differences of interpretation over the meaning of a Rule or Guidance, the CBB reserves the right to apply its own interpretation.

                  October 2010

                • UG-1.2.5

                  Rule UG-1.2.4 does not prejudice the rights of an authorised person to make a judicial appeal, should it believe that the CBB is acting unreasonably or beyond its legal powers.

                  October 2010

                • UG-1.2.6

                  All Rulebook content has the formal status of at least a Directive. Some Rulebook content may also have the status of Regulations. Rulebook content that is categorised as a Rule is therefore legally mandatory and must be complied with by those to whom the content is addressed.

                  October 2010

                • UG-1.2.7

                  [This Paragraph was deleted in October 2012].

                  Deleted: October 2012
                  October 2010

                • UG-1.2.8

                  The CBB's enforcement powers and processes are set out in Module EN.

                  October 2010

              • UG-1.3 Application

                • UG-1.3.1

                  Volume 5 of the CBB Rulebook for the most part applies only to specialised licenseesG , and to individuals undertaking key functions in those licensees (so-called 'approved personsG '). Most of the content of Volume 5 only has the formal status of a Directive.

                  October 2010

                • UG-1.3.2

                  A few Rules and Guidance have general applicability (and thus also have the formal status of a Regulation): for instance, no one may carry on specialised activities within or from Bahrain without the appropriate license, and controllersG of specialised licenseesG are also subject to various requirements.

                  October 2010

                • UG-1.3.3

                  Each Module in Volume 5 (except those listed under the 'Introduction' and 'Sector Guides' headings) contains a Scope of Application Chapter, setting out which Rules and Guidance apply to which particular type of specialised licenseeG or person, for the Module concerned. In addition, each Rule (or Section containing a series of Rules) is drafted such that its application is clearly highlighted for the user. Finally, each Module, in its Purpose Section, specifies in all cases the rulemaking instrument(s) used to issue the content of the Module in question, and the legal basis underpinning the Module's requirements.

                  October 2010

                • UG-1.3.4

                  All references in this Module to 'he' or 'his' shall, unless the context otherwise requires, be construed as also being references to 'she' and 'her'.

                  Added: October 2016

              • UG-1.4 Effective Date

                • UG-1.4.1

                  Volume 5 (Specialised Licensees) of the CBB Rulebook was first issued in October 2010. Its contents have immediate effect, subject to any specific transition arrangements that may be specified.

                  October 2010

            • UG-2 Rulebook Structure and Format

              • UG-2.1 Rulebook Structure

                • Rulebook Volumes

                  • UG-2.1.1

                    The Rulebook is divided into 7 Volumes, covering different areas of financial services activity, as follows:

                    Volume 1 Conventional Banks
                    Volume 2 Islamic Banks
                    Volume 3 Insurance
                    Volume 4 Investment Business
                    Volume 5 Specialised Licensees
                    Volume 6 Capital Markets
                    Volume 7 Collective Investment Undertakings
                    Amended: October 2012
                    October 2010

                  • UG-2.1.2

                    Volume 5 (Specialised Licensees), covers money changersG ; financing companiesG ; representative officesG ; administratorsG ; trust service providersG , micro-finance institutionsG and ancillary services providers.

                    Amended: October 2012
                    Amended: January 2011
                    October 2010

                • Rulebook Contents (Overview)

                  • UG-2.1.3

                    The material in Volume 5 is divided into common modules and specific modules. It is further organised by the type of the specialised licensee concerned, as outlined in the chart in UG-2.1.5 below. The contents of the common modules apply to all specialised licensees, while the content of the specific modules apply to one specific type of licensee (e.g. Capital Adequacy Module for Money Changers).

                    October 2010

                  • UG-2.1.4

                    Each Volume has its own appendix Volume containing relevant reporting and authorisation forms; a glossary; and any supplementary information. In all cases, the main Volume is called 'Part A' and the appendix Volume is called 'Part B'.

                    October 2010

                  • UG-2.1.5:

                    Volume 5 Structure
                    Common Modules (Applicable to all Specialised Licensees)
                    User's Guide Module (UG)
                    Financial Crime Module (FC)
                    Auditors and Accounting Standards Module (AA)
                    Enforcement Module (EN)
                    Principles of Business Module (PB)
                    Specific Modules (By Type of Licensee)
                    Type 1: Money Changers Licensees Type 2: Representative Office Licensees Type 3: Financing Companies Type 4: Fund Administrators Type 5: Trust Service Providers Type 6: Micro-Finance Institutions Type 7: Ancillary Services Providers
                    Authorisation Module (AU) Authorisation Module (AU) Authorisation Module (AU) Authorisation Module (AU) To be developed
                    Business Conduct Module (BC)   Business Conduct Module (BC)  
                    CBB Reporting Requirements Module (BR)   CBB Reporting Requirements Module (BR) CBB Reporting Requirements Module (BR)
                    Capital Adequacy Module (CA)   Capital Adequacy Module (CA) Capital Adequacy Module (CA)
                    General Requirements Module (GR) General Requirements Module (GR) General Requirements Module (GR) General Requirements Module (GR)
                    High-level Control Module (HC)   High-level Control Module (HC) High-level Control Module (HC)
                    Risk Management Module (RM)   Risk Management Module (RM)  
                    Training and Competency Module (TC)   Training and Competency Module  
                        Liquidity Risk Management Module (LM)  

                    Amended: October 2012
                    October 2010

              • UG-2.2 Volume Structure

                • Modules

                  • UG-2.2.1

                    Modules in Volume 5 are divided into Common and Specific Modules based on the nature of each specialised licenseeG . The contents of Common Modules apply to all specialised licensees, while the contents of Specific Modules apply to one specific type of licensee (e.g. Money Changers).

                    October 2010

                  • UG-2.2.2

                    Each Module in Volume 5 is referenced using a two-or three-letter code, which is usually a contraction or abbreviation of its title. For each Specific Module, in addition to the title, the type of licensee is mentioned. These codes are used for cross-referencing within the text.

                    Amended: October 2012
                    October 2010

                • Chapters

                  • UG-2.2.3

                    Each Module consists of Chapters, categorised into two types:

                    •   Standard introductory Chapters (referenced with a letter: e.g. UG-A); and
                    •   Chapters containing the substantive content of the Module (referenced with a number: e.g. CA-1, CA-2, etc.)
                    October 2010

                  • UG-2.2.4

                    The introductory Chapters summarise the purpose of the Module, its history (in terms of changes made to its contents) and, where relevant, lists previously issued circulars and regulations that were replaced by the Rulebook Module. A separate introductory Chapter also prescribes the scope of application of the Module's requirements.

                    October 2010

                • Sections and Paragraphs

                  • UG-2.2.5

                    Chapters are further sub-divided into Sections: these extend the Chapter numbering (e.g. FC-1.1, FC-1.2, FC-1.3 etc). In turn, Sections are sub-divided into Paragraphs; these extend the Chapter and Section numbering (e.g. FC-1.1.1, FC-1.1.2, FC-1.1.3 etc.). Where appropriate, sub-Section headings may be used, to guide the reader through a Section; sub-Section headings are italicised and unnumbered, and act purely as an indicator (without limitation) as to the contents of the Paragraphs that follow.

                    October 2010

                • Table of Contents

                  • UG-2.2.6

                    Each Volume's contents page lists all the Modules contained within it (Part A) and the information contained in the relevant appendix Volume (Part B).

                    October 2010

                  • UG-2.2.7

                    The contents page of each Module lists the Chapters and Sections it contains, and the latest version date of each Section in issue.

                    October 2010

              • UG-2.3 Format and Page Layout

                • Headers

                  • UG-2.3.1

                    The top of each page in the Rulebook identifies the Volume, Common or Specific Module and Chapter in question. Each Module is a separate document. New Chapters start on a fresh page.

                    October 2010

                • Footers

                  • UG-2.3.2

                    The bottom of each page in the Rulebook (on the left hand side) identifies the Module in question, its Section and page number. Page numbering starts afresh for each Section: the total number of pages in each Section is shown as well as the individual page number. The bottom right hand side shows an end-calendar quarter issue date. The contents page for each Module, and each Section in a Module, are each given their own issue date. In addition, the Module contents page lists the latest issue date for each Section in that Module. The contents page thus acts as a summary checklist of the current issue date in force for each Section. Further explanation is provided in Section UG-3.1 below.

                    October 2010

                • Defined terms

                  • UG-2.3.3

                    Defined terms used in the Rulebook are underlined. Each Volume has its own glossary listing defined terms and giving their meaning. Definitions of terms used apply only to the Volume in question. It is possible for the same term to be used in a different Volume with a different meaning.

                    October 2010

                • Cross-references

                  • UG-2.3.4

                    Any cross-references given in a text state the Module code, followed (where appropriate) by the numbering convention for any particular Chapter, Section or Paragraph being referred to. For example, the cross-reference FC-1.2.3 refers to the third Paragraph in the second Section of the first Chapter of the Financial Crime Module. Many references will be quite general, referring simply to a particular Module, Chapter or Section, rather than a specific Paragraph.

                    October 2010

                • Text format

                  • UG-2.3.5

                    Each Paragraph is assigned a complete reference to the Module, Chapter, and Section, as well as its own Paragraph number, as explained in Paragraph UG-2.3.4 above. The format of the Paragraph reference and text indicates its status as either a Rule or Guidance, as explained in Paragraph UG-1.2.4 above.

                    October 2010

                  • UG-2.3.6

                    When cross-referring to specific Paragraphs, and it is important to make clear the status of the Paragraph in question as a Rule or Guidance, then the words 'Rule' or 'Guidance' may be used instead of 'Paragraph', followed by the reference number (e.g. 'As required by Rule FC-1.1.1, licensees must...').

                    October 2010

            • UG-3 Rulebook Maintenance and Access

              • UG-3.1 Rulebook Maintenance

                • Quarterly Updates

                  • UG-3.1.1

                    Any changes to the Rulebook are generally made on a quarterly cycle (the only exception being when changes are urgently required), in early January, April, July and October. When changes are made to a Module, the amended Sections are given a new version date, in the bottom right-hand page.

                    October 2010

                  • UG-3.1.2

                    The contents page for each amended Module is also updated: the table of contents is changed to show the new version date for each amended Section (in the 'Date Last Changed' column), and the contents page itself is also given its own new version date in the bottom right-hand corner. The Module contents pages thus act as a checklist for hard-copy users to verify which are the current version dates for each Section in that Module.

                    October 2010

                  • UG-3.1.3

                    A summary of any changes made to a Module is included in the Module History Section of each Module. The table summarises the nature of the change made, the date of the change, and the Module components and relevant pages affected. The Module History can thus be used to identify which pages were updated within individual Sections.

                    October 2010

                  • UG-3.1.4

                    Hard-copy users of the CBB Rulebook can check that they have the latest copy of each Module's contents pages, by referring to the overall table of contents for each Volume. The Volume table of contents lists the date each Module was last changed; users can use this table to check the date showing in the bottom right-hand corner of each Module's contents page.

                    October 2010

                  • UG-3.1.5

                    The website version of the Rulebook acts at all times as the definitive version of the Rulebook. Any changes are automatically posted to the CBB website, together with a summary of those changes. Licensees are in addition e-mailed every quarter, to notify them of any changes (if any). Hard-copy users are invited to print off the updated pages from the website to incorporate in their Rulebook in order to keep it current.

                    October 2010

                • Changes to Numbering

                  • UG-3.1.6

                    In order to limit the knock-on impact of inserting or deleting text on the numbering of text that follows the change, the following conventions apply:

                    (a) Where a new Paragraph is to be included in a Section, such that it would impact the numbering of existing text that would follow it, the Paragraph retains the numbering of the existing Paragraph immediately preceding it, but with the addition of an "A"; a second inserted Paragraph that follows immediately afterwards would be numbered with a "B", and so on.

                    For example, if a new Paragraph needs to be inserted after UG-3.1.6, it would be numbered UG-3.1.6A; a second new Paragraph would be numbered UG-3.1.6B, and so on. This convention avoids the need for renumbering existing text that follows an insertion. The same principle is applied where a new Section or a new Chapter needs to be inserted: for example, UG-3.1A (for a new Section), and UG-3A (for a new Chapter)
                    (b) Where a Paragraph is deleted, then the numbering of the old Paragraph is retained, and the following inserted in square brackets: '[This Paragraph was deleted in April 2006.]' (The date given being the actual end-calendar quarter date of the deletion.) The same principle is applied with respect to Sections and Chapters.
                    October 2010

                  • UG-3.1.7

                    Where many such changes have built up over time, then the CBB may reissue the whole Section, Paragraph, Chapter or even Module concerned, consolidating all these changes.

                    October 2010

              • UG-3.2 Rulebook Access

                • Availability

                  • UG-3.2.1

                    The Rulebook is available on the CBB website.

                    Amended: January 2013
                    October 2010

                • Queries

                  • UG-3.2.2

                    Questions regarding the administration of the Rulebook (e.g. website availability, the updating of material etc) should be addressed to the Rulebook Section of the Licensing & Policy Directorate:

                    Rulebook Section
                    Licensing & Policy Directorate
                    Central Bank of Bahrain
                    P.O. Box 27
                    Manama
                    Kingdom of Bahrain

                    Tel: + 973 - 17 54 7413
                    Fax: + 973 - 17 53 0228
                    E-mail: rulebook@cbb.gov.bh
                    Web: www.cbb.gov.bh

                    Questions regarding interpretation of the policy and requirements contained in the Rulebook should be addressed to the licensee's regular supervisory point of contact within the CBB.

                    Amended: January 2013
                    October 2010

            • CBB Rulebook Order Form [This form was deleted in January 2013]

              Deleted: January 2013

          • ES Executive Summary

        • High Level Standards

          • PB Principles of Business

            • PB-A Introduction

              • PB-A.1 Purpose

                • Executive Summary

                  • PB-A.1.1

                    The Principles of Business are a general statement of the fundamental obligations of all Central Bank of Bahrain ('CBB') specialised licenseesG and approved personsG . They serve as a basis for other material in Volume 5 (Specialised Licensees), and help address specific circumstances not covered elsewhere in the Rulebook.

                    October 2010

                  • PB-A.1.2

                    The Principles of Business have the status of Rules and apply alongside other Rules contained in Volume 5 (Specialised Licensees). However, these other Rules do not exhaust the fundamental obligations contained in the Principles. Compliance with all other Rules, therefore, does not necessarily guarantee compliance with the Principles of Business.

                    October 2010

                • Legal Basis

                  • PB-A.1.3

                    This Module contains the CBB's Directive (as amended from time to time) relating to Principles of Business and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all specialised licenseesG (including their approved personsG ) where applicable.

                    Amended: January 2011
                    October 2010

                  • PB-A.1.4

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

                    October 2010

              • PB-A.2 Module History

                • Evolution of Module

                  • PB-A.2.1

                    This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    October 2010

                  • PB-A.2.2

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

                    Module Ref. Change Date Description of Changes
                    PB-A.1.3 01/2011 Clarified legal basis.
                         
                         
                         
                         

            • PB-B Scope of Application

              • PB-B.1 Scope of Application

                • PB-B.1.1

                  The 10 Principles of Business apply to all CBB specialised licenseesG , in accordance with Paragraph PB-B.1.2. Principles 1-8 also apply to all approved personsG , in accordance with Paragraph PB-B.1.5.

                  October 2010

                • PB-B.1.2

                  These principles are addressed to all specialised licenseesG (where applicable).

                  October 2010

                • PB-B.1.3

                  Principles 1 to 10 apply to activities carried out by the specialised licenseeG , including activities carried out through overseas branches (if any).

                  October 2010

                • PB-B.1.4

                  The CBB expects specialised licenseesG to take into account any activities of other members of the groupG of which the specialised licenseeG is a member for Principles 9 and 10.

                  October 2010

                • PB-B.1.5

                  Principles 1 to 8 apply to approved personsG in respect of the controlled functionG for which they have been approved.

                  October 2010

                • PB-B.1.6

                  Principles 1 to 8 do not apply to behaviour by an approved personG with respect to any other functions or activities they may undertake. However, behaviour unconnected to their controlled functionG duties may nonetheless be relevant to an assessment of that person's fitness and propriety.

                  October 2010

                • PB-B.1.7

                  The CBB's requirements regarding approved personsG and controlled functionsG are located in Module AU (Authorisation).

                  October 2010

              • PB-B.2 Non-compliance

                • PB-B.2.1

                  Breaching a Principle of Business makes the specialised licenseeG or approvedG personG concerned liable to enforcement action. In the case of a licenseeG , this may call into question whether they continue to meet the licensing conditions (see Chapter AU-2). In the case of an approved personG , this may call into question whether they continue to meet the 'fit and proper' requirements for the function for which they have been approved (see Chapter AU-3).

                  October 2010

                • PB-B.2.2

                  Module EN (Enforcement) sets out the CBB's policy and procedures on enforcement action.

                  October 2010

            • PB-1 The Principles

              • Principle 1 – Integrity

                • PB-1.1.1

                  Specialised licenseesG and approved personsG must observe high standards of integrity and fair dealing. They must be honest and straightforward in their dealings with customersG , and provide full disclosure of all relevant information to customersG , as required by the CBB's Regulations and Directives.

                  October 2010

              • Principle 2 – Conflicts of Interest

                • PB-1.1.2

                  Specialised licenseesG and approved personsG must take all reasonable steps to identify, and prevent or manage, conflicts of interest that could harm the interests of a customerG .

                  October 2010

              • Principle 3 – Due Skill, Care and Diligence

                • PB-1.1.3

                  Specialised licenseesG and approved personsG must act with due skill, care and diligence.

                  October 2010

              • Principle 4 – Confidentiality

                • PB-1.1.4

                  Specialised licenseesG and approved personsG must observe in full any obligations of confidentiality, including with respect to customer information. This requirement does not over-ride lawful disclosures.

                  October 2010

              • Principle 5 – Market Conduct

                • PB-1.1.5

                  Specialised licenseesG and approved personsG must observe proper standards of market conduct, and avoid action that would generally be viewed as improper.

                  October 2010

              • Principle 6 – Customer Assets

                • PB-1.1.6

                  Specialised licenseesG and approved personsG must take reasonable care to safeguard the assets of customersG for which they are responsible.

                  October 2010

              • Principle 7 – Customer Interests

                • PB-1.1.7

                  Specialised licenseesG and approved personsG must pay due regard to the legitimate interests and information needs of their customersG and communicate with them in a fair and transparent manner. Specialised licenseesG and approved personsG , when dealing with customersG who are entitled to rely on their advice or discretionary decisions, must take reasonable care to ensure the suitability of such advice or decisions.

                  October 2010

              • Principle 8 – Relations with Regulators/Supervisors

                • PB-1.1.8

                  Specialised licenseesG and approved personsG must act in an open and co-operative manner with the CBB and other regulatory/supervisory bodies whose authority they come under. They must take reasonable care to ensure that their activities comply with all applicable laws and regulations.

                  October 2010

              • Principle 9 – Adequate Resources

                • PB-1.1.9

                  Specialised licenseesG must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

                  October 2010

              • Principle 10 – Management, Systems & Controls

                • PB-1.1.10

                  Specialised licenseesG must take reasonable care to ensure that their affairs are managed effectively and responsibly, with appropriate systems and controls in relation to the size and complexity of their operations. Specialised licenseesG ' systems and controls, as far as is reasonably practical, must be sufficient to manage the level of risk inherent in their business and ensure compliance with the CBB Rulebook.

                  October 2010

          • AA Auditors and Accounting Standards

            • AA-A Introduction

              • AA-A.1 Purpose

                • Executive Summary

                  • AA-A.1.1

                    This Module presents requirements that have to be met by specialised licenseesG with respect to the appointment of external auditors. This Module also sets out certain obligations that external auditors have to comply with, as a condition of their appointment by specialised licenseesG .

                    October 2010

                  • AA-A.1.2

                    This Module is issued under the powers given to the Central Bank of Bahrain ('CBB') under Decree No. (64) of 2006 with respect to promulgating the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). It supplements Article 61 of the CBB Law, which requires licenseesG to appoint an external auditor acceptable to the CBB.

                    October 2010

                • Legal Basis

                  • AA-A.1.3

                    This Module contains the CBB's Directive (as amended from time to time) relating to auditors and accounting standards used by specialised licenseesG , and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to all specialised licenseesG (where applicable).

                    Amended: January 2011
                    October 2010

                  • AA-A.1.4

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

                    October 2010

              • AA-A.2 Module History

                • Evolution of Module

                  • AA-A.2.1

                    This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    October 2010

                  • AA-A.2.2

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

                    Module Ref. Change Date Description of Changes
                    AA-A.1.3 01/2011 Clarified legal basis.
                    AA-3.1.1 07/2011 Excluded money changers and administrators from Paragraph AA-3.1.1.
                    AA-5 04/2012 Chapter amended and content moved to Section BR-3.5 for money changers and administrators (or Module GR for rep offices) and retitled as Role of External Auditor as Appointed Expert.
                    AA-1.3.2 10/2012 Guidance Paragraph deleted as five year period varies depending on type of specialised licensee and when license was granted.
                    AA-1.5.4 and AA-1.5.5 10/2012 Clarified guidance by indicating what Law is being referred to.
                    AA-3.3 10/2012 Section deleted as report can now also be completed by approved consultancy from as per Section FC-4.3.
                    AA-3.2.2 and AA-3.2.3 04/2014 Added specific auditor reports applicable to financing companies.
                    AA-3.1 10/2016 Deleted Section on Review of QPR

            • AA-B Scope of Application

              • AA-B.1 Specialised Licensees

                • AA-B.1.1

                  The contents of this Module – unless otherwise stated – apply to all specialised licenseesG . Representative Offices are exempted from this Module.

                  October 2010

                • AA-B.1.2

                  The contents of this Module apply to both Bahraini specialised licenseesG and overseas specialised licenseesG .

                  October 2010

              • AA-B.2 Auditors

                • AA-B.2.1

                  Certain requirements in this Module indirectly extend to auditors, by virtue of their appointment by specialised licenseesG . Auditors appointed by specialised licenseesG must be independent (cf. Sections AA-1.4 and AA-1.5). Auditors who resign or are otherwise removed from office are required to inform the CBB in writing of the reasons for the termination of their appointment (cf. Sections AA-1.2). Other requirements are contained in Sections AA-1.3 (Audit partner rotation) and AA-3.1 (Auditor reports).

                  October 2010

            • AA-1 Auditor Requirements

              • AA-1.1 Appointment of Auditors

                • AA-1.1.1

                  Specialised licenseesG must obtain prior written approval from the CBB before appointing or re-appointing their auditor.

                  October 2010

                • AA-1.1.2

                  As the appointment of auditors normally takes place during the course of the firm's annual general meeting, specialised licenseesG should notify the CBB of the proposed agenda for the annual general meeting in advance of it being circulated to shareholdersG . The CBB's approval of the proposed auditors does not limit in any way shareholders'G rights to subsequently reject the Board's choice.

                  October 2010

                • AA-1.1.3

                  The CBB, in considering the proposed (re-) appointment of an auditor, takes into account the expertise, resources and reputation of the audit firm, relative to the size and complexity of the licenseeG . The CBB will also take into account the track record of the audit firm in auditing specialised licenseesG within Bahrain; the degree to which it has generally demonstrated independence from management in its audits; and the extent to which it has identified and alerted relevant persons of significant matters. Finally, the CBB will also consider the audit firm's compliance with applicable laws and regulations (including legislative Decree No. 26 of 1996; the Ministry of Industry and Commerce's Ministerial Resolution No. 6 of 1998; and relevant Bahrain Stock Exchange regulations).

                  October 2010

                • AA-1.1.4

                  In the case of overseas specialised licenseesG , the CBB will also take into account who act as the auditors of the parent firm. As a general rule, the CBB does not favour different parts of a specialised licensee group having different auditors.

                  October 2010

              • AA-1.2 Removal or Resignation of Auditors

                • AA-1.2.1

                  Specialised licenseesG must notify the CBB as soon as they intend to remove their external auditor, with an explanation of their decision, or as soon as their auditor resign.

                  October 2010

                • AA-1.2.2

                  Specialised licenseesG must ensure that a replacement auditor is appointed (subject to CBB approval as per Section AA-1.1), as soon as reasonably practicable after a vacancy occurs, but no later than three months.

                  October 2010

                • AA-1.2.3

                  The external auditor of specialised licenseesG must inform the CBB in writing, should it resign or its appointment as auditor be terminated, within 30 calendar days, of the event occurring, setting out the reasons for the resignation or termination.

                  October 2010

              • AA-1.3 Audit Partner Rotation

                • AA-1.3.1

                  Unless otherwise exempted by the CBB, specialised licenseesG must ensure that the audit partner responsible for their audit does not undertake that function more than five years in succession.

                  October 2010

                • AA-1.3.2

                  [This Paragraph was deleted in October 2012].

                  Deleted: October 2012

                • AA-1.3.3

                  Specialised licenseesG must notify the CBB of any change in audit partner.

                  October 2010

              • AA-1.4 Auditor Independence

                • AA-1.4.1

                  Article 61(d) of the CBB Law imposes conditions for the auditor to be considered independent. Before a specialised licenseeG appoints an auditor, it must take reasonable steps to ensure that the auditor has the required skill, resources and experience to carry out the audit properly, and is independent of the licenseeG .

                  October 2010

                • AA-1.4.2

                  For an auditor to be considered independent, it must, among things, comply with the restrictions in Section AA-1.5.

                  October 2010

                • AA-1.4.3

                  If a specialised licenseeG becomes aware at any time that its auditor is not independent, it must take reasonable steps to remedy the matter and notify the CBB of the fact.

                  October 2010

                • AA-1.4.4

                  If in the opinion of the CBB, independence has not been achieved within a reasonable timeframe, then the CBB may require the appointment of a new auditor.

                  October 2010

              • AA-1.5 Licensee/Auditor Restrictions

                • Financial Transactions with Auditors

                  • AA-1.5.1

                    Specialised licenseesG must not provide regulated servicesG to their auditor.

                    October 2010

                • Outsourcing to Auditors

                  • AA-1.5.2

                    Specialised licenseesG may not outsource their internal audit function to the same firm that acts as their (external) auditor.

                    October 2010

                • Other Relationships

                  • AA-1.5.3

                    Specialised licenseesG and their auditor must comply with the restrictions contained in Article 217 (c) of the Commercial Companies Law (Legislative Decree No. (21) of 2001), as well as in Article 61(d) of the CBB Law.

                    October 2010

                  • AA-1.5.4

                    Article 217(c) of the Commercial Companies Law prohibits an auditor from (i) being the chairman or a member of the Board of DirectorsG of the licenseeG he/she audits; (ii) holding any managerial position in the licenseeG he/she audits; and (iii) acquiring any shares in the licenseeG he/she audits, or selling any such shares he/she may already own, during the period of his audit. Furthermore, the auditor must not be a relative (up to the second degree) of a person assuming management or accounting duties in the licensee.

                    Amended: October 2012
                    October 2010

                  • AA-1.5.5

                    Article 61(d) of the CBB Law prohibits an auditor from (i) being the chairman or a member of the Board of DirectorsG of the licensee he/she audits; (ii) acting as a managing director, agent or representative of the licensee concerned; and (iii) taking up any administrative work in the licensee, or supervising its accounts, or having a next of kin in such a position.

                    Amended: October 2012
                    October 2010

                  • AA-1.5.6

                    The restriction in Paragraph AA-1.5.4 applies to overseas specialised licenseesG as well as Bahraini specialised licenseesG .

                    October 2010

                  • AA-1.5.7

                    A partner, DirectorG or manager on the engagement team of auditing a specialised licenseeG may not serve on the Board or in a controlled functionG of the licenseeG , for two years following the end of their involvement in the audit, without prior authorisation of the CBB.

                    October 2010

                  • AA-1.5.8

                    Chapter AU-1.2 sets out the CBB's "controlled functionsG " requirements.

                    October 2010

                • Definition of 'Auditor'

                  • AA-1.5.9

                    For the purposes of Section AA-1.5, 'auditor' means the partners, DirectorsG and managers on the engagement team responsible for the audit of the specialised licenseeG .

                    October 2010

            • AA-2 Access

              • AA-2.1 CBB Access to Auditors

                • AA-2.1.1

                  Specialised licenseesG must waive any duty of confidentiality on the part of their auditor, such that their auditor may report to the CBB any concerns held regarding material failures by the specialised licenseeG to comply with CBB requirements.

                  October 2010

                • AA-2.1.2

                  The CBB may, as part of its on-going supervision of specialised licenseesG , request meetings with a licensee'sG auditor. If necessary, the CBB may direct that the meeting be held without the presence of the licensee'sG management or DirectorsG .

                  October 2010

              • AA-2.2 Auditor Access to Outsourcing Providers

                • AA-2.2.1

                  Outsourcing agreements between specialised licenseesG and outsourcing providers must ensure that the licensee'sG internal and external auditors have timely access to any relevant information they may require to fulfil their responsibilities. Such access must allow them to conduct on-site examinations of the outsourcing provider, if required.

                  October 2010

                • AA-2.2.2

                  Further Rules and Guidance on outsourcing are contained in Module RM (Risk Management).

                  October 2010

            • AA-3 Auditor Reports

              • AA-3.1 This Section was deleted in October 2016.

                Deleted: October 2016

                • AA-3.1.1

                  [This paragraph was deleted in October 2016]

                  Deleted: October 2016
                  Amended: July 2011
                  October 2010

                • AA-3.1.2

                  [This paragraph was deleted in October 2016]

                  Deleted: October 2016
                  October 2010

              • AA-3.2 Review of Financial Disclosures

                • AA-3.2.1

                  Specialised licenseesG that are required to publish financial disclosures in accordance with Module PD must arrange for their external auditor to review these prior to their publication, unless otherwise exempted in writing by the CBB.

                  Amended: April 2014
                  October 2010

                • AA-3.2.2

                  Financing companiesG must arrange for their external auditor to review the annual disclosures required in Module PD, Section PD-1.3 and Chapter PD-4, prior to their submission to the CBB or their publication. This review must be in the form of an agreed-upon procedures report (see also PD-A.2.4). The report must be submitted to the CBB within 3 months of the year end of the concerned financing companyG (see also Paragraph BR-1.1.2).

                  Added: April 2014

                • AA-3.2.3

                  Financing companiesG must arrange for their external auditor to review the disclosures in the half-yearly financial statements required by Module PD, Paragraph PD-2.1.6 prior to their submission to the CBB or their publication. This review must be in the form of an agreed-upon procedure report. This report must be submitted to the CBB within two months of the end of the half year reporting period of the concerned financing companyG (see also Section BR-1.2.4).

                  Added: April 2014

              • AA-3.3 Report on Compliance with Financial Crime Rules [This Section was deleted in October 2012]

                • AA-3.3.1

                  [This Paragraph was deleted in October 2012].

                  Deleted: October 2012

                • AA-3.3.2

                  [This Paragraph was deleted in October 2012].

                  Deleted: October 2012

                • AA-3.3.3

                  [This Paragraph was deleted in October 2012].

                  Deleted: October 2012

            • AA-4 Accounting Standards

              • AA-4.1 General Requirements

                • AA-4.1.1

                  Specialised licenseesG must comply with International Financial Reporting Standards / International Accounting Standards and, to the extent that they undertake Shari'a compliant activities, relevant standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

                  October 2010

                • AA-4.1.2

                  Overseas specialised licenseesG that do not, at the parent licensee level, apply IFRS/IAS are still required under Paragraph AA-4.1.1 to produce pro-forma accounts for the Bahrain branch in conformity with these standards. Where this requirement is difficult to implement, the Bahraini specialised licenseeG should contact the CBB in order to agree to a solution.

                  October 2010

                • AA-4.1.3

                  Paragraph AA-4.1.1 requires specialised licenseesG that operate exclusively on a Shari'a compliant basis to apply relevant AAOIFI Financial Accounting Standards, depending on the type of Islamic finance contracts entered into. Specialised licenseesG that undertake both conventional finance and Shari'a compliant transactions are required by Paragraph AA-4.1.1 to apply AAOIFI Financial Accounting Standard 18, "Islamic Financial Services Offered by Conventional Financial Institutions".

                  October 2010

            • AA-5 Role of External Auditor as Appointed Expert

              • AA-5.1 General Requirements

                • AA-5.1.1

                  In accordance with Articles 114 and 121 of the CBB Law, the CBB may appoint appointed expertsG to undertake on-site examinations or report by way of investigations on specific aspects of a licensee'sG business. External auditors may be called upon to be appointed expertsG and should be aware of their role in that capacity by referring to Section BR-3.5 for money changers and administrators or Module GR for representative office licenseesG .

                  [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                  Amended: April 2012
                  October 2010

              • AA-5.2 The Required Report

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

              • AA-5.3 Other Notifications to the CBB

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

              • AA-5.4 Permitted Disclosure by the CBB

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

              • AA-5.5 Trilateral Meeting

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

        • Business Standards

          • FC Financial Crime

            • FC-A Introduction

              • FC-A.1 Purpose

                • Executive Summary

                  • FC-A.1.1

                    This Module applies, to all specialised licenseesG , a comprehensive framework of Rules and Guidance aimed at combating money laundering and terrorist financing. In so doing, it helps implement the 40 Recommendations on money laundering and 9 Special Recommendations on terrorist financing, issued by the Financial Action Task Force (FATF), that are relevant to specialised licenseesG . (Further information on these can be found in Chapter FC-10.) The Module also contains measures relating to the combating of fraud.

                    October 2010

                  • FC-A.1.2

                    The Module requires specialised licenseesG to have effective anti-money laundering ('AML') policies and procedures, in addition to measures for combating the financing of terrorism ('CFT'). The Module contains detailed requirements relating to customer due diligence, reporting and the role and duties of the Money Laundering Reporting Officer (MLRO). Furthermore, examples of suspicious activity are provided, to assist licenseesG monitor transactions and fulfill their reporting obligations under Bahrain law.

                    October 2010

                  • FC-A.1.3

                    This Module also covers measures in place to combat fraud. Chapter FC-11 sets out basic requirements regarding measures to deter, detect and report instances of fraud and attempted fraud.

                    October 2010

                • Legal Basis

                  • FC-A.1.4

                    This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding the combating of financial crime, and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all specialised licenseesG .

                    Amended: January 2011
                    October 2010

                  • FC-A.1.5

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

                    October 2010

              • FC-A.2 Module History

                • Evolution of Module

                  • FC-A.2.1

                    This Module was first issued in October 2010. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    October 2010

                  • FC-A.2.2

                    A list of recent changes made to this Module is detailed in the table below:

                    Module Ref. Change Date Description of Changes
                    FC-A.1.4 01/2011 Clarified legal basis.
                    FC-B.1.1 07/2011 Exempted administrators from specific sections of this Module.
                    FC-4.1.7 04/2012 Clarified requirements for MLRO.
                    FC-4.3 04/2012 Amended Section to allow for CBB-approved consultancy firm to do required sample testing and report under Paragraph FC-4.3.1.
                    FC-B.1.1 10/2012 Amended the scope of application to have a limited scope for ancillary services providers and to expand the role of the general managers for those licensees allowed to follow only certain Chapters of Module FC.
                    FC-1.2.3(b) 01/2013 Clarified location of guidance under Part B Supplementary Information Appendix FC-(v).
                    FC-1.2.11(f) and FC-1.2.11A 04/2013 Provided additional details when dealing with employee benefit trusts and occupational savings schemes.
                    FC-1.10.1 04/2013 Updated language to refer to licensed exchange.
                    FC-2.2.3A 04/2013 Guidance Paragraph added for trust service providers on automatic transaction monitoring.
                    FC-7.1.4 04/2013 Reference made to the use of electronic records.
                    FC-5.2.3 10/2014 Updated method of submitting STRs.
                    FC-5.3 10/2014 Updated relevant authorities information.
                    FC-1.2.8 07/2016 Change made for consistency across CBB Rulebook.
                    FC-1.5.4 07/2016 Definition of PEPs is already included in Glossary so this guidance paragraph was deleted.
                    FC-5.2.3 07/2016 Updated instructions for STR.
                    FC-1.2.9A 01/2017 Added guidance paragraph on CR printing
                    FC-8.2.1AA 04/2017 Added new Paragraph on Implementing and complying with the United Nations Security Council resolutions requirement.
                    FC-1.1.2A and FC-1.1.2B 10/2017 Added new paragraphs on CDD requirements.
                    FC-1.2.7 10/2017 Amended paragraph.
                    FC-1.2.8A 10/2017 Added new paragraph on legal entities or legal arrangements CDD.
                    FC-2.2.10 – FC- 2.2.11 10/2017 Amended paragraphs on On-going CDD and Transaction Monitoring.
                    FC-4.1.4A 10/2017 Added paragraph on combining the MLRO or DMLRO position with any other position within the licensee.
                    FC-B.2.4 01/2018 Added new paragraph on implementation of groupwide programmes against money laundering and terrorist financing.
                    FC-1.7.1 01/2018 Amended paragraph.
                    FC-1.10.1 01/2018 Deleted paragraph.
                    FC-5.2.6 01/2018 Amended paragraph.
                    FC-8.1.3 01/2018 Added new paragraph on due diligence measures (FATF).
                    FC-8.1.4 01/2018 Added new guidance paragraph.
                    FC-8.2.2 01/2018 Deleted paragraph.
                    FC-1.1.2 07/2018 Deleted sub-paragraph (a).
                    FC-1.9 07/2018 Amended Section title deleting the threshold.
                    FC-1.9.2 07/2018 Amended Paragraph deleting the threshold.
                    FC-1.10.1 07/2018 Deleted sub-paragraph (a).
                    FC-1.10.3 07/2018 Deleted Paragraph.
                    FC-1.10.8 07/2018 Deleted Paragraph.
                    FC-1.10.1 01/2019 Amended reference.

                • Superseded Requirements

                  • FC-A.2.3

                    Prior to the introduction of this Module, the CBB (BMA then) had issued various regulatory instruments containing requirements covering different aspects of financial crime. These requirements were consolidated and updated into a comprehensive financial crime regulation, issued in January 2006 to all non-bank and non-insurance licensees. In turn, this new consolidated regulation was transposed, with no major changes, into the initial version of this Module. This Regulation and other instruments listed below replaced by this Module are listed below:

                    Document Ref. Date of Issue Module Ref. Document Subject
                    BC/17/97 10 Nov 1997 FC B-1 Money Laundering
                    OG/308/89 14 Oct 1989 FC B-1 Money Laundering
                    EDBC/6/01 14 Oct 2001 FC 1, FC 4 – FC
                    7
                    Re: Money Laundering Regulation
                    BC/1/02 27 Jan 2002 FC 3 FATF Special Recommendations on Terrorism Financing
                    BC/3/00 5 Mar 2000 FC 1.5 Re: Accounts for Charity Organisations
                    EDFIS/136/2005 19 June 2005   New draft Financial Crime Regulation and Guidance
                    FIS/C/001/2006 2 Jan 2006 FC-A to FC-10 New Financial Crime Regulation.
                           
                    October 2010

            • FC-B Scope of Application

              • FC-B.1 Scope of Application

                • FC-B.1.1

                  This Module applies to all specialised licenseesG including branches of licenseesG incorporated outside of Bahrain, and Bahrain-incorporated subsidiaries of overseas groups. Certain parts of this Module may not be relevant to some licensees'G business. Some transactions may not involve the opening of account relationships, however whenever a transaction takes place with another party or the licenseeG acts as an introducer or intermediary in a transaction or business relationship, then this Module becomes effective. Representative office licenseesG , administratorsG and ancillary services providers are exempted from: FC-2, FC-3, FC-4 and FC-6 because of the limited nature of their business; however, for these licensees, the general manager of the licensee is responsible to comply with the remaining Chapters of Module FC. The scope provided for simplified customer due diligence requirements – as set out in Section FC-1.10 – will reduce the burden of customer due diligence for a number of specialised licenseesG .

                  Amended: October 2012
                  Amended: July 2011
                  October 2010

                • FC-B.1.2

                  The requirements of this Module are in addition to and supplement Decree Law No. (4) of 2001 with respect to the prevention and prohibition of the laundering of money; this Law was subsequently updated, with the issuance of Decree Law No. 54 of 2006 with respect to amending certain provisions of Decree No. 4 of 2001 (collectively, 'the AML Law'). The AML Law imposes obligations on persons generally in relation to the prevention of money laundering and the combating of the financing of terrorism, to all persons resident in Bahrain. All specialised licenseesG are therefore under the statutory obligations of that Law, in addition to the more specific requirements contained in this Module. Nothing in this Module is intended to restrict the application of the AML Law (a copy of which is contained in Part B of Volume 5 (Specialised licensees), under 'Supplementary Information'). Also included in Part B is a copy of Decree Law No. 58 of 2006 with respect to the protection of society from terrorism activities ('the anti-terrorism law).

                  October 2010

              • FC-B.2 Overseas Subsidiaries and Branches

                • FC-B.2.1

                  LicenseesG must apply the requirements in this Module to all their branches and subsidiaries operating both in the Kingdom of Bahrain and in foreign jurisdictions. Where local standards differ, the higher standard must be followed. LicenseesG must pay particular attention to procedures in branches or subsidiaries in countries that do not or insufficiently apply the FATF Recommendations and Special Recommendations.

                  October 2010

                • FC-B.2.2

                  Where another jurisdiction's laws or regulations prevent a licenseeG (or any of its foreign branches or subsidiaries) from applying the same standards contained in this Module or higher, the licenseeG must immediately inform the CBB in writing.

                  October 2010

                • FC-B.2.3

                  In such instances, the CBB will review alternatives with the licensee.G Should the CBB and the licenseeG be unable to reach agreement on the satisfactory implementation of this Module in a foreign subsidiary or branch, the licenseeG may be required by the CBB to cease the operations of the subsidiary or branch in the foreign jurisdiction in question.

                  October 2010

                • FC-B.2.4

                  Financial groups (e.g. a licensee with its subsidiaries) must implement groupwide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes, which must also be applicable, and appropriate to, all branches and subsidiaries of the financial group. These must include:

                  (a) The development of internal policies, procedures and controls, including appropriate compliance management arrangements, and adequate screening procedures to ensure high standards when hiring employees;
                  (b) An ongoing employee training programme;
                  (c) An independent audit function to test the system;
                  (d) Policies and procedures for sharing information required for the purposes of CDD and money laundering and terrorist financing risk management;
                  (e) The provision at group-level compliance, audit, and/or AML/CFT functions of customer, account and transaction information from branches and subsidiaries when necessary for AML/CFT purposes; and
                  (f) Adequate safeguards on the confidentiality and use of information exchanged.
                  Added: January 2018

            • FC-1 Customer Due Diligence

              • FC-1.1 General Requirements

                • Verification of Identity and Source of Funds

                  • FC-1.1.1

                    LicenseesG must establish effective systematic internal procedures for establishing and verifying the identity of their customers and the source of their funds. Such procedures must be set out in writing and approved by the licensee'sG Board of Directors. They must be strictly adhered to.

                    October 2010

                  • FC-1.1.2

                    LicenseesG must implement the customer due diligence measures outlined in Chapters 1, 2 and 3 when:

                    (a) [This Sub-paragraph was deleted in July 2018];
                    (b) Carrying out wire transfers (of the equivalent of US$1,000 or above) (particularly relevant for money changers);
                    (c) Establishing business relations with a new or existing customer;
                    (d) A change to the signatory or beneficiary of an existing account or business relationship is made;
                    (e) CustomerG documentation standards change substantially;
                    (f) The licenseeG has doubts about the veracity or adequacy of previously obtained customer due diligence information;
                    (g) A significant transactionG takes place (see FC-2.2.3);
                    (h) There is a material change in the way that an account is operated or in the manner in which the business relationship is conducted; or
                    (i) There is a suspicion of money laundering or terrorist financing.
                    Amended: July 2018
                    October 2010

                  • FC-1.1.2A

                    LicenseesG must understand, and as appropriate, obtain information on the purpose and intended nature of the business relationship.

                    Added: October 2017

                  • FC-1.1.2B

                    LicenseesG must conduct ongoing due diligence on the business relationship, including:

                    (a) Scrutinizing transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds; and
                    (b) Ensuring that documents, data or information collected under the CDD process is kept up-to-date and relevant, by undertaking reviews of existing records, particularly for higher risk categories of customers.
                    Added: October 2017

                  • FC-1.1.3

                    Representative office licenseesG are not allowed to undertake business directly with customersG . However, they may be assigned by the Head Office to contact new or existing customersG on their behalf, in this case they must pay regard to (c) – (f) and (h-i) customer due diligence measures listed under FC-1.1.2 above.

                    October 2010

                  • FC-1.1.4

                    For the purposes of this Module, "customer" includes counterparties such as financial markets counterparties, except where financial institutions are acting as principals where simplified due diligence measures may apply. These simplified measures are set out in Section FC 1.10. For the representative office licenseesG , 'customer' includes customers of the HO that the Representative office liaises with for general purposes. Examples might include general inquiries and inquiries regarding the accuracy of customer information.

                    October 2010

                  • FC-1.1.5

                    The CBB's specific minimum standards to be followed with respect to verifying customer identity and source of funds are contained in Section FC-1.2 and in the Guidance Notes (See Supplementary Information, FC-7 in Part B of the Rulebook). Enhanced requirements apply under certain high-risk situations: these requirements are contained in Sections FC-1.3 to FC-1.9 inclusive. Additional requirements apply where a licenseeG is relying on a professional intermediary to perform certain parts of the customer due diligence process: these are detailed in Section FC-1.7. Simplified customer due diligence measures may apply in defined circumstances: these are set out in Section FC-1.10.

                    October 2010

                • Verification of Third Parties

                  • FC-1.1.6

                    LicenseesG must obtain a signed statement from all new customers (or for one-off transactions above the BD6,000 threshold for moneychangers) confirming whether or not the customer is acting on their own behalf or not. This undertaking must be obtained prior to conducting any transactions with the customer concerned.

                    October 2010

                  • FC-1.1.7

                    Where a customer is acting on behalf of a third party, the licenseeG must also obtain a signed statement from the third party, confirming they have given authority to the customer to act on their behalf. Where the third party is a legal person, the licenseeG must have sight of the original board resolution (or other applicable document) authorising the customer to act on the third party's behalf, and retain a certified copy. Representative office licenseesG must obtain a signed statement from all new customers confirming whether or not the customer is acting on their own behalf or not.

                    October 2010

                  • FC-1.1.8

                    LicenseesG must establish and verify the identity of the customer and (where applicable) the party/parties on whose behalf the customer is acting, including the Beneficial Owner of the funds. Verification must take place in accordance with the requirements specified in this Chapter.

                    October 2010

                  • FC-1.1.9

                    Where financial services are provided to a minor or other person lacking full legal capacity, the normal identification procedures as set out in this Chapter must be followed. In the case of minors, licenseesG must additionally verify the identity of the parent(s) or legal guardian(s). Where a third party on behalf of a person lacking full legal capacity wishes to open business relations, the licenseeG must establish the identity of that third party as well as the person conducting the business.

                    October 2010

                • Anonymous and Nominee Accounts

                  • FC-1.1.10

                    LicenseesG must not establish or keep anonymous accounts or accounts in fictitious names. Where licenseesG maintain a nominee account, which is controlled by or held for the benefit of another person, the identity of that person must be disclosed to the licenseeG and verified by it in accordance with the requirements specified in this Chapter.

                    October 2010

                • Timing of Verification

                  • FC-1.1.11

                    LicenseesG must not commence a business relationship or undertake an occasional transaction (above the threshold) with a customer before completion of the relevant customer due diligence measures specified in Chapters 1, 2 and 3. However, verification may be completed after receipt of funds in the case of non face-to-face business, or the subsequent submission of CDD documents by the customer after initial face-to face contact, providing that no disbursement of funds takes place until after the requirements of this Chapter have been fully met.

                    October 2010

                • Incomplete Customer Due Diligence

                  • FC-1.1.12

                    Where a licenseeG is unable to comply with the requirements specified in Chapters 1, 2 and 3, it must consider whether to terminate the relationship or not proceed with the transaction. If it proceeds with the transaction (to avoid tipping off the customer), it should additionally consider whether it should file a suspicious transaction report.

                    October 2010

                  • FC-1.1.13

                    See also Chapter FC-5, which covers the filing of suspicious transaction reports.

                    October 2010

              • FC-1.2 Face-to-face Business

                • Natural Persons

                  • FC-1.2.1

                    If the customer is a natural person, licenseesG must obtain and record the following information (in hard copy or electronic form), before providing financial services as described in Paragraph FC-1.1.2:

                    (a) Full legal name and any other names used;
                    (b) Full permanent address (i.e. the residential address of the customer; a post office box is insufficient);
                    (c) Date and place of birth;
                    (d) Nationality;
                    (e) Passport number (if the customer is a passport holder);
                    (f) CPR or residence permit number (for residents of Bahrain or GCC states);
                    (g) Telephone/fax number and email address (where applicable);
                    (h) Occupation or public position held (where applicable);
                    (i) Employer's name and address (if self-employed, the nature of the self-employment);
                    (j) Type of account, and nature and volume of anticipated business dealings with the licenseeG ;
                    (k) Signature of the customer(s)G ; and
                    (l) Source of funds.
                    October 2010

                  • FC-1.2.2

                    See the Guidance Notes (filed under Supplementary Information in Part B of Volume 5) for further information on source of funds (FC-1.2.1 (1)) and CDD requirements for Bahrain residents (FC-1.2.1 (c) & (f)).

                    October 2010

                  • FC-1.2.3

                    LicenseesG must verify the information in Paragraph FC-1.2.1 (a) to (f), by the following methods below; at least one of the copies of the identification documents mentioned in (a) and (b) below must include a clear photograph of the customer:

                    (a) Confirmation of the date of birth and legal name, by taking a copy of a current valid official original identification document (e.g. birth certificate, passport, CPR or residence permit number);
                    (b) Confirmation of the permanent residential address by taking a copy of a recent utility bill, bank statement or similar statement from another licenseeG or financial institution, or some form of official correspondence or official documentation card, such as CPR, from a public/governmental authority, or a tenancy agreement or record of home visit by an official of the licenseeG (see also Guidance Notes under Part B Supplementary Information Appendix FC-(v); and
                    (c) Where appropriate, direct contact with the customer by phone, letter or email to confirm relevant information, such as residential address information.
                    Amended: January 2013
                    Amended: April 2012
                    October 2010

                  • FC-1.2.4

                    Any document copied for the purpose of identification verification must be an original. An authorised official of the licenseeG must certify the copy, by writing on it the words 'original sighted', together with the date and his signature. Equivalent measures must be taken for electronic copies.

                    October 2010

                  • FC-1.2.5

                    Identity documents which are not obtained by an authorised official of the licenseeG in original form (e.g. due to a customer sending a copy by post following an initial meeting) must instead be certified (as per FC-1.2.4) by one of the following from a GCC or FATF member state:

                    (a) A lawyer;
                    (b) A notary;
                    (c) A chartered/certified accountant;
                    (d) An official of a government ministry;
                    (e) An official of an embassy or consulate; or
                    (f) An official of another licensed financial institution or of a licensed associate company of the licenseeG .
                    October 2010

                  • FC-1.2.6

                    The individual making the certification under FC-1.2.5 must give clear contact details (e.g. by attaching a business card or company stamp). The licenseeG must verify the identity of the person providing the certification through checking membership of a professional organisation (for lawyers or accountants), or through checking against databases/websites, or by direct phone or email contact.

                    October 2010

                • Legal Entities or Legal Arrangements (such as trusts)

                  • FC-1.2.7

                    If the customer is a legal entity or a legal arrangement such as a trust, the licenseeG must obtain and record the following information from original identification documents, databases or websites, in hard copy or electronic form, identify the customer and to take reasonable measures to verify its identity, legal existence and structure:

                    (a) The entity's full name and other trading names used;
                    (b) Registration number (or equivalent);
                    (c) Legal form and proof of existence;
                    (d) Registered address and trading address (where applicable);
                    (e) Type of business activity;
                    (f) Date and place of incorporation or establishment;
                    (g) Telephone, fax number and email address;
                    (h) Regulatory body or listing body (for regulated activities such as financial services and listed companies);
                    (hh) The names of the relevant persons having a senior management position in the legal entity or legal arrangement;
                    (i) Name of external auditor (where applicable);
                    (j) Type of account, and nature and volume of anticipated business dealings with the licenseeG ; and
                    (k) Source of funds.
                    Amended: October 2017
                    October 2010

                  • FC-1.2.8

                    The information provided under Paragraph FC-1.2.7 must be verified by obtaining certified copies of the following documents, as applicable (depending on the legal form of the entity):

                    (a) Certificate of incorporation and/or certificate of commercial registration or trust deed;
                    (b) Memorandum of association;
                    (c) Articles of association;
                    (d) Partnership agreement;
                    (e) Board resolution seeking financial services (only necessary in the case of private or unlisted companies);
                    (f) Identification documentation of the authorised signatories of the account (certification not necessary for companies listed in a GCC/FATF state);
                    (g) Copy of the latest financial report and accounts, audited where possible (audited copies do not need to be certified); and
                    (h) List of persons authorised to do business on behalf of the company and in the case of the opening of an account, a board resolution (or other applicable document) authorising the named persons to operate the account (resolution only necessary for private or unlisted companies).
                    Amended: July 2016
                    October 2010

                  • FC-1.2.8A

                    For customers that are legal persons, LicenseesG must identify and take reasonable measures to verify the identity of beneficial ownersG through the following information:

                    (a) The identity of the natural person(s) who ultimately have a controlling ownership interest in a legal person, and
                    (b) To the extent that there is doubt under (a) as to whether the person(s) with the controlling ownership interest is the beneficial ownerG (s), or where no natural person exerts control of the legal person or arrangement through other means; and
                    (c) Where no natural person is identified under (a) or (b) above, the identity of the relevant natural person who holds the position of senior managing official.
                    Added: October 2017

                  • FC-1.2.9

                    Documents obtained to satisfy the requirements in Paragraph FC-1.2.8 above must be certified in the manner specified in Paragraphs FC-1.2.4 to FC-1.2.6.

                    October 2010

                  • FC-1.2.9A

                    For the purpose of Paragraph FC-1.2.8(a), the requirement to obtain a certified copy of the commercial registration, may be satisfied by obtaining a commercial registration abstract printed directly from the Ministry of Industry, Commerce and Tourism's website, through "SIJILAT Commercial Registration Portal".

                    Added: January 2017

                  • FC-1.2.10

                    The documentary requirements in Paragraph FC-1.2.8 above do not apply in the case of FATF/GCC listed companies: see Section FC-1.10 below. Also, the documents listed in Paragraph FC-1.2.8 above are not exhaustive: for customers from overseas jurisdictions, documents of an equivalent nature may be produced as satisfactory evidence of a customer's identity.

                    October 2010

                  • FC-1.2.11

                    LicenseesG must also obtain and document the following due diligence information. These due diligence requirements must be incorporated in the licensee'sG new business procedures:

                    (a) Enquire as to the structure of the legal entity or trust sufficient to determine and verify the identity of the ultimate beneficial owner of the funds, the ultimate provider of funds (if different), and the ultimate controller of the funds (if different);
                    (b) Ascertain whether the legal entity has been or is in the process of being wound up, dissolved, struck off or terminated;
                    (c) Obtain the names, country of residence and nationality of directors or partners (only necessary for private or unlisted companies);
                    (d) Require, through new customer documentation or other transparent means, updates on significant changes to corporate ownership and/or legal structure;
                    (e) Obtain and verify the identity of shareholders holding 20% or more of the issued capital (where applicable). The requirement to verify the identity of these shareholders does not apply in the case of FATF/GCC listed companies;
                    (f) In the case of trusts or similar arrangements (excluding employee benefit trusts and occupational savings schemes), establish the identity of the settlor(s), trustee(s), and beneficiaries (including making such reasonable enquiries as to ascertain the identity of any other potential beneficiary, in addition to the named beneficiaries of the trust); and
                    (g) Where a licenseeG has reasonable grounds for questioning the authenticity of the information supplied by a customer, conduct additional due diligence to confirm the above information.
                    Amended: April 2013
                    October 2010

                  • FC-1.2.11A

                    In the case of employee benefit trusts and occupational savings schemes, the licensee must establish the identity of the settlor and trustee as required in FC-1.2.11(f), but may rely upon the settlor to maintain the identity information of the beneficiaries, subject to written confirmation from the settlor that such information has been collected.

                    Added: April 2013

                  • FC-1.2.12

                    For the purposes of Paragraph FC-1.2.11, acceptable means of undertaking such due diligence might include taking bank references; visiting or contacting the company by telephone; undertaking a company search or other commercial enquiries; accessing public and private databases (such as stock exchange lists); making enquiries through a business information service or credit bureau; confirming a company's status with an appropriate legal or accounting firm; or undertaking other enquiries that are commercially reasonable.

                    October 2010

              • FC-1.3 Enhanced Customer Due Diligence: General Requirements

                • 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.

                  October 2010

                • FC-1.3.2

                  The additional information referred to in Paragraph FC-1.3.1 might include documents (either in hard copy or electronic format) relating to the following:

                  (a) Evidence of a person's permanent address through the use of a credit reference agency search or through independent verification by home visit;
                  (b) A personal reference (e.g. by an existing customer of the licenseeG );
                  (c) Another licensed entity's reference and contact with the concerned licenseeG regarding the customer;
                  (d) Documentation outlining the customer's source of wealth;
                  (e) Documentation outlining the customer's source of income; and
                  (f) Independent verification of employment, or public position held.
                  October 2010

                • 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.

                  October 2010

              • FC-1.4 Enhanced Customer Due Diligence: Non face-to-face Business and New Technologies

                • FC-1.4.1

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

                  October 2010

                • FC-1.4.2

                  Where no face-to-face contact takes place, licenseesG 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, licenseesG must take measures:

                  (a) To ensure that the customer is the person they claim to be; and
                  (b) To ensure that the address provided is genuinely the customer's.
                  October 2010

                • FC-1.4.3

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

                  (a) Telephone contact with the applicant on an independently verified home or business number;
                  (b) With the customer's consent, contacting an employer to confirm employment, via phone through a listed number or in writing; and
                  (c) Salary details appearing on recent bank statements.
                  October 2010

                • FC-1.4.4

                  Financial services provided via post, telephone or internet pose greater challenges for customer identification and AML/CFT purposes. LicenseesG must establish procedures to prevent the misuse of technological developments in money laundering or terrorist financing schemes. LicenseesG must also ensure that they comply with any e-commerce laws and/or CBB Modules issued from time to time.

                  October 2010

              • FC-1.5 Enhanced Customer Due Diligence: Politically Exposed Persons (“PEPs”)

                • FC-1.5.1

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

                  October 2010

                • FC-1.5.2

                  LicenseesG must establish a client acceptance policy with regard to PEPsG , taking into account the reputational and other risks involved. Senior management approval must be obtained before a PEPG is accepted as a customer.

                  October 2010

                • FC-1.5.3

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

                  (a) Analysis of complex financial structures, including trusts, foundations or international business corporations;
                  (b) A written record in the customer file to establish that reasonable measures have been taken to establish both the source of wealth and the source of funds;
                  (c) Development of a profile of anticipated customer activity, to be used in on-going monitoring;
                  (d) Approval of senior management for allowing the customer relationship to continue; and
                  (e) Ongoing account monitoring of the PEP'sG account by senior management (such as the MLRO).
                  October 2010

                • FC-1.5.4

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

                  Deleted: July 2016
                  October 2010

              • FC-1.6 Enhanced Due Diligence: Charities, Clubs and Other Societies

                • 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.

                  October 2010

                • 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).

                  October 2010

                • 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. LicenseesG must ensure that such transfers are in accordance with the spending plans of the charity (in terms of amount, recipient and country).

                  October 2010

                • 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 licenseesG 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 bank.

                  October 2010

                • 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.

                  October 2010

              • FC-1.7 Introduced Business from Professional Intermediaries

                • FC-1.7.1

                  A licenseeG 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 licenseesG 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 licenseeG , not the introducer.

                  Amended: January 2018
                  October 2010

                • FC-1.7.2

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

                  (a) The customer due diligence measures applied by the introducer are consistent with those required by the FATF 40 + 9 Recommendations;
                  (b) A formal agreement is in place defining the respective roles of the licenseeG and the introducer in relation to customer due diligence measures. The agreement must specify that the customer due diligence measures of the introducer will comply with the FATF 40 + 9 Recommendations;
                  (c) The introducer is able to provide all relevant data pertaining to the customer's identity, the identity of the customer and beneficial owner of the funds and, where applicable, the party/parties on whose behalf the customer is acting; also, the introducer has confirmed that the licenseeG will be allowed to verify the customer due diligence measures undertaken by the introducer at any stage; and
                  (d) Written confirmation is provided by the introducer confirming that all customer due diligence measures required by the FATF 40 + 9 Recommendations have been followed and the customer's identity established and verified. In addition, the confirmation must state that any identification documents or other customer due diligence material can be accessed by the licenseeG and that these documents will be kept for at least five years after the business relationship has ended.
                  October 2010

                • FC-1.7.3

                  The licenseeG 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 licenseeG must also perform periodic reviews to verify whether the jurisdiction is in compliance with the FATF 40 + 9 Recommendations.

                  October 2010

                • FC-1.7.4

                  Should the licenseeG not be satisfied that the introducer is in compliance with the requirements of the FATF 40 + 9 Recommendations, the licenseeG must conduct its own customer due diligence on introduced business, or not accept further introductions, or discontinue the business relationship with the introducer.

                  October 2010

              • FC-1.8 Shell Banks

                • FC-1.8.1

                  LicenseesG 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"). LicenseesG must not knowingly establish relations with financial institutions that have relations with shell banks.

                  October 2010

                • FC-1.8.2

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

                  October 2010

              • FC-1.9 Enhanced Due Diligence: Cross Border Cash Transactions by Courier

                • 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, licenseesG 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'G 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). LicenseesG 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.

                  October 2010

                • 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.

                  Amended: July 2018
                  October 2010

                • 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.

                  October 2010

                • 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).

                  October 2010

                • 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.

                  October 2010

              • FC-1.10 Simplified Customer Due Diligence

                • FC-1.10.1

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

                  (a) [This Subparagraph was deleted in July 2018];
                  (b) The transaction is a wire transfer below the equivalent of US$1000;
                  (c) The customer is a company listed on a GCC or FATF member state stock exchange with equivalent disclosure standards to those of a licensed exchangeG ;
                  (d) The customer is a financial institution whose entire operations are subject to AML/CFT requirements consistent with the FATF Recommendations / Special Recommendations and it is supervised by a financial services supervisor in a FATF or GCC member state for compliance with those requirements;
                  (e) The customer is a financial institution which is a subsidiary of a financial institution located in a FATF or GCC member state, and the AML/CFT requirements applied to its parent also apply to the subsidiary;
                  (f) The customer is the Central Bank of Bahrain ('CBB'), a licensed exchangeG or a licenseeG of the CBB; or
                  (g) The customer is a Ministry of a Gulf Cooperation Council ('GCC') or Financial Action Task Force ('FATF') member state government, a company in which a GCC government is a majority shareholder, or a company established by decree in the GCC.
                  Amended: January 2019
                  Amended: July 2018
                  Amended: January 2018
                  Amended: April 2013
                  October 2010

                • 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.

                  October 2010

                • FC-1.10.3

                  [This Paragraph was deleted in July 2018].

                  Deleted: July 2018
                  October 2010

                • FC-1.10.4

                  LicenseesG 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.

                  October 2010

                • 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.

                  October 2010

                • FC-1.10.6

                  LicenseesG 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), licenseesG 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.

                  October 2010

                • FC-1.10.7

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

                  October 2010

                • FC-1.10.8

                  [This Paragraph was deleted in July 2018].

                  Deleted: July 2018
                  October 2010

            • FC-2 AML / CFT Systems and Controls

              • FC-2.1 General Requirements

                • FC-2.1.1

                  LicenseesG must take reasonable care to establish and maintain appropriate systems and controls for compliance with the requirements of this Module and to limit their vulnerability to financial crime. These systems and controls must be documented, and approved and reviewed annually by the Board of the licenseeG . The documentation, and the Board's review and approval, must be made available upon request to the CBB.

                  October 2010

                • FC-2.1.2

                  The above systems and controls, and associated documented policies and procedures, should cover standards for customer acceptance, on-going monitoring of high-risk accounts, staff training and adequate screening procedures to ensure high standards when hiring employees.

                  October 2010

              • FC-2.2 Ongoing Customer Due Diligence and Transaction Monitoring

                • Risk Based Monitoring

                  • FC-2.2.1

                    LicenseesG must develop risk-based monitoring systems appropriate to the complexity of their business, their number of customers and types of transactions. These systems must be configured to identify significant or abnormal transactions or patterns of activity. Such systems must include limits on the number, types or size of transactions undertaken outside expected norms; and must include limits for cash and non-cash transactions.

                    October 2010

                  • FC-2.2.2

                    Licensees'G risk-based monitoring systems should therefore be configured to help identify:

                    (a) Transactions which do not appear to have a clear purpose or which make no obvious economic sense;
                    (b) Significant or large transactions not consistent with the normal or expected behavior of a customer; and
                    (c) Unusual patterns of activity (relative to other customers of the same profile or of similar types of transactions, for instance because of differences in terms of volumes, transaction type, or flows to or from certain countries), or activity outside the expected or regular pattern of a customer's account activity.
                    October 2010

                • Automated Transaction Monitoring

                  • FC-2.2.3

                    LicenseesG must consider the need to include automated transaction monitoring as part of their risk-based monitoring systems to spot abnormal or unusual flows of funds. In the absence of automated transaction monitoring systems, all transactions above BD 6,000 must be viewed as "significant" and be captured in a daily transactions report for monitoring by the MLRO or a relevant delegated official, and records retained by the licenseeG for five years after the date of the transaction.

                    October 2010

                  • FC-2.2.3A

                    In the case of trust service providers (or any other licenseeG that does not handle customer funds) such licenseesG should monitor bank statements and other records to ensure that they are aware of "significant" transactions on a timely basis.

                    Added: April 2013

                  • FC-2.2.4

                    The CBB would expect larger licenseesG to include automated transaction monitoring as part of their risk-based monitoring systems. See also Chapters FC-4 and FC-7, regarding the responsibilities of the MLRO and record-keeping requirements.

                    October 2010

                • Unusual Transactions or Customer Behaviour

                  • FC-2.2.5

                    Where a licensee'sG risk-based monitoring systems identify significant or abnormal transactions (as defined in Paragraphs FC-2.2.2 and FC-2.2.3), it must verify the source of funds for those transactions, particularly where the transactions are above the occasional transactions threshold of BD 6,000. Furthermore, licenseesG must examine the background and purpose to those transactions and document their findings. In the case of one-off transactions where there is no ongoing account relationship, the licenseeG must file an STR if it is unable to verify the source of funds to its satisfaction (see Chapter FC-5).

                    October 2010

                  • FC-2.2.6

                    The investigations required under Paragraph FC-2.2.5 must be carried out by the MLRO (or relevant delegated official). The documents relating to these findings must be maintained for five years from the date when the transaction was completed (see also Subparagraph FC-7.1.1 (b)).

                    October 2010

                  • FC-2.2.7

                    LicenseesG must consider instances where there is a significant, unexpected or unexplained change in customer activity.

                    October 2010

                  • FC-2.2.8

                    When an existing customer closes one account and opens another, the licenseeG must review its customer identity information and update its records accordingly. Where the information available falls short of the requirements contained in Chapter FC-1, the missing or out of date information must be obtained and re-verified with the customer.

                    October 2010

                  • FC-2.2.9

                    Once identification procedures have been satisfactorily completed and, as long as records concerning the customer are maintained in line with Chapters FC-1 and FC-7, no further evidence of identity is needed when transactions are subsequently undertaken within the expected level and type of activity for that customer, provided reasonably regular contact has been maintained between the parties and no doubts have arisen as to the customer's identity.

                    October 2010

                • On-going Monitoring

                  • FC-2.2.10

                    LicenseesG must take reasonable steps to:

                    (a) Scrutinize transactions undertaken throughout the course of that relationship to ensure that transactions being conducted are consistent with the licensee'sG knowledge of the customer, their business risk and risk profile; and
                    (b) Ensure that they receive and maintain up-to-date and relevant copies of the identification documents specified in Chapter FC-1, by undertaking reviews of existing records, particularly for higher risk categories of customers. LicenseesG must require all customers to provide up-to-date identification documents in their standard terms and conditions of business.
                    Amended: October 2017
                    October 2010

                  • FC-2.2.11

                    LicenseesG must review and update their customer due diligence information at least every three years, particularly for higher risk categories of customers. If, upon performing such a review, copies of identification documents are more than 12 months out of date, the licenseeG must take steps to obtain updated copies as soon as possible.

                    Amended: October 2017
                    October 2010

            • FC-3 Money Transfers and Alternative Remittances

              • FC-3.1 Electronic Transfers

                • Outward Transfers

                  • FC-3.1.1

                    LicenseesG must include all required originator information details with the accompanying electronic transfers of funds they make on behalf of their customers. Non-routine transfers must not be batched, if batching increases the risks of money laundering or terrorist financing. This obligation does not apply where the transfer is made by a licenseeG acting as principal or acting on behalf of another licenseeG as principal such as in the case of payment of spot FX transactions.

                    October 2010

                  • FC-3.1.2

                    For the purposes of this Chapter, "Originator Information" means:

                    (a) The name of the payer;
                    (b) The address of the payer; and
                    (c) The unique customer or transaction or account number of the payer.
                    Amended: April 2012
                    October 2010

                  • FC-3.1.3

                    It is not necessary for the recipient institution to pass the originator information on to the payee. The obligation is discharged simply by notifying the recipient institution of the originator information at the time the transfer is made.

                    October 2010

                • Inward Transfers

                  • FC-3.1.4

                    LicenseesG must:

                    (a) Maintain records (in accordance with Chapter FC-7 of this Module) of all originator information received with an inward transfer (see Section FC-1.10 for simplified arrangements for transfers below US$1,000); and
                    (b) Carefully scrutinise inward transfers which do not contain originator information (i.e. full name, address and account number or a unique customer identification number – see Paragraph FC-1.9.1 for simplified arrangements). LicenseesG must presume that such transfers are "suspicious transactions" and pass them to the MLRO for review for determination as to possible filing of an STR, unlessG (a), the sending institution is able to promptly (i.e. within two business days) advise the licenseeG in writing of the originator information upon the licensee'sG request; or (b), the sending institution and the licenseeG are acting on their own behalf (as principals); or (c), the inward transfer is below US$1,000 or equivalent in other currencies.
                    Amended: April 2012
                    October 2010

              • FC-3.2 Remittances on Behalf of other Money Transferors

                • FC-3.2.1

                  Whenever a licenseeG uses the services of Authorised Money Transferors to effect the transfer of funds for a customer to a person or organisation in another country, that licenseeG must, in respect of the amount so transferred, maintain records of:

                  (a) The identity of its customer(s) in accordance with Chapters FC-1 and FC-7 of this Module; and
                  (b) The exact amount transferred for each such customer (particularly where a single transfer is effected for more than one customer).
                  Amended: April 2012
                  October 2010

                • FC-3.2.2

                  LicenseesG must be able to produce this information for inspection immediately upon request by the CBB.

                  October 2010

                • FC-3.2.3

                  LicenseesG must not transfer funds for customers to a person or organisation in another country by any means other than through an Authorised Money Transferor. Where a licenseeG is found to be in contravention of this rule, the CBB will not hesitate to impose sanctions upon that licenseeG (and in serious cases may revoke the license).

                  October 2010

            • FC-4 Money Laundering Reporting Officer (MLRO)

              • FC-4.1 Appointment of MLRO

                • FC-4.1.1

                  LicenseesG must appoint a Money Laundering reporting officer ("MLRO"). The MLRO must be approved by the CBB prior to his appointment. The position of MLRO is a controlled functionG and the MLRO is an approved personG .

                  October 2010

                • FC-4.1.2

                  For details of CBB's requirements regarding controlled functionsG and approvedG personsG , see Section AU-1.2. Amongst other things, approved personsG require CBB approval before being appointed, which is granted only if they are assessed as 'fit and proper' for the function in question. A completed Form 3 must accompany any request for CBB approval.

                  October 2010

                • FC-4.1.3

                  The position of MLRO must not be combined with functions that create potential conflicts of interest, such as an internal auditor or business line head. The position of MLRO may not be outsourced.

                  October 2010

                • FC-4.1.4

                  Subject to Paragraph FC-4.1.2, however, the position of MLRO may otherwise be combined with other functions in the licenseeG , such as that of Compliance Officer, in cases where the volume and geographical spread of the business is limited and, therefore, the demands of the function are not likely to require a full time resource.

                  October 2010

                • FC-4.1.4A

                  For purposes of Paragraphs FC-4.1.3 and FC-4.1.4 above, licenseesG must clearly state in the Application for Approved Person Status — Form 3 — when combining the MLRO or DMLRO position with any other position within the licenseeG .

                  Added: October 2017

                • FC-4.1.5

                  LicenseesG must appoint a deputy MLRO to act for the MLRO in his absence. The deputy MLRO must be resident in Bahrain unless otherwise agreed with the CBB.

                  October 2010

                • FC-4.1.6

                  LicenseesG should note that although the MLRO may delegate some of his functions, either within the licensee or even possibly (in the case of larger groups) to individuals performing similar functions for other group entities, the responsibility for compliance with the requirements of this Module remains with the licenseeG and the designated MLRO. The deputy MLRO should be able to support the MLRO discharge his responsibilities and to deputise for him in his absence.

                  October 2010

                • FC-4.1.7

                  So that he can carry out his functions effectively, licenseesG must ensure that their MLRO:

                  (a) Is a member of senior management of the licenseeG ;
                  (b) Has a sufficient level of seniority within the licenseeG , has the authority to act without interference from business line management and has direct access to the board and senior management (where necessary);
                  (c) Has sufficient resources, including sufficient time and (if necessary) support staff, and has designated a replacement to carry out the function should the MLRO be unable to perform his duties;
                  (d) Has unrestricted access to all transactional information relating to any financial services provided by the licenseeG to a customer, or any transactions conducted by the licenseeG on behalf of that customer;
                  (e) Is provided with timely information needed to identify, analyse and effectively monitor customer accounts;
                  (f) Has access to all customer due diligence information obtained by the licenseeG ; and
                  (g) Is resident in Bahrain.
                  Amended: April 2012
                  October 2010

                • FC-4.1.8

                  In addition, licenseesG must ensure that their MLRO is able to:

                  (a) Monitor the day-to-day operation of its policies and procedures relevant to this Module; and
                  (b) Respond promptly to any reasonable request for information made by the Financial Intelligence Unit or the CBB.
                  October 2010

                • FC-4.1.9

                  If the position of MLRO falls vacant, the licenseeG must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the licenseeG must make immediate interim arrangements (including the appointment of an acting MLRO) to ensure continuity in the MLRO function's performance. These interim arrangements must be approved by the CBB.

                  October 2010

              • FC-4.2 Responsibilities of the MLRO

                • FC-4.2.1

                  The MLRO is responsible for:

                  (a) Establishing and maintaining the licensee'sG AML/CFT policies and procedures;
                  (b) Ensuring that the licenseeG complies with the AML Law and any other applicable AML/CFT legislation and this Module;
                  (c) Ensuring day-to-day compliance with the licensee'sG own internal AML/CFT policies and procedures;
                  (d) Acting as the licensee'sG main point of contact in respect of handling internal suspicious transactions reports from the licensee'sG staff (refer to Section FC-5.1) and as the main contact for the Financial Intelligence Unit, the CBB and other concerned bodies regarding AML/CFT;
                  (e) Making external suspicious transactions reports to the Financial Intelligence Unit and Compliance Directorate (refer to Section FC-5.2);
                  (f) Taking reasonable steps to establish and maintain adequate arrangements for staff awareness and training on AML/CFT matters (whether internal or external), as per Chapter FC-6;
                  (g) Producing annual reports on the effectiveness of the licensee'sG AML / CFT controls, for consideration by senior management, as per Paragraph FC-4.3.3;
                  (h) On-going monitoring of what may, in his opinion, constitute high-risk customer accounts; and
                  (i) Maintaining all necessary CDD, transactions, STR and staff training records for the required periods (refer to Section FC-7.1).
                  October 2010

              • FC-4.3 Compliance Monitoring

                • Annual Compliance Review

                  • FC-4.3.1

                    A licenseeG must review the effectiveness of its AML/CFT procedures, systems and controls at least once each calendar year. The review must cover the licenseeG and its branches and subsidiaries both inside and outside the Kingdom of Bahrain. The scope of the review must include:

                    (a) A report, containing the number of internal reports made in accordance with Section FC-5.1, a breakdown of all the results of those internal reports and their outcomes for each segment of the licensee'sG business, and an analysis of whether controls or training need to be enhanced;
                    (b) A report, indicating the number of external reports made in accordance with Section FC-5.2 and, where a licenseeG has made an internal report but not made an external report, noting why no external report was made;
                    (c) A sample test of compliance with this Module's customer due diligence requirements; and
                    (d) A report as to the quality of the licensee'sG anti-money laundering procedures, systems and controls, and compliance with the AML Law and this Module.
                    October 2010

                  • FC-4.3.2

                    The reports listed under Subparagraphs FC-4.3.1 (a) and (b) must be made by the MLRO. The sample testing required under Subparagraph FC-4.3.1 (c) must be undertaken either by the licensee'sG internal auditor, its external auditor or a consultancy firm approved by the CBB. The report required under Subparagraph FC-4.3.1 (d) must be made by the licensee'sG external auditor or a consultancy firm approved by the CBB.

                    Amended: April 2012
                    October 2010

                  • FC-4.3.2A

                    In order for a consultancy firm to be approved by the CBB for the purposes of Paragraph FC-4.3.2, such firm should provide the CBB's Compliance Directorate with:

                    (a) A sample AML/CFT report prepared for a financial institution;
                    (b) A list of other AML/CFT related work undertaken by the firm;
                    (c) A list of other audit/review assignments undertaken, specifying the nature of the work done, date and name of the licensee; and
                    (d) An outline of any assignment conducted for or in cooperation with an international audit firm.
                    Added: April 2012

                  • FC-4.3.2B

                    The firm should indicate which personnel (by name) will work on the report (including, where appropriate, which individual will be the team leader) and demonstrate that all such persons have appropriate qualifications in one of the following areas:

                    (a) Audit;
                    (b) Accounting;
                    (c) Law; or
                    (d) Banking/Finance.
                    Added: April 2012

                  • FC-4.3.2C

                    At least two persons working on the report (one of whom would normally expected to be the team leader) should have:

                    (a) A minimum of 5 years professional experience dealing with AML/CFT issues; and
                    (b) Formal AML/CFT training.
                    Added: April 2012

                  • FC-4.3.2D

                    Submission of a curriculum vitae for all personnel to be engaged on the report is encouraged for the purposes of evidencing the above requirements.

                    Added: April 2012

                  • FC-4.3.2E

                    Upon receipt of the above required information, the CBB Compliance Directorate will assess the firm and communicate to it whether it meets the criteria required to be approved by the CBB for this purpose. The CBB may also request any other information it considers necessary in order to conduct the assessment.

                    Added: April 2012

                  • FC-4.3.3

                    The reports listed under Paragraph FC-4.3.1 must be submitted to the licensee'sG Board, for it to review and commission any required remedial measures, and copied to the licensee'sG senior management.

                    October 2010

                  • FC-4.3.4

                    The purpose of the annual compliance review is to assist a licensee'sG Board and senior management to assess, amongst other things, whether internal and external reports are being made (as required under Chapter FC-5), and whether the overall number of such reports (which may otherwise appear satisfactory) does not conceal inadequate reporting in a particular segment of the licensee'sG business (or, where relevant, in particular branches or subsidiaries). LicenseesG should use their judgement as to how the reports listed under Subparagraphs FC-4.3.1 (a) and (b) should be broken down in order to achieve this aim (e.g. by branches, departments, product lines, etc).

                    October 2010

                  • FC-4.3.5

                    LicenseesG must instruct their appointed firm to produce the report referred to in Subparagraph FC-4.3.1 (d). The report must be submitted to the CBB by the 30th of April of the following year. The findings of this review must be received and acted upon by the licenseeG .

                    Amended: April 2012
                    October 2010

                  • FC-4.3.6

                    The appointed firm may rely upon work performed by the licensee'sG internal audit function, as part of their procedures for producing the statement referred to in Paragraph FC-4.3.5.

                    Amended: April 2012
                    October 2010

                  • FC-4.3.7

                    The four reports referred to in Paragraph FC-4.3.1 must be submitted to the Director, Compliance Directorate of the CBB by the 30th of April of the following year.

                    October 2010

            • FC-5 Suspicious Transaction Reporting

              • FC-5.1 Internal Reporting

                • FC-5.1.1

                  LicenseesG must implement procedures to ensure that staff who handle customer business (or are managerially responsible for such staff) make a report promptly to the MLRO if they know or suspect that a customer (or a person on whose behalf a customer may be acting) is engaged in money laundering or terrorism financing, or if the transaction or the customer's conduct otherwise appears unusual or suspicious. These procedures must include arrangements for disciplining any member of staff who fails, without reasonable excuse, to make such a report.

                  October 2010

                • FC-5.1.2

                  Where licenseesG ' internal processes provide for staff to consult with their line managers before sending a report to the MLRO, such processes must not be used to prevent reports reaching the MLRO, where staff have stated that they have knowledge or suspicion that a transaction may involve money laundering or terrorist financing.

                  October 2010

              • FC-5.2 External Reporting

                • FC-5.2.1

                  LicenseesG must take reasonable steps to ensure that all reports made under Section FC-5.1 are considered by the MLRO (or his duly authorised delegate). Having considered the report and any other relevant information the MLRO (or his duly authorised delegate), if he still suspects that a person has been engaged in money laundering or terrorism financing, or the activity concerned is otherwise still regarded as suspicious, must report the fact promptly to the relevant authoritiesG . Where no report is made, the MLRO must document the reasons why.

                  October 2010

                • FC-5.2.2

                  To take reasonable steps, as required under Paragraph FC-5.2.1, licenseesG must:

                  (a) Require the MLRO to consider reports made under Section FC-5.1.1 in the light of all relevant information accessible to or reasonably obtainable by the MLRO;
                  (b) Permit the MLRO to have access to any information, including know your customer information, in the licensee'sG possession which could be relevant; and
                  (c) Ensure that where the MLRO, or his duly authorised delegate, suspects that a person has been engaged in money laundering or terrorist financing, a report is made by the MLRO which is not subject to the consent or approval of any other person.
                  October 2010

                • FC-5.2.3

                  Reports to the relevant authoritiesG made under Paragraph FC-5.2.1 must be sent to the Financial Intelligence Unit at the Ministry of Interior, and CBB's Compliance Directorate using the Suspicious Transaction Reporting Online System (Online STR system). STRs in paper format will not be accepted.

                  Amended: July 2016
                  Amended: October 2014
                  October 2010

                • FC-5.2.4

                  LicenseesG must report all suspicious transactions or attempted transactions. This reporting requirement applies regardless of whether the transaction involves tax matters.

                  October 2010

                • FC-5.2.5

                  LicenseesG must retain all relevant details of STRs submitted to the relevant authoritiesG , for at least five years.

                  Amended: October 2014
                  October 2010

                • FC-5.2.6

                  In accordance with the AML Law, licenseesG , their directors, officers and employees:

                  (a) Must not warn or inform ("tipping off") their customers, the beneficial owner or other subjects of the STR when information relating to them is being reported to the relevant authoritiesG ; and
                  (b) In cases where licenseesG form a suspicion that transactions relate to money laundering or terrorist financing, they must take into account the risk of tipping-off when performing the CDD process. If the licenseeG reasonably believes that performing the CDD process will tip-off the customer or potential customer, it may choose not to pursue that process, and must file an STR.
                  Amended: January 2018
                  October 2010

              • FC-5.3 Contacting the Relevant Authorities

                • FC-5.3.1

                  Reports made by the MLRO or his duly authorised delegate under Section FC-5.2 must be sent electronically using the Suspicious Transaction Reporting Online System (Online STR system).

                  Amended: October 2014
                  October 2010

                • FC-5.3.2

                  The relevant authoritiesG are:
                  Financial Intelligence Directorate (FID)
                  General Directorate of Anti Corruption and Economic and Electronic Security
                  Ministry of Interior
                  P.O. Box 26698
                  Manama, Kingdom of Bahrain
                  Telephone: + 973 17 749397
                  Fax: + 973 17 715502
                  E-mail: bahrainfid@moipolice.bh

                  Director of Compliance Directorate
                  Central Bank of Bahrain
                  P.O. Box 27
                  Manama, Kingdom of Bahrain
                  Telephone: 17 547107
                  Fax: 17 535673
                  E-mail: Compliance@cbb.gov.bh

                  Added: October 2014

            • FC-6 Staff Training and Recruitment

              • FC-6.1 General Requirements

                • FC-6.1.1

                  A licenseeG must take reasonable steps to provide periodic training and information to ensure that staff who handle customer transactions, or are managerially responsible for such transactions, are made aware of:

                  (a) Their responsibilities under the AML Law, this Module, and any other relevant AML/CFT laws and regulations;
                  (b) The identity and responsibilities of the MLRO and his deputy;
                  (c) The potential consequences, both individual and corporate, of any breach of the AML Law, this Module and any other relevant AML/CFT laws or regulations;
                  (d) The licensee'sG current AML/CFT policies and procedures;
                  (e) Money laundering and terrorist financing typologies and trends;
                  (f) The type of customer activity or transaction that may justify an internal report in accordance with Section FC-5.1;
                  (g) The licensee'sG procedures for making internal report in accordance with Section FC-5.1; and
                  (h) Customer due diligence measures with respect to establishing business relations with customers.
                  October 2010

                • FC-6.1.2

                  The information referred to in Paragraph FC-6.1.1 must be brought to the attention of relevant new employees of licenseesG , and must remain available for reference by staff during their period of employment.

                  October 2010

                • FC-6.1.3

                  Relevant new employees must be given AML/CFT training within three months of joining a licenseeG .

                  October 2010

                • FC-6.1.4

                  LicenseesG must ensure that their AML/CFT training for relevant staff remains up-to-date, and is appropriate given the licensee'sG activities and customer base.

                  October 2010

                • FC-6.1.5

                  The CBB would normally expect AML/CFT training to be provided to relevant staff at least once a year.

                  October 2010

                • FC-6.1.6

                  LicenseesG must develop adequate screening procedures to ensure high standards when hiring employees. These procedures must include controls to prevent criminals or their associates from being employed by licenseesG .

                  October 2010

            • FC-7 Record Keeping

              • FC-7.1 General Requirements

                • CDD and Transaction Records

                  • FC-7.1.1

                    LicenseesG must comply with the record keeping requirements contained in the AML Law and in the CBB Law. LicenseesG must therefore retain adequate records (including accounting and identification records), for the following minimum periods:

                    (a) For customers, in relation to evidence of identity and business relationship records (such as application forms and business correspondence), for at least five years after the customer relationship has ceased; and
                    (b) For transactions, in relation to documents enabling a reconstitution of the transaction concerned, for at least five years after the transaction was completed.
                    October 2010

                • Compliance Records

                  • FC-7.1.2

                    LicenseesG must retain copies of the reports produced for their annual compliance review, as specified in Paragraph FC-4.3.1, for at least five years. LicenseesG must also maintain for 5 years reports made to, or by, the MLRO made in accordance with Sections FC-5.1 and 5.2, and records showing how these reports were dealt with and what action, if any, was taken as a consequence of those reports.

                    October 2010

                • Training Records

                  • FC-7.1.3

                    LicenseesG must maintain for at least five years, records showing the dates when AML/CFT training was given, the nature of the training, and the names of the staff that received the training.

                    October 2010

                • Access

                  • FC-7.1.4

                    All records required to be kept under this Section must be made available available (in hard copy or electronic form, where the concerned law(s) allow electronic records to be kept) for prompt and swift access by the relevant authoritiesG or other authorised persons.

                    Amended: October 2014
                    Amended: April 2013
                    October 2010

            • FC-8 AML & CFT Measures

              • FC-8.1 Special Measures for Non-Cooperative Countries or Territories ('NCCTs')

                • FC-8.1.1

                  LicenseesG must give special attention to any dealings they may have with entities or persons domiciled in countries or territories which are:

                  (a) Identified by the FATF as being "non-cooperative"; or
                  (b) Notified to licenseesG from time to time by the CBB.
                  October 2010

                • FC-8.1.2

                  Whenever transactions with such parties have no apparent economic or visible lawful purpose, their background and purpose must be reexamined and the findings documented. If suspicions remain about the transaction, these must be reported to the relevant authoritiesG in accordance with Section FC-5.2.

                  October 2010

                • FC-8.1.3

                  LicenseesG must apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries where such measures are called for by the FATF. The type of enhanced due diligence measures applied must be effective and proportionate to the risks.

                  Added: January 2018

                • FC-8.1.4

                  With regard to the jurisdictions identified as NCCTs or those which in the opinion of the CBB, do not have adequate AML/CFT systems, the CBB reserves the right to:

                  (a) Refuse the establishment of subsidiaries or branches or representative offices of financial institutions from such jurisdictions;
                  (b) Limit business relationships or financial transactions with such jurisdictions or persons in those jurisdictions;
                  (c) Prohibit financial institutions from relying on third parties located in such jurisdictions to conduct elements of the CDD process;
                  (d) Require financial institutions to review and amend, or if necessary terminate, correspondent relationships with financial institutions in such jurisdictions;
                  (e) Require increased supervisory examination and/or external audit requirements for branches and subsidiaries of financial institutions based in such jurisdictions; or
                  (f) Require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in such jurisdictions.
                  Added: January 2018

              • FC-8.2 Terrorist Financing

                • FC-8.2.1AA

                  LicenseesG must implement and comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing. LicenseesG must freeze, without delay, the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267(1999) and its successor resolutions as well as Resolution 2178(2014) or (ii) designated as pursuant to Resolution 1373(2001).

                  Added: April 2017

                • FC-8.2.1

                  LicenseesG must comply in full with the provisions of the UN Security Council Anti-terrorism Resolution No. 1373 of 2001 ('UNSCR 1373').

                  October 2010

                • FC-8.2.2

                  [This Paragraph was deleted in January 2018].

                  Deleted: January 2018
                  October 2010

                • FC-8.2.3

                  A copy of UNSCR 1373 is included in Part B of Volume 5 (Specialised Licensees), under 'Supplementary Information' on the CBB Website.

                  October 2010

                • FC-8.2.4

                  LicenseesG must report to the CBB details of:

                  (a) Funds or other financial assets or economic resources held with them which may be the subject of Article 1, paragraphs c) and d) of UNSCR 1373; and
                  (b) All claims, whether actual or contingent, which the licenseeG has on persons and entities which may be the subject of Article 1, paragraphs c) and d) of UNSCR 1373.
                  October 2010

                • FC-8.2.5

                  For the purposes of Paragraph FC-8.2.4, 'funds or other financial resources' includes (but is not limited to) shares in any undertaking owned or controlled by the persons and entities referred to in Article 1, paragraph c) and d) of UNSCR 1373, and any associated dividends received by the licenseeG .

                  October 2010

                • FC-8.2.6

                  All reports or notifications under this Section must be made to the CBB's Compliance Directorate.

                  October 2010

                • FC-8.2.7

                  See Section FC-5.3 for the Compliance Directorate's contact details.

                  October 2010

              • FC-8.3 Designated Persons and Entities

                • FC-8.3.1

                  Without prejudice to the general duty of all licenseesG to exercise the utmost care when dealing with persons or entities who might come under Article 1, paragraphs (c) and (d) of UNSCR 1373, licenseesG must not deal with any persons or entities designated by the CBB as potentially linked to terrorist activity.

                  October 2010

                • FC-8.3.2

                  The CBB from time to time issues to licenseesG lists of designated persons and entities believed linked to terrorism. LicenseesG are required to verify that they have no dealings with these designated persons and entities, and report back their findings to the CBB. Names designated by the CBB include persons and entities designated by the United Nations, under UN Security Council Resolution 1267 ("UNSCR 1267").

                  October 2010

                • FC-8.3.3

                  LicenseesG must report to the relevant authoritiesG , using the procedures contained in Section FC-5.2, details of any accounts or other dealings with designated persons and entities, and comply with any subsequent directions issued by the relevant authoritiesG .

                  October 2010

            • FC-9 Enforcement Measures

              • FC-9.1 Regulatory Penalties

                • FC-9.1.1

                  Without prejudice to any other penalty imposed by the CBB Law, the AML Law No. 4 or the Penal Code of the Kingdom of Bahrain, failure by a licenseeG to comply with this Module or any direction given hereunder shall result in the levying by the CBB, without need of a court order and at the CBB's discretion, of a fine of up to BD 20,000.

                  October 2010

                • FC-9.1.2

                  Module EN provides further information on the assessment of financial penalties and the criteria taken into account prior to imposing such fines (reference to Paragraph EN-5.1.4). Other enforcement measures may also be applied by the CBB in response to a failure by a licenseeG to comply with this Module; these other measures are also set out in Module EN.

                  October 2010

                • FC-9.1.3

                  The CBB will endeavor to assist licenseesG to interpret and apply the requirements of this Module. LicenseesG may seek clarification on any issue by contacting the Compliance Directorate (see Section FC-5.3 for contact details).

                  October 2010

                • FC-9.1.4

                  Without prejudice to the CBB's general powers under the law, the CBB may amend, clarify or issue further directions on any provision of this Module from time to time, by notice to its licenseesG .

                  October 2010

            • FC-10 AML / CFT Guidance and Best Practice

              • FC-10.1 Guidance Provided by International Bodies

                • FATF: 40 Recommendations and 9 Special Recommendations

                  • FC-10.1.1

                    The Forty Recommendations (see www.fatf-gafi.org) and Nine Special Recommendations (together with their associated interpretative notes and best practices papers) issued by the Financial Action Task Force (FATF), provide the basic framework for combating money laundering activities and the financing of terrorism. FATF Recommendations 4-6, 8-11, 13-15, 17 and 21-23 as well as Special Recommendations IV, V, VII and the AML/CFT Methodology are specifically relevant to the financial institutions.

                    October 2010

                  • FC-10.1.2

                    The relevant authoritiesG in Bahrain believe that the principles established by these Recommendations and Special Recommendations should be followed by licenseesG in all material respects, as representing best practice and prudence in this area.

                    October 2010

                • Other Website References Relevant to AML/CFT

                  • FC-10.1.3

                    The following lists a selection of other websites relevant to AML/CFT:

                    (a) The Middle East North Africa Financial Action Task Force: www.menafatf.org;
                    (b) The Egmont Group: www.egmontgroup.org;
                    (c) The United Nations: www.un.org/terrorism;
                    (d) The UN Counter-Terrorism Committee: www.un.org/Docs/sc/committees/1373/;
                    (e) The UN list of designated individuals: www.un.org/Docs/sc/committees/1267/1267ListEng.htm ;
                    (f) The Wolfsberg Group: www.wolfsberg-principles.com; and
                    (g) The Association of Certified Anti-Money Laundering Specialists: www.acams.org.
                    October 2010

            • FC-11 Fraud

              • FC-11.1 General Requirements

                • FC-11.1.1

                  The requirements of this Chapter apply to all Specialised LicenseesG .

                  October 2010

                • FC-11.1.2

                  LicenseesG must ensure that they allocate appropriate resources and have in place systems and controls to deter, detect, and record instances of fraud or attempted fraud.

                  October 2010

                • FC-11.1.3

                  Fraud may arise from internal sources originating from changes or weaknesses to processes, products and internal systems and controls. Fraud can also arise from external sources, for instance through false invoicing or advance fee frauds.

                  October 2010

                • FC-11.1.4

                  Any actual or attempted fraud incident (however small) must be reported to the appropriate authorities (including the CBB) and followed up. Monitoring systems must be designed to measure fraud patterns that might reveal a series of related fraud incidents.

                  October 2010

                • FC-11.1.5

                  LicenseesG must ensure that a person, of sufficient seniority, is given overall responsibility for the prevention, detection and remedying of fraud within the organisation.

                  October 2010

                • FC-11.1.6

                  LicenseesG must ensure the effective segregation of functions and responsibilities, between different individuals and departments, such that the possibility of financial crime is reduced and that no single individual is able to initiate, process and control a transaction.

                  October 2010

                • FC-11.1.7

                  LicenseesG must provide regular training to their management and staff, to make them aware of potential fraud risks.

                  October 2010

        • Enforcement & Redress

          • EN Enforcement

            • EN-A Introduction

              • EN-A.1 Purpose

                • Executive Summary

                  • EN-A.1.1

                    This Module sets out the Central Bank of Bahrain's ('CBB') approach to enforcement, and the measures used by the CBB to address failures by authorised personsG to comply with its regulatory requirements (whether they be specialised licenseesG or approved personsG ). The purpose of such measures is to encourage a high standard of compliance by all those authorised by the CBB, thus reducing risk to customersG and the financial system.

                    Amended: January 2011
                    October 2010

                • Legal Basis

                  • EN-A.1.2

                    This Module contains the CBB's Directive (as amended from time to time) relating to enforcement and penalties and administrative provisions under Articles 125 to 132 of Central Bank of Bahrain and Financial institutions Law 2006 and its amendments ('CBB Law') is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to all specialised licenseesG (including their approved personsG ).

                    Amended: April 2016
                    Amended: January 2011
                    October 2010

                  • EN-A.1.3

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

                    October 2010

                  • EN-A.1.4

                    Specialised licenseesG who are also members of the Bahrain Stock Exchange ('BSE') are reminded that the BSE is also empowered to exercise its own enforcement powers by virtue of the Bahrain Stock Exchange Decree – Law No. 4 of 1987 (the 'BSE Law'). Article 14 of the BSE Law lays down a number of penalties which the disciplinary Board of the BSE may impose on persons who violate the BSE Law and/or the regulations made thereunder. In appropriate circumstances, the CBB may ask the BSE to consider the exercise of its powers under Article 14 in support of the enforcement objectives of the CBB.

                    October 2010

              • EN-A.2 Module History

                • Evolution of Module

                  • EN-A.2.1

                    This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    October 2010

                  • EN-A.2.2

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

                    Module Ref. Change Date Description of Changes
                    EN-A.1.2 01/2011 Clarified legal basis.
                    EN-2 04/2012 Chapter has been streamlined and repetitive information has been eliminated and reference is now made to Section BR-3.5 for money changers and administrators or Module GR for representative offices.
                    EN-B.4.5 10/2012 Guidance changed to Rule.
                    EN-4.1.1 10/2012 Corrected typo.
                    EN-5.1.1 10/2012 Amended guidance.
                    EN-5.3A 10/2012 New Section added on financial penalties for date sensitive requirements.
                    EN-8.2.4 10/2012 Inserted missing word.
                    EN-9.3.1A 01/2013 Paragraph added to refer to Article 161 of the CBB Law.
                    EN-5.2.7 01/2016 Paragraph deleted and replaced as it is a repetition of EN-5.2.6.
                    EN-A.1.2 04/2016 Reference added to amendments to the CBB Law.
                    EN-B.1.4 04/2016 New guidance Paragraph added to broaden the scope of the application of financial penalties to persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law.
                    EN-5 04/2016 Amended to be in line with amendments to Article 129 of the CBB Law.
                    EN-B.4.5 07/2016 Corrected typo.
                    EN-5.3A.3 04/2017 Adjustment to Financial Penalties for Date Sensitive Requirements.
                    EN-5.3A.1 and 5.3A.2 07/2017 Added the requirement of HC as part of date sensitive requirements for financing companies.
                    EN-4.3.3 04/2019 Moved guideline to Section EN-B.2.
                    EN-6 04/2019 Deleted Chapter.

                • Superseded Requirements

                  • EN-A.2.4

                    This Module replaces CBB Circular No. ODG/249/2004 (the "Enforcement Circular"), issued on 22 July 2004.

                    October 2010

            • EN-B Scope of Application

              • EN-B.1 Scope

                • EN-B.1.1

                  The contents of this Module mostly consist of Guidance material, explaining the different measures that the CBB can employ to ensure compliance with Volume 5 (Specialised Licensees). Certain Rules, applicable to specialised licenseesG , are however contained in Paragraphs EN-B.3.1, EN-B.4.5, EN-2.2.4, EN-2.2.10, EN-5.2.2 and EN-8.2.4 and Sections EN-2.4 and EN-2.5.

                  October 2010

                • EN-B.1.2

                  Chapters EN-1 to EN-9 of this Module are generally relevant to specialisedG licenseesG . In the case of overseas specialised licenseesG , the CBB's enforcement powers apply only to the branch operating in the Kingdom of Bahrain.

                  October 2010

                • EN-B.1.3

                  In addition, Chapters EN-8 and EN-9 of this Module are relevant to approvedG personsG .

                  October 2010

                • EN-B.1.4

                  Section EN-5 dealing with financial penalties is applicable to specialised licenseesG as well as to persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law.

                  April 2016

              • EN-B.2 The CBB's Approach

                • EN-B.2.1

                  The CBB favours an open, pragmatic and collaborative relationship with authorised personsG , within the boundaries set by the CBB Law and Rulebook. Whilst the CBB wishes to avoid a legalistic and confrontational style of supervision, it believes that effective supervision requires effective and timely enforcement of its requirements. Should authorised personsG fail to cooperate, then the CBB will use the means described in this Module to achieve compliance.

                  October 2010

                • EN-B.2.2

                  In the CBB's view, it is generally neither practical nor effective to prescribe in detail the exact regulatory response for each and every potential contravention. There are a large number of potential contraventions. Moreover, individual circumstances are unlikely to be identical in all cases, and may warrant different responses.

                  October 2010

                • EN-B.2.3

                  In deciding any given supervisory response, the CBB will nonetheless consistently assess the individual circumstance of each contravention against the principles described in this Module. The CBB's overall approach is to take into account:

                  (a) The seriousness of the contravention concerned (including the risks posed to customersG and other market participants);
                  (b) The compliance track record of the authorised personG concerned (including the extent to which the contravention reflects systemic weaknesses or reckless behaviour); and
                  (c) Which measures are most likely to achieve the desired result of remedying the contravention.
                  October 2010

                • EN-B.2.4

                  Such an approach reduces the risk of inappropriate enforcement actions, by allowing regulatory measures to be tailored to individual circumstances. By taking into account an authorised person'sG compliance record and attitude, it also creates positive incentives and encourages an open and collaborative approach. By assessing individual cases against the same broad principles, the CBB also aims to achieve an overall consistency in its regulatory actions.

                  October 2010

                • EN-B.2.5

                  Underlying the CBB's approach outlined in Paragraph EN-B.2.3 is the fundamental principle of proportionality. The enforcement measures contained in this Module are of varying severity, and will be used accordingly in keeping with the CBB's assessment of the contravention. Thus, the CBB will reserve its most serious enforcement measures – such as cancellation of license or withdrawal of "fit and proper" status – for the most serious contraventions.

                  October 2010

                • EN-B.2.6

                  In keeping with the proportionality principle, and to the extent consistent with the CBB's enforcement approach in Paragraph EN-B.2.3, the CBB will usually opt for the least severe of appropriate enforcement measures. In most cases, the CBB expects to use a Formal Warning before resorting to more severe measures; the need for further measures will then usually be dependent on the response of the authorised personG concerned.

                  October 2010

                • EN-B.2.7

                  Where a significant element of judgement is required to assess compliance with a requirement, the CBB will usually discuss the matter with the authorised personG concerned, before using one of this Module's enforcement mechanisms. This is likely to be the case, for example, with respect to requirements for adequate systems and controls. Conversely, where there are clear-cut contraventions of CBB requirements, then the CBB will usually move immediately to one or more of the enforcement mechanisms outlined in this Module. This is more likely to occur in cases where quantitative requirements – such as those relating to capital and/or large exposures – are concerned. In most such cases, though, the CBB also expects to continue an active dialogue with the authorised personG concerned, aimed at remedying the contravention.

                  October 2010

                • EN-B.2.8

                  Except in the limited circumstances outlined below, the CBB will usually only apply an enforcement measure after the authorised personG concerned has been given a suitable opportunity to make representations. In the case of measures described in Chapters EN-6 and EN-7, certain procedures are set out in the CBB Law.

                  October 2010

                • EN-B.2.9

                  In extreme circumstances, where the CBB believes that immediate action is required to prevent real damage to Bahrain's financial markets, its users or to customersG of the licenseeG concerned, it may amend or cancel a license, place a licenseeG under administration, or suspend a license (cf. Articles 48(g), 130(b) and 131 of the CBB Law).

                  Added: April 2019

              • EN-B.3 Prohibition on Insurance

                • EN-B.3.1

                  To help the CBB achieve the purpose of this Module, specialised licenseesG may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in this Module.

                  October 2010

              • EN-B.4 Publicity

                • EN-B.4.1

                  The CBB will not as a matter of general policy publicise individual cases when it uses the measures described in Chapters EN-2 to EN-5, and EN-8. However, in such cases the CBB may inform (where relevant) an authorised person'sG external auditor and – in the case of licenseesG with overseas operations – relevant overseas regulators.

                  October 2010

                • EN-B.4.2

                  In exceptional circumstances, as allowed by Article 132 of the CBB Law, the CBB may decide to publicise individual cases when the measures set out in Chapters EN-2 to EN-5 and EN-8 are used, where there is a strong case that doing so would help achieve the CBB's supervisory objectives. In such instances, the CBB will usually allow the licenseeG or person concerned the opportunity to make representations to the CBB before a public statement is issued.

                  October 2010

                • EN-B.4.3

                  Without prejudice to the above policy, the CBB may from time to time publish aggregate information on its use of enforcement measures, without identifying the licenseesG or persons concerned, unless their identities have previously been disclosed as provided for in Paragraphs EN-B.4.1 or EN-B.4.2.

                  October 2010

                • EN-B.4.4

                  By their nature, the penalties in Chapters EN-6, EN-7 and EN-9 are public acts, once applied. The CBB will in these instances generally issue a public statement explaining the circumstances of the case.

                  October 2010

                • EN-B.4.5

                  If a financial penalty is imposed on a specialised licenseeG under the provision of Chapter EN-5, and it is subject to the requirements of Module PD (Public Disclosure), then the specialised licenseeG must disclose in the manner prescribed by Module PD the amount of any financial penalties imposed by the CBB, together with a factual description of the reasons given by the CCB for the penalty.

                  Amended: July 2016
                  Amended: October 2012
                  October 2010

                • EN-B.4.6

                  Specialised licenseesG subject to a CBB enforcement measure (with the exception of formal requests for information) must inform their external auditor of the fact.

                  October 2010

            • EN-1 Formal Requests for Information

              • EN-1.1 Legal Source

                • EN-1.1.1

                  As part of its on-going supervision, under Articles 111 and 123 of the CBB Law, the CBB may specifically request information or temporary reporting from a licenseeG or individual. Recipients of such requests are bound to respond to such requests under the terms of their license.

                  October 2010

              • EN-1.2 Procedure

                • EN-1.2.1

                  To clearly identify formal information requests, these will always be made in writing, under signature of a Director or more senior official of the CBB. They will include the statement, "This is a formal request for information as defined in Chapter 1 of Module EN of Volume 5 of the CBB Rulebook"; and will state the deadline by which the information is to be communicated to the CBB.

                  October 2010

                • EN-1.2.2

                  Failure to respond to such formal requests within the deadline set will be viewed as a significant breach of regulatory requirements and may result in a formal warning or other enforcement measure, specified under Articles 163 and 170 of the CBB Law, as decided by the CBB depending on the circumstances of the case.

                  October 2010

                • EN-1.2.3

                  The deadline set in the request will vary depending on individual circumstances. A recipient may submit a case for an extension to the deadline; it should do so as soon as possible if it believes that an extension will be required, and in any event prior to the passing of the original deadline. Unless otherwise directed by the CBB, the original deadline remains valid pending consideration by the CBB of a request for an extension. The CBB will respond before the original deadline has passed; if it fails to do so, then the requested extension will apply. Whilst waiting for a reply, the recipient must assume that the original deadline will apply.

                  October 2010

                • EN-1.2.4

                  The above procedures do not prevent individual CBB supervisors from making oral requests for information as part of their day-to-day interaction with authorised personsG . The CBB expects authorised personsG to maintain their cooperative response to such requests; however, in the interests of clarity, the CBB will not view failures to respond to oral requests as a breach of regulatory requirements.

                  October 2010

            • EN-2 Investigations

              • EN-2.1 Legal Source

                • EN-2.1.1

                  Articles 121 to 123 of the CBB Law empowers the CBB to order investigations of licenseesG , in order to help it assess a licensee'sG compliance with the provisions of the CBB Law. Such investigations may be carried out either by its own officials or appointed expertsG . Articles 111 and 124 require licenseesG to make available to the CBB's inspectors and appointed expertsG their books and other records, and to provide all relevant information within the time limits deemed reasonable by the inspectors and/or appointed expertsG .

                  Amended: April 2012
                  October 2010

                • EN-2.1.2

                  Articles 163 and 170 of the CBB Law provide for criminal sanctions where false or misleading statements are made to the CBB, or an investigation by the CBB is otherwise obstructed (see Section EN-9.3).

                  October 2010

              • EN-2.2 CBB Policy

                • EN-2.2.1

                  The CBB uses its own inspectors to undertake on-site examinations of licenseesG as an integral part of its regular supervisory efforts. In addition, the CBB may commission special investigations of licenseesG in order to help it assess their compliance with CBB requirements, as contained in Article 121 of the CBB Law. Such investigations may be carried out either by the CBB's own officials, by duly qualified experts appointed for the purpose by the CBB ('appointed expertsG '), or a combination of the two.

                  Amended: April 2012
                  October 2010

                • EN-2.2.2

                  Failure by licenseesG to cooperate fully with the CBB's inspectors, or its appointed expertsG or to respond to their examination reports within the time limits specified, will be treated as demonstrating a material lack of cooperation with the CBB which will result in other enforcement measures being considered, as described elsewhere in this Module. This guidance is supported by Article 114(a) of the CBB Law.

                  Amended: April 2012
                  October 2010

                • EN-2.2.3

                  The CBB may appoint an individual or a firm as an appointed expertG . Examples of appointed expertsG are lawyers and expert witnesses. The appointment of appointed expertsG is not necessarily indicative of a contravention of CBB requirements or suspicion of such a contravention. For instance, an appointed expertG may be commissioned to provide an expert opinion on a technical matter.

                  Amended: April 2012
                  October 2010

                • EN-2.2.4

                  Appointed expertsG report in a form and within a scope defined by the CBB, and are solely responsible to the CBB for the work they undertake in relation to the investigation concerned. The report produced by the appointed expertsG is the property of the CBB (but is usually shared by the CBB with the firm concerned). The cost of the appointed experts'G work must be borne by the licenseeG concerned.

                  Amended: April 2012
                  October 2010

                • EN-2.2.5

                  In selecting an appointed expertG , the CBB will take into account the level of fees proposed and aim to limit these to the lowest level consistent with an adequate review of the matters at hand, given the qualifications, track record and independence of the persons concerned. Because the costs of such investigations are met by the licenseeG , the CBB makes only selective use of appointed expertsG , when essential to supplement CBB's other supervisory tools and resources.

                  Amended: April 2012
                  October 2010

                • EN-2.2.6

                  [This Paragraph was moved to Section BR-3.5 for money changers and administrators and the module GR for representative offices in April 2012.]

                • EN-2.2.7

                  [This Paragraph was deleted in April 2012].

                  Deleted: April 2012
                  October 2010

                • EN-2.2.8

                  [This Paragraph was deleted in April 2012].

                  Deleted: April 2012
                  October 2010

                • EN-2.2.9

                  The CBB may commission reports, which require appointed expertsG to review information from another company within the reporting specialised licensee'sG group even when that other entity is not subject to any CBB requirements.

                  Amended: January 2012
                  October 2010

                • EN-2.2.10

                  In accordance with Articles 114 and 123 of the CBB Law, specialised licenseesG must provide all relevant information and assistance to appointed expertsG on demand.

                  Amended: April 2012
                  October 2010

                • EN-2.2.11

                  [This Paragraph was moved to Section BR-3.5 for money changers and administrators and the module GR for representative offices in April 2012.]

              • EN-2.3 Procedure

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

              • EN-2.4 The Required Report

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

              • EN-2.5 Other Notifications to the CBB

                [The Rules and guidance in this Section were moved to Section BR-3.5 for money changers and administrators and Module GR for Representative offices in April 2012]

                • The content selected is no longer in force and cannot be presented in Whole Section view.

            • EN-3 Formal Warnings

              • EN-3.1 CBB Legal Source

                • EN-3.1.1

                  Article 38 of the CBB Law empowers the CBB to issue formal warnings to specialised licenseesG or authorised personsG . The CBB will issue such warnings where it reasonably believes that these are required to achieve its statutory objectives.

                  October 2010

              • EN-3.2 CBB Policy

                • EN-3.2.1

                  Formal warnings are clearly identified as such and represent the CBB's first level formal enforcement measure. They are intended to clearly set out the CBB's concerns to a licenseeG or individual regarding an issue, and should be viewed by the recipient with the appropriate degree of seriousness.

                  October 2010

                • EN-3.2.2

                  As indicated in Paragraph EN-B.2.7, the CBB will usually discuss concerns it may have prior to resorting to a formal enforcement measure, especially where a significant element of judgement is required in assessing compliance with a regulatory requirement.

                  October 2010

                • EN-3.2.3

                  Where such discussions fail to resolve matters to the CBB's satisfaction, then it may issue a formal warning. Failure to respond adequately to a formal warning will lead the CBB to consider more severe enforcement measures. However, more severe measures do not require the prior issuance of a formal warning – depending on its assessment of the circumstances, the CBB may decide to have immediate recourse to other measures. Similarly, there may be circumstances where the CBB issues a formal warning without prior discussion with the licenseeG or individual concerned: this would usually be the case where a clear-cut compliance failing has occurred.

                  October 2010

                • EN-3.2.4

                  When considering whether to issue a formal warning, the criteria taken into consideration by the CBB therefore include the following:

                  (a) The seriousness of the actual or potential contravention, in relation to the requirement(s) concerned and the risks posed to customersG , market participants and other stakeholders;
                  (b) In the case of an actual contravention, its duration and/or frequency of the contravention; the extent to which it reflects more widespread weaknesses in controls and/or management; and the extent to which it was attributable to deliberate or reckless behaviour; and
                  (c) The extent to which the CBB's supervisory objectives would be better served by issuance of a formal warning as opposed to another type of regulatory action.
                  October 2010

              • EN-3.3 Procedure for Issuing Formal Warnings

                • EN-3.3.1

                  Proposals to issue formal warnings are carefully considered against the criteria listed in Paragraph EN-3.2.4. They require approval of a Director or more senior CBB official, and include the statement "This is a formal warning as defined in Chapter EN-3 of Volume 5 of the CBB Rulebook".

                  October 2010

                • EN-3.3.2

                  Depending on the issue in question, recipients of a formal warning may be required to respond to the contents of the warning. Where a formal warning is served prior to imposing any penalties or administrative proceedings, Articles 125(c) and 126 of the CBB Law provide the recipients the right to object or challenge the formal warning.

                  October 2010

            • EN-4 Directions

              • EN-4.1 Legal Source

                • EN-4.1.1

                  Article 38 of the CBB Law empowers the CBB to issue Directions to specialised licenseesG or individuals. The powers conveyed allow the CBB to issue whatever Directions, it reasonably believes, are required to achieve its statutory objectives.

                  Amended: October 2012
                  October 2010

              • EN-4.2 CBB Policy

                • EN-4.2.1

                  The types of Directions that the CBB may issue in practice vary and will depend on the individual circumstances of a case. Generally, however, Directions require a licenseeG or individual either to undertake or to stop specific actions in order to address or mitigate certain perceived risks. They may also include restrictions on a licensee'sG activities until those risks have been addressed – for instance, a ban on the acceptance of new customersG .

                  October 2010

                • EN-4.2.2

                  The CBB is conscious of the powerful nature of a Direction and, in the case of a licenseeG , the fact that it subordinates the role of its Board and management on a specific issue. The CBB will carefully consider the need for a Direction, and whether alternative measures may not achieve the same end. Where feasible, the CBB will try to achieve the desired outcome through persuasion, rather than recourse to a Direction.

                  October 2010

                • EN-4.2.3

                  In considering whether to issue a Direction, the criteria taken into consideration by the CBB include the following:

                  (a) The seriousness of the actual or potential contravention, in relation to the requirement(s) concerned and the risks posed to customersG , market participants and other stakeholders ;
                  (b) In the case of an actual contravention, its duration and/or frequency of the contravention; the extent to which it reflects more widespread weaknesses in controls and/or management; and the extent to which it was attributable to deliberate or reckless behaviour; and
                  (c) The extent to which the CBB's supervisory objectives would be better served by issuance of a Direction as opposed to another type of regulatory action.
                  October 2010

              • EN-4.3 Procedure

                • EN-4.3.1

                  Proposals to issue Directions are carefully considered against the criteria listed in Paragraph EN-4.2.3. They require approval of an Executive Director or more senior official of the CBB, and include the statement "This is a formal Direction as defined in Chapter EN-4 of Volume 5 of the CBB Rulebook".

                  October 2010

                • EN-4.3.2

                  The subject of the Direction will normally be given 30 calendar days from the Direction's date of issuance in which to make representations to the CBB concerning the actions required. This must be done in writing, and addressed to the issuer of the original Direction. Should a representation be made, the CBB will make a final determination within 30 calendar days of the date of the representation, as specified in Articles 125(c) and 126 of the CBB Law.

                  October 2010

                • EN-4.3.3

                  [This Paragraph was moved to Section EN-B.2 in April 2019].

                  Deleted: April 2019
                  October 2010

            • EN-5 Financial Penalties

              • EN-5.1 Legal Source

                • EN-5.1.1

                  Article 129 of the CBB Law, provides the CBB the power to impose financial penalties on licenseesG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law.

                  Amended: April 2016
                  Amended: October 2012
                  October 2010

              • EN-5.2 CBB Policy

                • EN-5.2.1

                  The level of financial penalty applied is determined by the nature of the contravention and the amount of additional supervisory attention and resources taken up by a licenseeG 's or persons' referred to in paragraph (b) of Article (68 bis 1) of the CBB Law behaviour and by limits set in the CBB Law. The CBB intends that the impact of a penalty should derive more from its signalling effect than from the actual amount of money involved.

                  Amended: April 2016
                  October 2010

                • EN-5.2.2

                  As indicated in Paragraph EN-B.4.5, the CBB requires disclosure by licenseesG in accordance with Module PD of any financial penalties served on them, together with a factual description of the reasons given by the CBB for applying the penalty. In addition, the CBB may publicise the issuance of a financial penalty notice, where there is a strong case that doing so would help achieve the CBB's supervisory objectives, as mentioned in Article 132 of the CBB Law.

                  October 2010

                • EN-5.2.3

                  In assessing whether to serve a financial written penalty notice, the CBB takes into account the following criteria:

                  (a) The seriousness of the contravention, in relation to the requirement(s) concerned;
                  (b) The duration and/or frequency of the contravention, and the extent to which it reflects more widespread weaknesses in controls and/or management;
                  (c) The extent to which the contravention was deliberate or reckless;
                  (d) The licenseeG 's past compliance record and conduct following the contravention; and
                  (e) The scope of any other action taken by the CBB or other regulators against the licenseeG , in response to the compliance failures in question.
                  October 2010

                • EN-5.2.4

                  Part 11 of the CBB Law outlines instances where financial penalties may be imposed. Examples of the types of compliance failings that may lead to the serving of a financial penalty notice include (but are not limited to):

                  (a) Failures to address persistent delays and/or significant inaccuracies in regulatory reporting to the CBB;
                  (b) Repeated failures to respond to formal requests for information from the CBB, within the deadlines set;
                  (c) The submission of information to the CBB known to be false or misleading; and
                  (d) Major failures in maintaining adequate systems and controls in accordance with CBB's requirements, subjecting investors and other customersG to significant risk of financial loss.
                  October 2010

                • EN-5.2.5

                  In accordance with Article 125 of the CBB Law, a written notice of a financial penalty must be issued before imposing any financial penalty. The written notice must contain the following information:

                  (a) The violations committed by the licenseeG with respect to the CBB Law; the CBB Rulebook; any Directions, Warnings or Formal Requests for Information; or violations of the terms and conditions of the license issued to the licenseeG ;
                  (b) Evidence or proof to support the above;
                  (c) The level of financial penalty to be imposed; and
                  (d) The grace period to be allowed to the licenseeG for challenging the intended penalty (which will not be less than 30 calendar days).
                  October 2010

                • EN-5.2.6

                  The licenseeG may either pay the penalty or, pursuant to Article 126 of the CBB Law, may object within the period noted in Subparagraph EN-5.2.5(d). In accordance with Article 127 of the CBB Law, the CBB will consider any objection and make a formal resolution within 30 calendar days of receiving the objection. Thereafter, the resolution and any accompanying penalties are final and must be paid within 30 calendar days.

                  October 2010

                • EN-5.2.7

                  [This Paragraph was deleted in January 2016.]

                  Deleted: January 2016
                  October 2010

                • EN-5.2.8

                  The imposition of a financial penalty does not preclude the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).

                  October 2010

              • EN-5.3 Module FC (Financial Crime)

                • EN-5.3.1

                  In addition to the general circumstances set out in Section EN-5.2, a financial penalty of up to BD 100,000 may be applied by the CBB in cases where a licenseeG fails to comply with any of the requirements in Module FC (Financial Crime). The fine shall be multiplied by the number of violations.

                  Amended: April 2016
                  October 2010

                • EN-5.3.2

                  As with the imposition of financial penalties in response to breaches of other regulatory requirements, the CBB will apply financial penalties with respect to Module FC, based on the criteria set out in paragraph EN-5.2.3.

                  October 2010

                • EN-5.3.3

                  A failure to comply with Module FC (Financial Crime) that warrants a financial penalty would not trigger also a financial penalty under Section EN-5.2.

                  October 2010

                • EN-5.3.4

                  Any financial penalties applied by the CBB as regards the implementation of Module FC, are without prejudice to the criminal sanctions available to the Bahraini courts under the Decree – Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money. As with other financial penalties, the imposition of a financial penalty with regards to breaches of Module FC does not prevent the CBB from also using other enforcement measures to remedy the same violation (for instance, a Direction).

                  October 2010

              • EN-5.3A Financial Penalties for Date Sensitive Requirements

                • EN-5.3A.1

                  Modules AU, FC, BR, HC and PD contain specific requirements where specialised licenseesG must comply with, by a precise date. Where a specific due date is involved, the CBB's financial penalties are based on a per diem basis.

                  Amended: July 2017
                  Added: October 2012

                • EN-5.3A.2

                  This Section applies to date sensitive requirements for:

                  (a) Reporting requirements included in Module BR;
                  (b) Public disclosure requirements included in Module PD;
                  (c) The report of the external auditor or approved consultancy firm required as per Paragraph FC-4.3.1 (d);
                  (d) Annual licensing fees required as per Module AU, and
                  (e) Conduct of Shareholders' Meetings requirements included in Section HC-7.2 (for financing companies).
                  Amended: July 2017
                  Added: October 2012

                • EN-5.3A.3

                  Financial penalties related to late filing or other date sensitive requirements are calculated as per the following per diem basis:

                  (a) Where the financing companyG licensee'sG total consolidated assets are less than or equal to BD 50 million, the financial penalty for late filing is BD 100 per day;
                  (b) Where the financing companyG licensee'sG total consolidated assets are greater than BD 50 million but less than or equal to BD 250 million, the financial penalty for late filing is BD 200 per day;
                  (c) Where the financing companyG licensee'sG total consolidated assets are greater than BD 250 million, the financial penalty is BD 400 per day;
                  (e) For new financing companyG licenseesG who have yet to provide audited financial statements, the financial penalty is BD 100 per day;
                  (f) For all Volume 5 specialised licenseesG , other than financing companyG licenseesG , the financial penalty under this Section is BD 40 per day.
                  Amended: April 2017
                  Added: October 2012

                • EN-5.3A.4

                  In accordance with Article 129 of the CBB Law, the maximum financial penalty levied for failing to comply with date sensitive requirements is BD 100,000. The fine shall be multiplied by the number of violations. The CBB may opt to limit the amount of the financial penalty and use other enforcement measures as outlined in Module EN (Enforcement), such as imposing restrictions on a specialised license limiting the scope of operations.

                  Amended: April 2016
                  Added: October 2012

                • EN-5.3A.5

                  The various deadlines for submission of reports and annual fees referred to in Modules BR, FC, PD and AU are defined:

                  (a) In terms of a specified number of days or months following a given date, such as the last date of a calendar quarter;
                  (b) A specified number of days or months after the occurrence of a specific event; or
                  (c) A specific date.
                  Added: October 2012

                • EN-5.3A.6

                  In imposing financial penalties for date sensitive requirements, the following criteria apply:

                  (a) Where the due date falls on a holiday as designated by the CBB, the first business day following the holiday will be considered as being the due date;
                  (b) Where a due date is not complied with by the end of the day on which it is due, holidays and weekend days are included in the number of days the item is considered late;
                  (c) For returns and other filings, the date received is the date recorded by the CBB's systems in case of returns filed electronically;
                  (d) In the case of returns filed in hard copy, the CBB stamp is the date received;
                  (e) All returns are to be sent to the respective Supervision Directorate and the annual fees to the Accounts Directorate, on or before the due date, to be considered filed on time;
                  (f) A day ends at midnight in the case of returns that must be filed electronically, or at the close of CBB business day, in the case returns are filed in hard copy; and
                  (g) An incomplete return, where completeness is determined in relation to the requirements of the relevant instructions and Module BR, is considered 'not filed' until the CBB receives all necessary elements of the return.
                  Added: October 2012

                • EN-5.3A.7

                  The CBB does not require any particular method of delivery for returns and filings that are filed in hard copy. The use of the Bahrain postal services, private courier services or other methods of delivery is entirely at the discretion and risk of the licensee. For the payment of annual fees, licensees must follow the requirements of Form ALF, included under Part B of Volume 5.

                  Added: October 2012

                • EN-5.3A.8

                  A decision to impose a financial penalty for date sensitive requirements is unrelated to whether the CBB issues a reminder; it is the licensee's responsibility to file and disclose on time as per the requirements of Volume 5 (Specialised Licensees) Rulebook.

                  Added: October 2012

              • EN-5.4 Procedure for Financial Penalties

                • EN-5.4.1

                  A written financial penalty notice will be addressed to the Chief Executive OfficerG or General ManagerG of the licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law concerned. This written notification will describe the contravention concerned, the CBB's evidence supporting a financial penalty, and the factors justifying the level of penalty proposed. Only an Executive Director or more senior member of the CBB's management may sign the notification.

                  Amended: April 2016
                  October 2010

                • EN-5.4.2

                  The licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law has 30 calendar days from the notification's date of issuance to submit any representations it wishes to make to the CBB, in writing and addressed to the issuer of the original notification. If the licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law decides not to submit representations, it has 30 calendar days from the notification's date of issuance in which to pay the penalty.

                  Amended: April 2016
                  October 2010

                • EN-5.4.3

                  Should the licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law make representations challenging the proposed penalty, the CBB has 30 calendar days from the issuance of those representations in which to re-examine the facts of the case and its conclusions. If the CBB confirms application of a penalty, payment is required within 30 calendar days of a final notice being issued.

                  Amended: April 2016
                  October 2010

                • EN-5.4.4

                  Failure to pay a penalty within the required deadlines will be considered a breach of CBB's regulatory requirements, and will also result in other measures being considered, as described elsewhere in this Module.

                  October 2010

              • EN-5.5 Addressing a Compliance Failure

                • EN-5.5.1

                  Payment of a financial penalty does not by itself absolve a licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law from remedying the compliance failure concerned. The CBB will expect the licenseeG or persons referred to in paragraph (b) of Article (68 bis 1) of the CBB Law to address the contravention within a reasonable timescale, to be agreed on a case-by-case basis. Failure to do so will result in other measures being considered.

                  Amended: April 2016
                  October 2010

            • EN-6 Administration

              • EN-6.1 [This Section was deleted in April 2019]

                • EN-6.1.1

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.1.2

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.1.3

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

              • EN-6.2 [This Section was deleted in April 2019]

                • EN-6.2.1

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.2.2

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.2.3

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

              • EN-6.3 [This Section was deleted in April 2019]

                • EN-6.3.1

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.3.2

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

                • EN-6.3.3

                  [This Paragraph was deleted in April 2019].

                  Deleted: April 2019
                  October 2010

            • EN-7 Cancellation or Amendment of License

              • EN-7.1 Legal Source

                • EN-7.1.1

                  Article 48 of the CBB Law empowers the CBB to cancel or amend a license under certain circumstances. These include cases where a licenseeG has:

                  (a) Failed to satisfy its license conditions;
                  (b) Violated the terms of the CBB Law, Regulations or Rulebook;
                  (c) Failed to start business within six months from the date of the license being issued;
                  (d) Ceased to carry out the licensed activities permitted; or
                  (e) Not acted in the legitimate interest of its customersG or creditors.
                  October 2010

                • EN-7.1.2

                  Article 48(d) of the CBB Law requires the CBB to give the licenseeG concerned at least 30 calendar days in which to appeal any proposed cancellation or amendment of its license.

                  October 2010

              • EN-7.2 CBB Policy

                • EN-7.2.1

                  When used as an enforcement tool, the CBB views cancelling a license as appropriate only in the most serious of circumstances, when faced with the gravest of contraventions or when left with no other reasonable means of successfully addressing the regulatory failings in question. Cancellation or amendment of a license, however, may also be required in circumstances outside of an enforcement context, for instance because of a change in the business profile of a licenseeG .

                  October 2010

                • EN-7.2.2

                  When used as an enforcement tool, the criteria used by the CBB in assessing whether to seek the cancellation or amendment of a license include:

                  (a) The extent to which the interests of the market, its users and those who have a claim on the licenseeG would be best served by the cancellation or amendment of the license;
                  (b) The extent to which other supervisory penalties could reasonably be expected to achieve the CBB's desired supervisory objectives;
                  (c) The extent to which the licenseeG has contravened the conditions of its license and/or the CBB Law, including the seriousness, duration and/or frequency of the contravention(s) concerned, and the extent to which the contraventions reflect more widespread or systemic weaknesses in controls and/or management;
                  (d) The extent to which the licenseeG has been involved in financial crime or other criminal conduct; and
                  (e) The licenseeG 's past compliance record and conduct following the contravention (s).
                  October 2010

                • EN-7.2.3

                  When the CBB issues a notice of cancellation or amendment as an enforcement tool, it will only implement the actual change once it is satisfied that there are no longer any regulated activities for which it is necessary to keep the current authorisation in force. Until such time as these activities have been run off or moved to another licenseeG , the CBB will control these activities through other means (such as taking the licenseeG into administration or through issuing Directions).

                  October 2010

              • EN-7.3 Procedure for Amendment or Cancellation of License

                • EN-7.3.1

                  All proposals for cancelling or amending a license as an enforcement tool are subject to a thorough review by the CBB of all relevant facts, assessed against the criteria outlined in Paragraphs EN-7.2.1 and EN-7.2.2. After being assessed at the Executive Director level, proposals are submitted to H.E. the Governor for approval.

                  October 2010

                • EN-7.3.2

                  Once approved within the CBB, a formal notice of cancellation or amendment is issued to the licenseeG concerned. The notice of cancellation or amendment will describe the factual circumstances of the contraventions concerned, and the CBB's rationale for the proposed cancellation or amendment, as measured against the criteria outlined in Paragraphs EN-7.2.1 and EN-7.2.2.

                  October 2010

                • EN-7.3.3

                  The licenseeG has 30 calendar days from the date of the notice in which to lodge an appeal. The appeal should be addressed to the Board of the CBB, and copied to H.E. the Governor of the CBB.

                  October 2010

                • EN-7.3.4

                  If an appeal is lodged, the Board of the CBB will make a final ruling within 60 calendar days of its date of issuance.

                  October 2010

                • EN-7.3.5

                  A licenseeG may appeal to a competent court within 60 days of the above final ruling for a decision. The court's decision will then be final.

                  October 2010

            • EN-8 Cancellation of 'Fit and Proper' Approval

              • EN-8.1 Legal Source

                • EN-8.1.1

                  Article 65 of the CBB Law allows the CBB to determine the level of qualifications, experience and training of a licensee'sG officers or employees. Article 65(c) of the CBB Law empowers the CBB the right to remove any official, being a Board member or in an executive position, that is unqualified or unsuitable for the assigned position.

                  October 2010

              • EN-8.2 CBB Policy

                • EN-8.2.1

                  Chapter AU-3 of Module AU (Authorisation), specifies that approved personsG must be assessed by the CBB as 'fit and proper' to hold such a position. The Chapter specifies various factors that the CBB takes into account when reaching such a decision.

                  October 2010

                • EN-8.2.2

                  The CBB is conscious of the impact that assessing someone as not 'fit and proper' may have on an individual approved personG . Such assessments are carefully reviewed in the light of all relevant facts. The criteria used in reaching a decision include the following:

                  (a) The extent to which the factors set out in Chapter AU-3 have not been met;
                  (b) The extent to which the person has deliberately or recklessly breached requirements of the CBB Law or Volume 5 (Specialised Licensees);
                  (c) The person's past compliance record and conduct following any such breaches;
                  (d) The length of time since factors indicating a lack of fitness or propriety occurred; and
                  (e) The risk the person poses to licenseesG and their customersG .
                  October 2010

                • EN-8.2.3

                  Amongst other matters, the CBB will normally consider as grounds for the revocation of approved personG status the following events affecting the approved personG :

                  (a) The conviction by a court, whether in Bahrain or elsewhere, for a crime affecting honesty;
                  (b) A declaration of bankruptcy by a court of law;
                  (c) A court ruling that the approved person'sG legal capacity is totally or partially impaired; or
                  (d) The sanction by a professional body of a fine, suspension, expulsion or censure.
                  October 2010

                • EN-8.2.4

                  Specialised licenseesG must inform the CBB immediately when they become aware of any of the events listed in Paragraph EN-8.2.3, affecting one of their approved personsG .

                  Amended: October 2012
                  October 2010

                • EN-8.2.5

                  If the CBB has grounds for considering that an individual is no longer fit and proper to continue to hold their existing controlled function(s)G , it will revoke the approved personG status granted to that individual. The individual will then be required to resign from each of the controlled functionsG to which this revocation applies. This revocation does not automatically preclude them from applying to hold other controlled functionsG in the future, but will be taken into account in considering new requests from specialised licenseesG that pertain to that individual.

                  October 2010

                • EN-8.2.6

                  Depending on the seriousness of the situation, the CBB may impose further measures, which may include disqualification from:

                  (a) Holding any controlled functionG ;
                  (b) Performing any function in relation to any regulated activity carried out by a licensed firm; or
                  (c) Being a controllerG of any licensed firm.
                  October 2010

                • EN-8.2.7

                  In assessing evidence, the CBB applies a lower threshold than is applied in a criminal court of law, reflecting the administrative nature of the sanction. The CBB may also take into account the cumulative effect of factors which, when considered individually, may not in themselves be sufficient to justify an adverse 'fit and proper' finding.

                  October 2010

                • EN-8.2.8

                  The CBB may also take into account the particular function being undertaken in the licenseeG by the individual concerned, and the size and nature of the licenseeG itself, particularly when assessing the suitability of a person's experience or qualifications. Thus, the fact that a person was deemed 'fit and proper' for a particular position in a particular firm does not necessarily mean he would be suitable in a different position or in a different firm.

                  October 2010

              • EN-8.3 Procedure for Issuing an Adverse Finding

                • EN-8.3.1

                  All proposals for issuing an adverse fit and proper' finding are subject to a thorough review by the CBB of all relevant facts, assessed against the criteria outlined in Paragraph EN-8.2.2. In some instances, it may be appropriate for the CBB to request the licenseeG or person concerned to provide further information, in order to help reach a decision.

                  October 2010

                • EN-8.3.2

                  All adverse findings have to be approved by an Executive Director of the CBB. Once approved, a notice of intent is issued to the person concerned and copied to the Board/senior management of the licenseeG , setting out the circumstances and the basis for the CBB's proposed adverse finding. The person has 30 calendar days from the date of the notice in which to make written representations, addressed to the Executive Director concerned, failing which a final notice is issued by the CBB.

                  October 2010

            • EN-9 Criminal Sanctions

              • EN-9.1 Overview

                • EN-9.1.1

                  The CBB Law provides for a number of criminal sanctions in cases where certain of its provisions are contravened. This Section provides a summary of those sanctions most relevant to licenseesG , their DirectorsG and employees. What follows is not a complete list of all sanctions provided for in the CBB Law, nor is it a substitute for reading the Law and being fully aware of its provisions.

                  October 2010

                • EN-9.1.2

                  LicenseesG , their DirectorsG and employees should also be aware of the criminal sanctions provided for under other relevant Bahraini laws, such as the Decree – Law No. 4 of 2001, with respect to the prevention and prohibition of the laundering of money.

                  October 2010

                • EN-9.1.3

                  In all cases to do with criminal sanctions, the CBB can only refer the matter to the Office of the Public Prosecutor. The CBB has no authority to apply such sanctions without recourse to the courts.

                  October 2010

              • EN-9.2 CBB Policy

                • EN-9.2.1

                  Because of their criminal status, and their provision for custodial sentences, the sanctions provided for under the CBB Law are viewed by the CBB as very powerful measures, to be pursued sparingly. In most situations, the CBB will seek to address regulatory failures through administrative sanctions, as outlined in the preceding Chapters, rather than by pursuing the criminal sanctions outlined here.

                  October 2010

                • EN-9.2.2

                  Where, however, the nature of the offence is such that there is strong evidence of a reckless or intentional breach of the CBB Law relevant to the following Articles, then the CBB will refer the matter to the Office of the Public Prosecutor.

                  October 2010

              • EN-9.3 Articles of CBB Law

                • Article 161

                  • EN-9.3.1A

                    Article 161 of the CBB Law provides for a penalty of up to BD 1 million, without prejudice to any other penalty prescribed in any other law, in case of any person who breaches the provisions of Resolution No.(16) for the year 2012 issued pursuant to Article 42 of the CBB Law. The Court may also confiscate the proceeds resulting from breaching the Resolution.

                    Added: January 2013

                • Article 163

                  • EN-9.3.1

                    Article 163 of the CBB Law provides for a term of imprisonment and/or a fine of up to BD 20,000, without prejudice to any other penalty prescribed in any other law, in case of conviction of a DirectorG , manager, official, agent or representative of any licenseeG who:

                    (a) Conceals any records, information or documents requested by the CBB (or any person appointed by the CBB to conduct an investigation or inspection);
                    (b) Provides statements or information in bad faith which do not reflect the actual financial position of the LicenseeG ;
                    (c) Conceals from an external auditor any records, information or documents necessary for auditing the accounts of the LicenseeG ; or
                    (d) Provides in bad faith any misleading or inaccurate statements to an external auditor which do not reflect the actual financial position of the LicenseeG .
                    October 2010

                • Article 169

                  • EN-9.3.2

                    Article 169 provides for a term of imprisonment, and/or a fine of up to BD 20,000 for any DirectorG , manager, official or employee, who acts or permits an act in violation of Article 134 of the CBB Law where he knows (or should have known) that the LicenseeG is insolvent.

                    October 2010

                • Article 170

                  • EN-9.3.3

                    Part 2 of Article 170 of the CBB Law provides for term of imprisonment and/or a fine not exceeding BD3,000 if any DirectorG , manager, official or employee intentionally obstructs an investigation by the CBB or an Appointed ExpertG .

                    October 2010

                • Article 171

                  • EN-9.3.4

                    Article 171 of the CBB Law provides for a term of imprisonment and/or a fine not exceeding BD10, 000, if any DirectorG , manager, official or employee discloses in bad faith any confidential information relating to a customerG of the concerned of a licenseeG .

                    October 2010

    • Specific Modules (By Type of Licensee)

      • Type 1: Money Changers Licensees

        • Part A

          • High Level Standards

            • AU Money Changers Authorisation Module

              • AU-A Introduction

                • AU-A.1 Purpose

                  • Executive Summary

                    • AU-A.1.1

                      The Authorisation Module sets out the Central Bank of Bahrain's ('CBB') approach to licensing providers of regulated money changer servicesG in the Kingdom of Bahrain. It also sets out CBB requirements for approving persons undertaking key functions in those providers.

                      Amended: January 2011
                      October 2010

                    • AU-A.1.2

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

                      October 2010

                  • Retaining Authorised Status

                    • AU-A.1.3

                      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.

                      October 2010

                  • Legal Basis

                    • AU-A.1.4

                      This Module contains the CBB's Directive, Regulations and Resolutions (as amended from time to time) regarding authorisation under Volume 5 (Specialised Licensees) of the CBB Rulebook. It is applicable to all licenseesG (as well as to approved personsG ), 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 ('CBB Law'). Requirements regarding regulated money changer servicesG as per Article 39 (see Paragraph AU-1.1.8), licensing conditions as per Article 44 (see Chapter AU-2) and licensing fees as per Article 180 (see Chapter AU-5) are also included in Regulations and Resolutions and included in this Module. The Module also contains requirements governing the conditions of granting a license for the provision of regulated services as prescribed under Resolution No.(43) of 2011 and issued under the powers available to the CBB under Article 44(c). The Module contains requirements under Resolution No.(16) for the year 2012 including the prohibition of marketing financial services pursuant to Article 42 of the CBB Law. Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module. This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

                      Amended: July 2015
                      Amended: January 2013
                      Amended: April 2012
                      Amended: January 2011
                      October 2010

                    • AU-A.1.5

                      Approved PersonsG are individuals holding certain specified positions at CBB licenseesG ; they must be approved by the CBB prior to taking on those positions and must demonstrate that they are fit and proper. The list of positions subject to the CBB's Approved PersonsG regime vary according to the CBB license Category, but generally cover directors and senior management, as well as certain other positions. Approved PersonsG requirements are specified in the relevant Rulebook Volume for the license Category in question.

                      October 2010

                    • AU-A.1.6

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

                      October 2010

                • AU-A.2 Module History

                  • Evolution of Module

                    • AU-A.2.1

                      This Module was first issued in October 2010. All subsequent changes to this Module are annotated with the end-calendar quarter date in which the change was made. 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:

                      Module Ref. Change Date Description of Changes
                      AU-A.1.4 01/2011 Clarified legal basis.
                      AU-4.1.4 01/2011 Removed the requirement for a letter of comfort to be provided with an application for license.
                      AU-4.1.15 01/2011 Corrected cross reference.
                      AU-4.1.4(a) 04/2011 Added cross reference.
                      AU-4.2 04/2011 Clarified Rules for authorisation of a branch and added Rules for authorisation of a subsidiary.
                      AU-4.3.7A 07/2011 Added a Rule dealing with notification to CBB when an approved person ceases to hold a controlled function.
                      AU-4.4.6 07/2011 Cross reference added to Rule.
                      AU-A.1.4 04/2012 Legal basis updated to reflect all Articles of the CBB Law covered by this Module as well as applicable Resolutions.
                      AU-4.4 04/2012 Clarified language on cancellation of a license to be in line with other Volumes of the CBB Rulebook.
                      AU-1.1.8A and AU-1.1.8B 10/2012 Rule and guidance added to address the activity of wholesale export and import of various currency bank notes in physical form.
                      AU-2.1.1 10/2012 Amended legal status.
                      AU-A.1.4 01/2013 Updated legal basis.
                      AU-1.1 01/2013 References added to requirements under Resolution No.(16) for the year 2012.
                      AU-1.2.3 01/2013 Clarified approval requirements for controlled functions for Bahrain operations.
                      AU-4.4.4A 01/2013 Corrected cross reference to CBB Law.
                      AU-5.2 07/2013 Amended due date and collection process for annual licensee fee.
                      AU-A.1.4 07/2015 Legal basis updated to reflect Resolution No (23) of 2015.
                      AU-4.3 07/2015 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                      AU-4.4.6 07/2015 Clarified interim arrangements for replacement of approved person.
                      AU-1.2 01/2016 Clarified general requirements for approved persons.
                      AU-3 01/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
                      AU-4.3 01/2016 Minor amendments to be aligned with other Volumes of the Rulebook.
                      AU-4.5 07/2017 Added new Section on Publication of the Decision to Grant, Cancel or Amend a License
                      AU-4.1.1 04/2018 Amended Paragraph.
                      AU-4.1.18 04/2018 Amended Paragraph.
                      AU-4.3.2 04/2018 Amended Paragraph.
                      AU-4.3.8AA 10/2018 Amended Paragraph number.
                      AU-4.4.6 10/2018 Amended reference Paragraph.

                  • Superseded Requirements

                    • AU-A.2.3

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

                      Circular / other reference Subject
                      Standard Conditions and Licensing Criteria: Money Changers Scope of license and licensing conditions.
                      Circular BC/309/1994 Management Personnel
                      Circular BC/120/1995 Money Changers Permitted Business
                      Circular BC/11/98 Appointment and suitability of Directors and senior managers ('fit and proper').
                      Circular EDFIS/C/05/2007 CBB's New License Fees System
                      October 2010

              • AU-B Scope of Application

                • AU-B.1 Scope of Application

                  • AU-B.1.1

                    The content of this Module applies to all Money Changer licenseesG authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licenseesG .

                    October 2010

                  • AU-B.1.2

                    Two types of authorisation are prescribed:

                    (i) Any person seeking to provide a regulated money changer serviceG within or from the Kingdom of Bahrain must hold the appropriate CBB license (see AU-1.1). Money Changer LicenseesG are thereafter referred to in this Module as licenseesG ; and
                    (ii) Natural persons wishing to perform a controlled functionG in a licenseeG also require prior CBB approval, as an approved personG (see AU-1.2).
                    October 2010

                • AU-B.2 Authorised Persons

                  • AU-B.2.1

                    Various requirements in Chapters AU-2 to AU-4 inclusive also apply to persons once they have been authorised by the CBB (whether as licenseesG or approved personsG ).

                    October 2010

                  • AU-B.2.2

                    Chapter AU-2 applies to licenseesG (not just applicants), since licensing conditions have to be met on a continuous basis by licenseesG . Similarly, Chapter AU-3 applies to approved personsG on a continuous basis; it also applies to licenseesG seeking an approved personG authorisation. Chapter AU-4 contains requirements applicable to licenseesG , with respect to the starting up of their operations, as well as to licenseesG and approved personsG , with respect to the amendment or cancellation of their authorised status. Finally, Section AU-5.2 imposes annual fees on licenseesG .

                    October 2010

              • AU-1 Authorisation Requirements

                • AU-1.1 Licensing

                  • AU-1.1.1

                    No person may:

                    (a) Undertake (or hold themselves out to undertake) regulated money changer servicesG , by way of business, within or from the Kingdom of Bahrain unless duly licensed by the CBB;
                    (b) Hold themselves out to be licensed by the CBB unless they have as a matter of fact been so licensed; or
                    (c) Market any financial servicesG in the Kingdom of Bahrain unless:
                    (i) Allowed to do by the terms of a license issued by the CBB;
                    (ii) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
                    (iii) Has obtained the express written permission of the CBB to offer financial servicesG .
                    Amended: January 2013
                    October 2010

                  • AU-1.1.2

                    For the purposes of Rule AU-1.1.1, please refer to Rule AU-1.1.8 for the definition of 'regulated money changer servicesG ' and Rule AU-1.1.9 for 'by way of business'. Such activities will be deemed to be undertaken within or from the Kingdom of Bahrain if, for example, the person concerned:

                    (a) Is incorporated in the Kingdom of Bahrain; or
                    (b) Uses an address situated in the Kingdom of Bahrain for its correspondence.
                    October 2010

                  • AU-1.1.2A

                    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 servicesG in return for monetary payment or some other form of valuable consideration.

                    Added: January 2013

                  • AU-1.1.2B

                    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).

                    Added: January 2013

                  • AU-1.1.3

                    Persons wishing to be licensed to undertake regulated money changer servicesG within or from the Kingdom of Bahrain must apply in writing to the CBB.

                    October 2010

                  • AU-1.1.4

                    An application for a license must be in the form prescribed by the CBB and must contain, inter alia:

                    (a) A business plan specifying the type of business to be conducted;
                    (b) Application forms for all controllersG ; and
                    (c) Application forms for all controlled functionsG .
                    October 2010

                  • AU-1.1.5

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

                    (a) Granted the application without conditions;
                    (b) Granted the application subject to conditions specified by the CBB; or
                    (c) Refused the application, stating the grounds on which the application has been refused and the process for appealing against that decision.
                    October 2010

                  • AU-1.1.6

                    Detailed rules and guidance regarding information requirements and processes for licenses can be found in Section AU-4.1. As specified in Paragraph AU-4.1.12, 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.

                    October 2010

                  • AU-1.1.7

                    All applicants seeking a Money Changers license must satisfy the CBB that they meet, by the date of authorisation, the minimum criteria for licensing, as contained in Chapter AU-2. Once licensed, licenseesG must maintain these criteria on an on-going basis.

                    October 2010

                  • Money Changer License Permitted Activities

                    • AU-1.1.8

                      For the purposes of Volume 5 (Specialised Licensees), regulated money changer servicesG mean all transactions including:

                      (a) The sale, purchase and exchange of foreign currencies;
                      (b) Currency transfer to/from Bahrain;
                      (c) Purchase and sale of travellers' cheques;
                      (d) The dealing in precious metals within the allowed limits; or
                      (e) Any other financial business related to Money Changers activities and approved by the CBB.
                      Amended: April 2011
                      October 2010

                    • AU-1.1.8A

                      For purposes of Subparagraph AU-1.1.8(a), the sale, purchase and exchange of foreign currencies may include the wholesale export and import of various currency bank notes in physical form, for the purpose of distribution/collection to/from the local market or for transmission to a foreign jurisdiction. Only licenseesG whose license specifically allows for such activity to be undertaken are permitted to engage in this activity.

                      Added: October 2012

                    • AU-1.1.8B

                      In assessing a request from a licenseeG to add the activity of export/import of bank notes to its permitted activities, the CBB will consider among other factors, the following:

                      (a) A satisfactory track record of not less than 5 years operating as a licensed regulated entity in the financial sector;
                      (b) The licensee'sG financial soundness, an acceptable level of capitalisation and financial resources and its ability to meet its obligations in a timely and satisfactory manner;
                      (c) The legal status and regulatory track record of the licenseeG including previous disciplinary measures taken against the licenseeG by the CBB or any other jurisdiction in which its group operates;
                      (d) The maintenance of an adequate insurance coverage to cater for any risk that may arise while importing/exporting the consignment;
                      (e) The application of prudent security measures when transporting the banknotes within the Kingdom of Bahrain, as required by Paragraphs GR-7.1.1 and GR-9.1.5A;
                      (f) The existence of prudent documented and approved internal procedures and controls within the licenseeG to govern the entire import/export activity starting from the origination of the consignment to its final destination. Such procedures must observe the requirements of any other Law or relevant competent authority in this regard, whether in the Kingdom of Bahrain or the jurisdiction to/from which the banknotes are being exported/imported;
                      (g) The existence of the necessary AML/CFT systems and controls in place as required by Module FC;
                      (h) The quality of management and corporate governance framework and oversight over the activities of the licenseeG ; and
                      (i) The maintenance of proper books and records as required by Chapter GR-1.
                      Added: October 2012

                    • AU-1.1.9

                      For the purposes of Volume 5 (Specialised Licensees), carrying on a regulated money changer servicesG by way of business means:

                      (a) Undertaking one or more of the activities specified in Paragraph AU-1.1.8 for commercial gain;
                      (b) Holding oneself out as willing and able to engage in that activity; or
                      (c) Regularly soliciting other persons to engage in transactions constituting that activity.
                      October 2010

                    • AU-1.1.10

                      LicenseesG are prohibited from conducting any other financial business other than that set out in Rule AU-1.1.8 above, and permitted by the license issued to them by the CBB.

                      October 2010

                    • AU-1.1.11

                      A person does not carry on an activity constituting regulated money changer servicesG if it is an organisation, commercial company or travel and tourism agency accepting foreign currencies and travellers' cheques in consideration for their sales. In addition, hotels do not undertake regulated money changer servicesG when accepting foreign currencies and travellers' cheques in consideration for their services and/or as a service to their guests.

                      October 2010

                  • Suitability

                    • AU-1.1.12

                      Those seeking authorisation must satisfy the CBB as to their suitability to carry out the regulated money changer servicesG for which they are seeking authorisation.

                      October 2010

                    • AU-1.1.13

                      In assessing applications for a license, the CBB will assess whether an applicant satisfies the licensing conditions (as specified in Chapter AU-2) with respect to all the regulated servicesG that the applicant proposes to undertake.

                      October 2010

                • AU-1.2 Approved Persons

                  • General Requirements

                    • AU-1.2.1

                      LicenseesG must obtain the CBB's prior written approval for any person wishing to undertake a controlled functionG at a licenseeG . The approval from the CBB must be obtained prior to their appointment, subject to the variations contained in Paragraph AU-1.2.3.

                      Amended: January 2016
                      October 2010

                    • AU-1.2.2

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

                      (a) DirectorG ;
                      (b) Chief ExecutiveG or General ManagerG ;
                      (c) Head of functionG ;
                      (d) Compliance Officer; and
                      (e) Money Laundering Reporting Officer (MLRO).
                      Amended: January 2016
                      October 2010

                    • AU-1.2.3

                      Prior approval is required for all of the above controlled functionsG . Combination of the above controlled functionsG is subject to the requirements contained in Modules HC and RM. Controlled functionsG (b) to (e) are in relation to Bahrain operations.

                      Amended: January 2013
                      October 2010

                  • Basis for Approval

                    • AU-1.2.4

                      Approval under Paragraph AU-1.2.1 is only granted by the CBB, if it is satisfied that the person is 'fit and proper' to hold the particular position at the licenseeG 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 Sections AU-3.1 and AU-3.2 respectively.

                      October 2010

                  • Definitions

                    • AU-1.2.5

                      DirectorG is any person who occupies the position of a DirectorG , as defined in Article 173 of the Commercial Companies Law (Legislative Decree No. 21 of 2001).

                      October 2010

                    • AU-1.2.6

                      The fact that a person may have 'Director'G in their job title does not of itself make them a DirectorG within the meaning of the definition noted in Paragraph AU-1.2.5. For example, a 'Director of IT', is not necessarily a member of the Board of DirectorsG and therefore may not fall under the definition of Paragraph AU-1.2.5.

                      October 2010

                    • AU-1.2.7

                      The Chief ExecutiveG or General ManagerG means a person who is responsible for the conduct of the licenseeG (regardless of actual title). The Chief ExecutiveG or General ManagerG must be resident in Bahrain. This person is responsible, for the conduct of the whole of the firm.

                      October 2010

                    • AU-1.2.8

                      Head of functionG 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 licenseeG .

                      October 2010

                    • AU-1.2.9

                      Whether a person is a head of functionG 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 functionG might include, depending on the scale, nature and complexity of the business, a deputy Chief ExecutiveG , heads of departments such as Risk Management, Compliance or Internal Audit, or the Chief Financial Officer.

                      October 2010

                    • AU-1.2.10

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

                      October 2010

              • AU-2 Licensing Conditions

                • AU-2.1 Condition 1: Legal Status

                  • AU-2.1.1

                    The legal status of a licenseeG must be:

                    (i) A Bahraini joint stock company (B.S.C.); or
                    (ii) A Bahraini company with limited liability (W.L.L.) and licensed to conduct money changer business prior to 1st October 2012.
                    Amended: October 2012
                    October 2010

                  • AU-2.1.2

                    For those licenseesG that do not meet the requirements of Rule AU-2.1.1, they should discuss their legal status with the CBB.

                    October 2010

                • AU-2.2 Condition 2: Mind and Management

                  • AU-2.2.1

                    LicenseesG with their Registered Office in the Kingdom of Bahrain must maintain their Head Office in the Kingdom and must conduct their business from their Head Office and approved branches only.

                    October 2010

                  • AU-2.2.2

                    In assessing the location of a licensee'sG Head Office, the CBB will take into account the residency of its Directors and senior management. The CBB requires the majority of key decision makers in executive management — including the Chief ExecutiveG - to be resident in Bahrain.

                    October 2010

                • AU-2.3 Condition 3: Controllers

                  • AU-2.3.1

                    LicenseesG must satisfy the CBB that their controllersG are suitable and pose no undue risks to the licenseeG .

                    October 2010

                • AU-2.4 Condition 4: Board and Employees

                  • AU-2.4.1

                    As per Article 65(a) of the CBB law, those nominated to carry out controlled functionsG must satisfy CBB's approved person'sG requirements.

                    October 2010

                  • AU-2.4.2

                    The definition of controlled functionsG is contained in Paragraph AU-1.2, whilst Chapter AU-3 sets out CBB's approved personsG requirements. Applications for approved personG status must be submitted using the prescribed approved personsG form.

                    October 2010

                  • AU-2.4.3

                    The licensee'sG staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licenseeG in a sound and prudent manner. LicenseesG must ensure their employees meet any training and competency requirements specified by the CBB.

                    October 2010

                  • AU-2.4.4

                    The CBB's training and competency requirements are contained in Module TC (Training and Competency).

                    October 2010

                • AU-2.5 Condition 5: Financial Resources

                  • AU-2.5.1

                    LicenseesG must maintain a level of financial resources, as agreed with the CBB, adequate for the level of business proposed. The level of financial resources held must exceed at all times the minimum requirements contained in Module CA (Capital Adequacy), as specified for the license held.

                    October 2010

                • AU-2.6 Condition 6: Systems and Controls

                  • AU-2.6.1

                    LicenseesG must maintain systems and controls that are, in the opinion of the CBB, adequate for the scale and complexity of their activities. These systems and controls must meet the minimum requirements contained in Modules HC (High-level Controls) and RM (Risk Management), as specified for the license held.

                    October 2010

                  • AU-2.6.2

                    LicenseesG must maintain adequate segregation of responsibilities in their staffing arrangements, to protect against the misuse of systems or errors. Such segregation should ensure that no single individual has control over all stages of a transaction.

                    October 2010

                  • AU-2.6.3

                    LicenseesG must maintain systems and controls that are, in the opinion of the CBB, adequate to address the risks of financial crime occurring in the licenseeG . These systems and controls must meet the minimum requirements contained in Module FC (Financial Crime), as specified for the license held.

                    October 2010

                  • AU-2.6.4

                    As part of the licensing approval process, applicants must demonstrate in their business plan (together with any supporting documentation) what risks their business would be subject to and how they would manage those risks. Applicants may also be asked to provide an independent assessment of the appropriateness of their systems and controls to the CBB.

                    October 2010

                • AU-2.7 Condition 7: External Auditors

                  • AU-2.7.1

                    As per Article 61 of the CBB Law, licenseesG must appoint external auditors, subject to prior CBB approval. The minimum requirements regarding auditors contained in Module AA (Auditors and Accounting Standards) must be met.

                    October 2010

                  • AU-2.7.2

                    Applicants must submit details of their proposed external auditor to the CBB as part of their license application.

                    October 2010

                • AU-2.8 Condition 8: Other Requirements

                  • Books and Records

                    • AU-2.8.1

                      LicenseesG must maintain comprehensive books of accounts and other records, which must be available for inspection within the Kingdom of Bahrain by the CBB, or persons appointed by the CBB, at any time. LicenseesG must comply with the minimum record-keeping requirements contained in Module GR. Books of accounts must comply with IFRS standards.

                      October 2010

                  • Provision of Information

                    • AU-2.8.2

                      LicenseesG must act in an open and cooperative manner with the CBB. LicenseesG must meet the regulatory reporting and public disclosure requirements contained in Modules BR and PD respectively.

                      October 2010

                  • General Conduct

                    • AU-2.8.3

                      LicenseesG must conduct their activities in a professional and orderly manner, in keeping with good market practice standards. LicenseesG must comply with the general standards of business conduct contained in Module PB, as well as the standards relating to treatment of customers contained in Module BC.

                      October 2010

                  • License Fees

                    • AU-2.8.4

                      LicenseesG must comply with any license fee requirements applied by the CBB.

                      October 2010

                    • AU-2.8.5

                      License fee requirements are contained in Chapter AU-5.

                      October 2010

                  • Additional Conditions

                    • AU-2.8.6

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

                      October 2010

                    • AU-2.8.7

                      When granting a license, the CBB specifies the regulated services that the licenseeG may undertake. LicenseesG must respect the scope of their license.

                      October 2010

                    • AU-2.8.8

                      In addition, the CBB may vary existing requirements or impose additional restrictions or requirements, beyond those already specified in Volume 5 (Specialised Licensees), to address specific risks.

                      October 2010

              • AU-3 Approved Persons Conditions

                • AU-3.1 Condition 1: 'Fit and Proper'

                  • AU-3.1.1

                    LicenseesG seeking an approved personG authorisation for an individual, must satisfy the CBB that the individual concerned is 'fit and proper' to undertake the controlled functionG in question.

                    October 2010

                  • AU-3.1.2

                    The authorisation requirement for persons nominated to carry out controlledG functionsG is contained in Section AU-1.2. The authorisation process is described in Section AU-4.3.

                    October 2010

                  • AU-3.1.3

                    Each applicant applying for approved personG status and those individuals occupying approved personG positions must comply with the following conditions:

                    (a) Has not previously been convicted of any felony or crime that relates to his/her honesty and/or integrity unless he/she has subsequently been restored to good standing;
                    (b) Has not been the subject of any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud;
                    (c) Has not been adjudged bankrupt by a court unless a period of 10 years has passed, during which the person has been able to meet all his/her obligations and has achieved economic accomplishments;
                    (d) Has not been disqualified by a court, regulator or other competent body, as a director or as a manager of a corporation;
                    (e) Has not failed to satisfy a judgement debt under a court order resulting from a business relationship;
                    (f) Must have personal integrity, good conduct and reputation;
                    (g) Has appropriate professional and other qualifications for the controlled function in question; and
                    (h) Has sufficient experience to perform the duties of the controlled functionG .
                    Amended: January 2016
                    October 2010

                  • AU-3.1.4

                    In assessing the conditions prescribed in Rule AU-3.1.3, the CBB will take into account the criteria contained in Paragraph AU-3.1.5. The CBB reviews each application on a case-by-case basis, taking into account all relevant circumstances. A person may be considered 'fit and proper' to undertake one type of controlled functionG but not another, depending on the function's job size and required levels of experience and expertise. Similarly, a person approved to undertake a controlled functionG in one licenseeG may not be considered to have sufficient expertise and experience to undertake nominally the same controlled functionG but in a much bigger licenseeG .

                    Amended: January 2016
                    October 2010

                  • AU-3.1.5

                    In assessing a person's fitness and propriety, the CBB will also consider previous professional and personal conduct (in Bahrain or elsewhere) including, but not limited to, the following:

                    (a) The propriety of a person's conduct, whether or not such conduct resulted in a criminal offence being committed, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
                    (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                    (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                    (d) Whether the person, or any body corporate, partnership or unincorporated institution to which the applicant has, or has been associated with as a director, controller, manager or company secretary been the subject of any disciplinary proceeding, investigation or fines by any government authority, regulatory agency or professional body or association;
                    (e) The contravention of any financial services legislation;
                    (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
                    (g) Dismissal or a request to resign from any office or employment;
                    (h) Whether the person has been a Director, partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners have been declared bankrupt whilst the person was connected with that partnership;
                    (i) The extent to which the person has been truthful and open with supervisors; and
                    (j) Whether the person has ever entered into any arrangement with creditors in relation to the inability to pay due debts.
                    Added: January 2016

                  • AU-3.1.6

                    With respect to Paragraph AU-3.1.5, the CBB will take into account the length of time since any such event occurred, as well as the seriousness of the matter in question.

                    Added: January 2016

                  • AU-3.1.7

                    Approved personsG undertaking a controlled functionG must act prudently, and with honesty, integrity, care, skill and due diligence in the performance of their duties. They must avoid conflicts of interest arising whilst undertaking a controlled functionG .

                    Amended: January 2016
                    October 2010

                  • AU-3.1.8

                    In determining where there may be a conflict of interest arising, factors that may be considered will include whether:

                    (a) A person has breached any fiduciary obligations to the company or terms of employment;
                    (b) A person has undertaken actions that would be difficult to defend, when looked at objectively, as being in the interest of the licenseeG ; and
                    (c) A person has failed to declare a personal interest that has a material impact in terms of the person's relationship with the licenseeG .
                    Amended: January 2016
                    October 2010

                  • AU-3.1.9

                    Further guidance on the process for assessing a person's 'fit and proper' status is given in Module EN (Enforcement): see Chapter EN-8.

                    Added: January 2016

                • AU-3.2 [This Section was deleted in January 2016]

                  Deleted: January 2016

                  • AU-3.2.1

                    [This Paragraph was deleted in January 2016.]

                    Deleted: January 2016
                    October 2010

                  • AU-3.2.2

                    [This Paragraph was deleted in January 2016.]

                    Deleted: January 2016
                    October 2010

                  • AU-3.2.3

                    [This Paragraph was moved to Paragraph AU-3.1.9 in January 2016.]

                    Amended: January 2016
                    October 2010

              • AU-4 Information Requirements and Processes

                • AU-4.1 Licensing

                  • Application Form and Documents

                    • AU-4.1.1

                      Applicants for a license must submit a duly completed Form 1 (Application for a License), under cover of a letter signed by an authorised signatory of the applicant marked for the attention of the Director, Licensing Directorate. The application must be accompanied by the documents listed in Rule AU-4.1.4, unless otherwise directed by the CBB.

                      Amended: April 2018
                      October 2010

                    • 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 time-lines.

                      October 2010

                    • AU-4.1.3

                      References to applicant mean the proposed licenseeG 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.

                      October 2010

                    • AU-4.1.4

                      Unless otherwise directed by the CBB, the following documents must be provided in support of a Form 1:

                      (a) A duly completed Form 2 (Application for Authorisation of Controller) for each controller of the proposed licenseeG (refer to Chapter GR-5 for detailed requirements on controllersG );
                      (b) A duly completed Form 3 (Application for Approved Person status), for each individual proposed to undertake controlled functionsG (as defined in Rule AU-1.2.2 ) in the proposed licenseeG ;
                      (c) A comprehensive business plan for the application, addressing the matters described in AU-4.1.6;
                      (d) Where the applicant is an existing Bahraini company, a copy of the applicant's commercial registration certificate;
                      (e) A certified copy of a Board resolution of the applicant, confirming its decision to seek a CBB money changer license;
                      (f) In the case of applicants that are part of a group, copies of the audited financial statements of the applicant's group, for the three years immediately prior to the date of application;
                      (g) In the case of applicants not falling under (f) above, copies of the audited financial statements of the applicant's major shareholder (where a legal person), for the three years immediately prior to the date of application;
                      (h) In the case of applicants seeking to raise part of their capital through a private placement, a draft of the relevant private placement memorandum, together with a formal, independent legal opinion that the memorandum comply with all applicable capital markets laws and regulations; and
                      (i) A copy of the applicant's memorandum and articles of association (in draft form for applicants creating a new company) addressing the matters described in AU-4.1.8.
                      Amended: April 2011
                      Amended: January 2011
                      October 2010

                    • 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 the major shareholder in control of the licensee.

                      October 2010

                    • AU-4.1.6

                      The business plan submitted in support of an application must explain:

                      (a) An outline of the history of the applicant and its shareholders;
                      (b) The reasons for applying for a license, including the applicant's strategy and market objectives;
                      (c) The proposed Board and senior management of the applicant and the proposed organisational structure of the applicant;
                      (d) An assessment of the risks that may be faced by the applicant, together with the proposed systems and controls framework to be put in place for addressing those risks and to be used for the main business functions; and
                      (e) An opening balance sheet for the applicant, together with a three-year financial projection, with all assumptions clearly outlined, demonstrating that the applicant will be able to meet applicable capital adequacy requirements.
                      October 2010

                    • AU-4.1.7

                      In the case of applicants seeking to raise capital (refer to AU-4.1.4(h)), the CBB's review is aimed at checking that the proposed private placement complies with applicable capital markets laws and regulations, and that the information contained in the private placement memorandum ('PPM') is consistent with the information provided in the license application. The CBB's review does not in any way constitute an approval or endorsement as to any claims made in the PPM regarding the future value of the company concerned. Note also that the CBB will not license applicants without a core group of sponsoring shareholders (who can demonstrate a strong business track record with relevant expertise), and where failure of the private placement to raise its targeted amount would leave the institution unable to comply with the CBB's minimum capital requirements. The CBB will normally expect core shareholders to account for at least 40% of the applicant's initial proposed total capital.

                      October 2010

                    • AU-4.1.8

                      The applicant's memorandum and articles of association must explicitly provide for it to undertake the activities proposed in the license application, and must preclude the applicant from undertaking other regulated services, or commercial activities.

                      October 2010

                    • AU-4.1.9

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

                      October 2010

                    • AU-4.1.10

                      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.

                      October 2010

                    • AU-4.1.11

                      Failure to inform the CBB of the changes specified in Rule AU-4.1.10 is likely to be viewed as a failure to provide full and open disclosure of information, and thus a failure to meet licensing condition Rule AU-2.8.2.

                      October 2010

                    • 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'sG 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.

                      October 2010

                  • Licensing Process and Timelines

                    • AU-4.1.13

                      By law, the 60 day time limit referred to in Paragraph AU-4.1.2 only applies once the application is complete and all required information (which may include any clarifications requested by the CBB) and documents have been provided. This means that all the items specified in Rule AU-4.1.4 have to be provided, before the CBB may issue a license.

                      October 2010

                    • AU-4.1.14

                      The CBB recognises, however, that applicants may find it difficult to secure suitable senior management (refer AU-4.1.4(b) above) in the absence of preliminary assurances regarding the likelihood of obtaining a license.

                      October 2010

                    • AU-4.1.15

                      Therefore, applicants may first submit an unsigned Form 1 in draft, together with as many as possible of the items specified in Rule AU-4.1.4. This draft application should contain at least items AU-4.1.4(a); AU-4.1.4(b), with respect to proposed DirectorsG (but not necessarily senior management); AU-4.1.4(c); AU-4.1.4(d); and AU-4.1.4(f) to AU-4.1.4(i) inclusive.

                      Amended: January 2011
                      October 2010

                    • AU-4.1.16

                      On the basis of the information specified in Paragraph AU-4.1.15, the CBB may provide an initial 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

                      October 2010

                    • AU-4.1.17

                      An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents required under Rule AU-4.1.4 and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahrain company proposing to undertake financial services activities would not be able to obtain a commercial registration from the Ministry of Industry and Commerce unless they receive the final approval from the CBB.

                      October 2010

                    • AU-4.1.18

                      Regardless of whether an applicant submits a draft application or not, all potential applicants are strongly encouraged to contact the CBB at an early stage to discuss their plans and associated requirements. The Licensing Directorate would normally expect to hold at least one pre-application meeting with an applicant, prior to receiving an application (either in draft or in final form).

                      Amended: April 2018
                      October 2010

                    • AU-4.1.19

                      Potential applicants should initiate pre-application meetings in writing, setting out a short summary of their proposed business and any issues or questions that they may have already identified, once they have a clear business proposition in mind and have undertaken their preliminary research. The CBB can then guide the applicant on the specific areas in the Rulebook that will apply to them and the relevant requirements that they must address in their application.

                      October 2010

                    • AU-4.1.20

                      At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with Rule AU-4.1.21 below. Failure to do so may constitute grounds for refusing an application and result in a contravention of Articles 40 and 41 of the CBB Law (which carries a maximum penalty of BD 1 million).

                      October 2010

                  • Granting or Refusal of License

                    • AU-4.1.21

                      To be granted a license, an applicant must 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.

                      October 2010

                    • AU-4.1.22

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

                      (a) The requirements of the CBB Law or this Module are not met;
                      (b) False or misleading information has been provided to the CBB, or information which should have been provided to the CBB has not been so provided; or
                      (c) The CBB believes it necessary in order to safeguard the interests of potential customers.
                      October 2010

                    • AU-4.1.23

                      Where the CBB proposes to refuse an application for a license, it must give the applicant 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.

                      October 2010

                  • Starting Operations

                    • AU-4.1.24

                      Within 6 months of the license being issued, the new licenseeG must provide to the CBB (if not previously submitted):

                      (a) The registered office address and details of premises to be used to carry out the business of the proposed licenseeG ;
                      (b) The address in the Kingdom of Bahrain where full business records will be kept;
                      (c) The licensee'sG contact details including telephone and fax number, e-mail address and website;
                      (d) A copy of its business continuity plan;
                      (e) A description of the IT system that will be used, including details of how IT systems and other records will be backed up;
                      (f) A copy of the auditor's acceptance to act as auditor for the applicant;
                      (g) A copy of an auditor's opinion certifying that the licensee'sG capital — as specified in the business plan submitted under Rule AU-4.1.4 — has been paid in;
                      (h) A copy of the licensee'sG professional indemnity insurance policy (see Section GR-7.1);
                      (i) A copy of the applicant's notarized memorandum and articles of association, addressing the matters described in Paragraph AU-4.1.8;
                      (j) A copy of the Ministry of Industry and Commerce commercial registration certificate in Arabic and in English;
                      (k) A copy of the licensee's business card and any written communication (including stationery, website, e-mail, business documentation, etc.) including a statement that the money changer is licensed by the CBB; and
                      (l) Any other information as may be specified by the CBB.

                    • AU-4.1.25

                      New licenseesG must start their operations within 6 months of being granted a license by the CBB, failing which the CBB may cancel the license, as per the powers and procedures set out in Article 48 of the CBB Law.

                    • AU-4.1.26

                      The procedures for cancelling licenses are contained in Section AU-4.4.

                • AU-4.2 Authorisation of a Branch or Subsidiary

                  • AU-4.2.1

                    LicenseesG may open branches in the Kingdom of Bahrain after obtaining the CBB's prior written approval. LicenseesG are prohibited from opening branches in foreign jurisdictions but may open subsidiaries in such jurisdictions with the CBB prior approval.

                    Amended: April 2011
                    October 2010

                  • Authorisation of a Branch

                    • AU-4.2.2

                      Unless otherwise directed by the CBB, the following documents must be provided to the CBB in support of an application to open a branch:

                      (a) A business plan explaining:
                      1) The reasons for applying for a branch, including the applicant's strategy and market objectives; and
                      2) A minimum of three-year financial projection, with all assumptions clearly outlined, demonstrating that the branch will be able to meet all liabilities and obligations;
                      (b) The location of the proposed branch, including the full address;
                      (c) A confirmation that the branch will comply with the minimum security measures for money changer licenseesG as specified in Section GR-9.1;
                      (d) Confirmation from the external auditor that the licensee'sG capital adequacy is sufficient to support the operation of the branch, in addition to other existing branches (if applicable), at the time of filing the request; and
                      (e) Confirmation from the external auditor that additional capital requirement of BD30,000 (refer to Section CA-1.4), has been deposited in the licensee'sG bank account.
                      Amended: April 2011
                      October 2010

                  • Starting Operations of a Branch

                    • AU-4.2.3

                      LicenseesG should submit to the CBB confirmation that the authorised branch has commenced operations within 6 months of the authorisation letter.

                      Amended: April 2011
                      October 2010

                    • AU-4.2.4

                      An application for authorisation of a new branch will not be considered by the CBB unless the written confirmation that the preceding branch is operational, as required in Rule AU-4.2.3 above, has been submitted.

                      October 2010

                  • Authorisation of a Subsidiary

                    • AU-4.2.5

                      LicenseesG wishing to establish or acquire a new subsidiary undertakingG must submit to the CBB the following information as part of their request:

                      (a) Proposed name of subsidiary;
                      (b) Country of incorporation;
                      (c) Legal structure;
                      (d) Proposed issued capital;
                      (e) Proposed shareholding structure;
                      (f) Purpose of establishing or acquiring the subsidiary;
                      (g) Draft incorporation documents of the subsidiary;
                      (h) Board resolution approving the establishment or acquisition of the subsidiary; and
                      (i) Any other information or documentation requested by the CBB.
                      Added: April 2011

                    • AU-4.2.6

                      LicenseesG should ensure adherence with Rules contained in Chapter CA-1 and in particular with the leverage and liquidity requirements contained in Section CA-1.5 when considering the impact of a subsidiary on capital requirements.

                      Added: April 2011

                • AU-4.3 Approved Persons

                  • Prior Approval Requirements and Process

                    • AU-4.3.1

                      LicenseesG must obtain CBB's prior written approval before a person is formally appointed to a controlled functionG . The request for CBB approval must be made by submitting to the CBB a duly completed Form 3 (Application for Approved Person status) and Curriculum Vitae after verifying that all the information contained in the Form 3, including previous experience, is accurate. Form 3 is available under Volume 5 Part B Authorisation Forms of the CBB Rulebook.

                      Amended: January 2016
                      Amended: July 2015
                      October 2010

                    • AU-4.3.2

                      When the request for approved personG status forms part of a license application, the Form 3 must be marked for the attention of the Director, Licensing Directorate. When the submission to undertake a controlled functionG is in relation to an existing licenseeG , the Form 3, except if dealing with a MLRO, must be marked for the attention of the Director, Financial Institutions Supervision Directorate. In the case of the MLRO, Form 3 should be marked for the attention of the Director, Compliance Directorate.

                      Amended: April 2018
                      October 2010

                    • AU-4.3.3

                      When submitting Form 3, licenseesG must ensure that the Form 3 is:

                      (a) Submitted to the CBB with a covering letter signed by an authorised representative of the licenseeG , seeking approval for the proposed controlled function;G
                      (b) Submitted in original form;
                      (c) Submitted with a certified copy of the applicant's passport, original or certified copies of educational and professional qualification certificates (and translation if not in Arabic or English) and the Curriculum Vitae; and
                      (d) Signed by an authorised representative of the licenseeG and all pages stamped with the licensee'sG seal.
                      Amended: July 2015
                      October 2010

                    • AU-4.3.3A

                      LicenseesG seeking to appoint Board Directors must seek CBB approval for all the candidates to be put forward for election/approval at a shareholders' meeting, in advance of the agenda being issued to shareholders. CBB approval of the candidates does not in any way limit shareholders' rights to refuse those put forward for election/approval.

                      Added: July 2015

                    • AU-4.3.4

                      For existing licenseesG applying for the appointment of a DirectorG or the Chief ExecutiveG /General ManagerG , the authorised representative should be the Chairman of the Board or a DirectorG signing on behalf of the Board. For all other controlled functionsG , the authorised representative should be a DirectorG or the Chief ExecutiveG /General ManagerG .

                      October 2010

                    • AU-4.3.5

                      [This Paragraph was deleted in July 2015.]

                      Deleted: July 2015
                      October 2010

                    • AU-4.3.6

                      [This Paragraph was moved to AU-4.3.3A in July 2015.]

                      Amended: July 2015
                      October 2010

                  • Assessment of Application

                    • AU-4.3.6A

                      The CBB shall review and assess the application for approved personG 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.

                      Amended: January 2016
                      Added: July 2015

                    • AU-4.3.6B

                      For purposes of Paragraph AU-4.3.6A, licenseesG 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.

                      Amended: January 2016
                      Added: July 2015

                    • AU-4.3.6C

                      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 the criteria outlined in Paragraph AU-3.1.5. A notice of such refusal is issued by registered mail to the licenseeG concerned, setting out the basis for the decision.

                      Amended: January 2016
                      Added: July 2015

                    • AU-4.3.7

                      [This Paragraph was deleted in January 2016.]

                      Deleted: January 2016
                      Amended: July 2015
                      October 2010

                  • Appeal Process

                    • AU-4.3.7A

                      LicenseesG or the nominated approved personsG may, within 30 calendar days of the notification, appeal against the CBB's decision to refuse the application for approved personG status. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from submitting the appeal.

                    • AU-4.3.7B

                      Where notification of the CBB's decision to grant a person approved personG 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, licenseesG or the nominated approved personsG may appeal to the the Executive Director, Financial Institutions Supervision of the CBB provided that the appeal is justified with supporting documents. The CBB shall decide on the appeal and notify the licenseeG of its decision within 30 calendar days from the date of submitting the appeal.

                      Amended: January 2016
                      Added: July 2015

                  • Notification Requirements and Process

                    • AU-4.3.8AA

                      LicenseesG must immediately notify the CBB when an approved personG ceases to hold a controlled functionG together with an explanation as to the reasons why (see Paragraph AU-4.4.6). In such cases, their approved personG status is automatically withdrawn by the CBB.

                      Amended: October 2018
                      Amended: July 2015
                      Added: July 2011

                    • AU-4.3.8

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

                      October 2010

                    • AU-4.3.9

                      LicenseesG 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 personsG .

                      October 2010

                  • Change in Controlled Function

                    • AU-4.3.10

                      LicenseesG must seek prior CBB approval before an approved personG may move from one controlled functionG to another within the same licenseeG .

                      October 2010

                    • AU-4.3.11

                      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 functionG , but not for another, if for instance the new role requires a different set of skills and experience. Where an approved personG is moving to a controlled functionG at another licenseeG , the first licenseeG should notify the CBB of that person's departure (see Rule AU-4.4.6), and the new licenseeG should submit a request for approval under Rule AU-1.2.1.

                      October 2010

                • AU-4.4 Cancellation of Authorisation

                  • Voluntary Surrender of a License or Closure of Branch

                    • AU-4.4.1

                      In accordance with Article 50 of the CBB Law, licenseesG wishing to cancel their license or cease activities for a branch, must obtain the CBB's written approval, before ceasing their activities. All such requests must be made in writing to the Director, Financial Institutions Supervision, setting out in full the reasons for the request and how the business is to be wound up.

                      Amended: April 2012
                      October 2010

                    • AU-4.4.2

                      LicenseesG must satisfy the CBB that their customers'G interests are to be safeguarded during and after the proposed cancellation. The requirements contained in Chapter GR-6 regarding cessation of business must be satisfied.

                      October 2010

                    • AU-4.4.3

                      Failure to comply with Rule AU-4.4.1 may constitute a breach of Article 50(a) of the CBB Law. The CBB will only approve such a request where it has no outstanding regulatory concerns and any relevant customerG interests would not be prejudiced. A voluntary surrender of a license will not be accepted where it is aimed at preempting supervisory actions by the CBB. A voluntary surrender will only be allowed to take effect once the licenseeG , in the opinion of the CBB, has discharged all its regulatory responsibilities to customersG .

                      October 2010

                  • Cancellation of a License by the CBB

                    • AU-4.4.4

                      As provided for under Article 48(c) of the CBB Law, the CBB may itself move to cancel a license, for instance if a licenseeG fails to satisfy any of its existing license conditions or protecting the legitimate interests of customersG or creditors of the licenseeG require a cancellation. The CBB generally views the cancellation of a license as appropriate only in the most serious of circumstances, and generally tries to address supervisory concerns through other means beforehand. See also Chapter EN-7, regarding the cancellation or amendment of licenses, including the procedures used in such instances and the licensee'sG right to appeal the formal notice of cancellation issued by the CBB.

                      Amended: April 2012
                      October 2010

                    • AU-4.4.4A

                      Cancellation of a license requires the CBB to issue a formal notice of cancellation to the licenseeG concerned. The notice of cancellation describes the CBB's rationale for the proposed cancellation, as specified in Article 48(d) of the CBB Law.

                      Amended: January 2013
                      Added: April 2012

                    • AU-4.4.4B

                      Where the cancellation of a license has been confirmed by the CBB, the CBB will only effect the cancellation once a licenseeG has discharged all its regulatory responsibilities to clientsG . Until such time, the CBB will retain all its regulatory powers towards the licenseeG and will direct the licenseeG so that no new regulated money changer servicesG may be undertaken whilst the licenseeG discharges its obligations to its clientsG .

                      Added: April 2012

                    • AU-4.4.5

                      Licensees wishing to cancel an authorisation for a branch must obtain the CBB's written approval, before ceasing the activities of the branch.

                      October 2010

                  • Cancellation of Approved Person Status

                    • AU-4.4.6

                      In accordance with Paragraphs AU-4.3.8AA and BR-2.2.11, licenseesG must promptly notify the CBB in writing when a person undertaking a controlled functionG will no longer be carrying out that function. If a controlled functionG falls vacant, the licenseeG must appoint a permanent replacement (after obtaining CBB approval), within 120 calendar days of the vacancy occurring. Pending the appointment of a permanent replacement, the licenseeG must make immediate interim arrangements to ensure continuity of the duties and responsibilities of the controlled functionG affected, provided that such arrangements do not pose a conflict of duties. These interim arrangements must be approved by the CBB.

                      Amended: October 2018
                      Amended: July 2015
                      Amended: July 2011
                      October 2010

                    • AU-4.4.7

                      The explanation given for any such changes should simply identify if the planned move was prompted by any concerns over the person concerned, or is due to a routine staff change, retirement or similar reason.

                      October 2010

                    • AU-4.4.8

                      The CBB may also move to declare someone as not 'fit and proper', in response to significant compliance failures or other improper behaviour by that person: see Chapter EN-8 regarding the cancellation of 'fit and proper' approval.

                      October 2010

                • AU-4.5 Publication of the Decision to Grant, Cancel or Amend a License

                  • AU-4.5.1

                    In accordance with Articles 47 and 49 of the CBB Law, the CBB must publish its decision to grant, cancel or amend a license in the Official Gazette and in two local newspapers, one in Arabic and the other in English.

                    Added: July 2017

                  • AU-4.5.2

                    For the purposes of Paragraph AU-4.5.1, the cost of publication must be borne by the Licensee.

                    Added: July 2017

                  • AU-4.5.3

                    The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

                    Added: July 2017

              • AU-5 License Fees

                • AU-5.1 License Application Fees

                  • AU-5.1.1

                    Applicants seeking a Money Changer licenseG from the CBB must pay a non-refundable license application fee of BD 100 at the time of submitting their formal application to the CBB.

                    October 2010

                  • AU-5.1.2

                    There are no application fees for those seeking approved personG status.

                    October 2010

                • AU-5.2 Annual License Fees

                  • AU-5.2.1

                    LicenseesG must pay the relevant annual license fee to the CBB, on 1st December of the preceding year for which the fee is due.

                    Amended: July 2013
                    October 2010

                  • AU-5.2.2

                    The relevant fees are specified in Rule AU-5.2.3 below. The fees due on 1st December are those due for the following calendar year, but are calculated on the basis of the firm's latest audited financial statements for the previous calendar year: i.e. the fee payable on 1st December 2013 for the 2014 year (for example), is calculated using the audited financial statements for 2012, assuming a 31st December year end. Where a licenseeG does not operate its accounts on a calendar-year basis, then the most recent audited financial statements available are used instead.

                    Amended: July 2013
                    October 2010

                  • AU-5.2.3

                    The variable annual license fee payable by licenseesG is 0.25% of their relevant operating expensesG , subject to a minimum ('floor') of BD 300 and a maximum ('cap') of BD 6,000.

                    Amended: July 2013
                    October 2010

                  • AU-5.2.4

                    Relevant operating expensesG are defined as the total operating expenses of the licenseeG concerned, as recorded in the most recent audited financial statements available, subject to the adjustments specified in Rule AU-5.2.5.

                    October 2010

                  • AU-5.2.5

                    The adjustments to be made to relevant operating expensesG are the exclusion of the following items from total operating expenses:

                    (a) Training costs;
                    (b) Charitable donations;
                    (c) CBB fees paid; and
                    (d) Non-executive DirectorsG ' remuneration.
                    October 2010

                  • AU-5.2.6

                    For the avoidance of doubt, operating expenses for the purposes of this Section, do not include items such as depreciation, provisions, interest expense, and dividends.

                    October 2010

                  • AU-5.2.7

                    The CBB would normally rely on the audited accounts of a licenseeG as representing a true and fair picture of its operating expenses. However, the CBB reserves the right to enquire about the accounting treatment of expenses, and/or policies on intra-group charging, if it believes that these are being used artificially to reduce a license fee.

                    October 2010

                  • AU-5.2.8

                    LicenseesG must complete and submit Form ALF (Annual License Fee) to the CBB, no later than 15th October of the preceding year for which the fees are due.

                    Amended: July 2013
                    October 2010

                  • AU-5.2.8A

                    All licenseesG are subject to direct debit for the payment of the annual fee and must complete and submit to the CBB a Direct Debit Authorisation Form by 15th September available under Part B of Volume 5 (Specialised Licensees) CBB Rulebook on the CBB Website.

                    Added: July 2013

                  • AU-5.2.9

                    For new licenseesG , the first annual license fee is payable when the license is issued by the CBB. The amount payable is the floor amount of BD 300.

                    October 2010

                  • AU-5.2.9A

                    For the first full year of operation for licenseesG , the licenseeG would calculate its fee as the floor amount. For future years, the licenseeG would submit a Form ALF by 15th October of the preceding year for which the fees are due and calculate its fee using its last audited financial statements (or alternative arrangements as agreed with CBB, should its first set of accounts cover an 18-month period).

                    Added: July 2013

                  • AU-5.2.10

                    Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question.

                    October 2010

                  • AU-5.2.11

                    LicenseesG failing to comply with this Section may be subject to financial penalties for date sensitive requirements as outlined in Section EN-5.3A or may have their licenses withdrawn by the CBB.

                    Added: July 2013

            • HC Money Changers High-Level Controls Module

              • HC-A Introduction

                • HC-A.1 Purpose

                  • Executive Summary

                    • HC-A.1.1

                      This Module contains requirements that have to be met by licenceesG with respect to:

                      (a) The role and composition of their Boards and Board committees; and
                      (b) Related high-level controls and policies.
                      October 2010

                    • HC-A.1.2

                      These requirements specify minimum good practice standards, with regards to the function and responsibilities of Boards, their composition and size, and required standards of attendance and frequency of meetings. It also specifies basic requirements with respect to establishing policies and procedures that address the segregation of duties, internal audit and compliance arrangements, and the licensee'sG approach to remuneration and corporate ethics.

                      October 2010

                    • HC-A.1.3

                      This Module supplements various provisions relating to corporate governance contained in Legislative Decree No. 21 of 2001, with respect to promulgating the Commercial Companies Law ('Commercial Companies Law 2001'). In case of conflict, the Commercial Companies Law shall prevail. Compliance with this Module does not guarantee compliance with the Commercial Companies Law.

                      October 2010

                  • Legal Basis

                    • HC-A.1.4

                      This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding High-level Control requirements applicable to licenseesG , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding Money Changer licenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • HC-A.1.5

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

                      October 2010

                • HC-A.2 Module History

                  • Evolution of the Module

                    • HC-A.2.1

                      This Module was first issued in October 2010. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • HC-A.2.2

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

                      Module Ref. Change Date Description of Changes
                      HC-A.1.4 01/2011 Clarified legal basis.
                      Module HC 04/2016 Module updated to be in line, where applicable, to other Volumes of the CBB Rulebook.
                      HC-2.3 and HC-2.4 07/2016 Clarified application of Rules for overseas licensees.
                           
                           

                  • Superseded Requirements

                    • HC-A.2.3

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

                      Document Ref. Document Subject
                      BSD/D(111)3179 Regarding nomination of Senior Liaison Officer.
                      BC/11/98 Appointment of Approved Persons
                      October 2010

                  • Monitoring and Enforcement of Module HC

                    • HC-A.2.4

                      Disclosure and transparency are underlying principles of Module HC. Disclosure is crucial to allow outside monitoring of functions effectively. This Module looks to a combined monitoring system relying on the Board, the money changer licensee'sG shareholders and the CBB.

                      April 2016

                    • HC-A.2.5

                      It is the Board's responsibility to see to the accuracy and completeness of the money changer licensee'sG corporate governance guidelines and compliance with Module HC. Failure to comply with this Module is subject to enforcement measures as outlined in Module EN (Enforcement).

                      April 2016

              • HC-B Scope of Application

                • HC-B.1 Scope of Application

                  • HC-B.1.1

                    The content of this Module applies to all Money Changer licenseesG authorised in the Kingdom of Bahrain, thereafter referred to in this Module as licenseesG .

                    October 2010

              • HC-1 The Board

                • HC-1.1 Functions and Responsibilities

                  • General Requirements

                    • HC-1.1.1

                      LicenseesG must have a Board of DirectorsG ('the Board').

                      Amended: April 2016
                      October 2010

                    • HC-1.1.1A

                      The directors are ultimately accountable and responsible both individually and collectively for performing these responsibilities and must have sufficient expertise as a Board to understand the important issues relating to operation and control of the licenseeG . Although the Board may delegate certain functions to committees or management, it may not delegate its ultimate responsibility to ensure that an adequate, effective, comprehensive and transparent corporate governance framework is in place. This statement must be clearly communicated to Board members and senior managementG .

                      April 2016

                    • HC-1.1.2

                      To discharge its responsibility effectively, a Board typically delegates various functions and tasks, for instance to Board sub-committees, management and other employees. When it delegates, the Board nonetheless retains ultimate responsibility for the performance of those functions and tasks.

                      October 2010

                    • HC-1.1.2A

                      The licenseeG should have a written appointment agreement with each director which recites the directors' powers and duties and other matters relating to his appointment including his term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed.

                      April 2016

                  • Specific Requirements

                    • HC-1.1.3

                      The Board must establish and maintain a statement of its responsibilities, defining its functions and tasks and those delegated to Board sub-committees and senior management. This statement must be clearly communicated to Board members and senior management.

                      October 2010

                    • HC-1.1.4

                      For the purposes of HC-1.1.3, the CBB expects licenseesG to maintain detailed mandatesG for Boards and sub-committees. These mandatesG should be reviewed periodically by the Board. Depending on the size and complexity of the licenseeG concerned, the CBB also expects the Board to operate appropriate sub-committees.

                      Amended: April 2016
                      October 2010

                    • HC-1.1.5

                      The Board must approve and review at least annually the licensee'sG :

                      (a) Strategic plans;
                      (b) Management structure and responsibilities; and
                      (c) Systems and controls framework (including its policies and procedures).
                      October 2010

                    • HC-1.1.6

                      The Board must also regularly review:

                      (a) The licensee'sG implementation of its strategy and operational performance;
                      (b) The performance of its executive management; and
                      (c) The level of risk.
                      October 2010

                    • HC-1.1.7

                      The Board must set out clearly and review on a regular basis who has authority to commit the licenseeG to contractual obligations. The Board must set a materiality threshold so that contractual obligations above this set threshold are regularly reported to the Board. In setting the materiality threshold, the Board must consider the financial impact the contractual obligations may have in relation to its capital.

                      October 2010

                    • HC-1.1.8

                      The Board must must establish and disseminate to employees policies and processes for the identification, reporting and prevention or management of potential conflicts of interest, including matters such as:

                      (a) Related party transactions;
                      (b) The misuse of the licensee'sG assets; and
                      (c) The use of privileged information for personal advantage ('insider trading').
                      Amended: April 2016
                      October 2010

                    • HC-1.1.9

                      The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licenseeG , its shareholdersG and customersG .

                      October 2010

                    • HC-1.1.10

                      In assessing compliance with Paragraph HC-1.1.9, the CBB will take into account all actions of the Board and its members. The interest of the licenseeG includes the licensee'sG continued compliance with all relevant rules and regulations, and the interests of employees, customersG and other stakeholders. The interest of shareholdersG includes the current and future value of the licenseeG , its status as a going concern, transparency and disclosure of information to the market.

                      October 2010

                    • HC-1.1.11

                      The Board must oversee the process of disclosure to all stakeholders. The Board must ensure that the licensee'sG communications are fair, transparent, comprehensive and timely.

                      October 2010

                    • HC-1.1.12

                      The CBB expects the Board to have effective policies and processes in place for:

                      (a) Approving and reviewing at least annually the overall business performance and strategy for the licenseeG ;
                      (b) Causing financial statements to be prepared which accurately disclose the licensee'sG financial position;
                      (c) Ensuring a formal and transparent Board nomination process;
                      (d) Convening and preparing the agenda for shareholder meetings;
                      (e) Monitoring conflicts of interest and preventing abusive related party transactions;
                      (f) Appointing senior managers, after assessing that they have the necessary integrity, technical and managerial competence, and experience;
                      (g) Overseeing succession planning, and minimizing undue reliance on key individuals;
                      (d) Reviewing key senior management and Board remuneration packages and ensuring such packages are consistent with the corporate values and strategy of the licenseeG and encourage prudent risk taking;
                      (e) Monitoring and evaluating management's performance in implementing agreed strategy and business plans, and ensuring appropriate resources are available; and
                      (f) Approving budgets and reviewing performance against those budgets.
                      Amended: April 2016
                      October 2010

                    • HC-1.1.13

                      In assessing the systems and controls framework (see Paragraph HC-1.1.5), the CBB would expect the Board to be able to demonstrate that the licensee'sG operations, individually and collectively:

                      (a) Are measured, monitored and controlled by appropriate, effective and prudent risk management systems commensurate with the scope of the licensee'sG activities. These should pro-actively identify as well as monitor risk. The systems should produce information on a timely basis, and in a form and quality appropriate to the needs of the different recipients;
                      (b) Are supported by an appropriate control environment. The risk management and financial reporting functions must be independent of business lines and must be run by individuals not involved with the day-to-day running of the various business areas; and
                      (c) Make effective use of the work of internal and external auditors. The internal audit function should be independent of the senior management, reporting to the Board. The Board should ensure that the external audit firm and its partners are truly independent of the licenseeG and have no financial or other relationship with the licenseeG . Audit findings should be used as an independent check on the information received from management about the licensee'sG operations and performance and the effectiveness of internal controls.
                      Amended: April 2016
                      October 2010

                • HC-1.2 Composition

                  • HC-1.2.1

                    The Memorandum and Articles of Association of licenseesG must adequately set out procedures for the appointment, removal and retirement of DirectorsG .

                    October 2010

                  • HC-1.2.2

                    These should, amongst other things, include procedures for removing DirectorsG in case of non-attendance or other failure to discharge properly their responsibilities as company DirectorsG .

                    October 2010

                  • HC-1.2.2A

                    The Board should have a minimum of 3 members, as agreed with the CBB.

                    April 2016

                  • HC-1.2.3

                    To fulfil its responsibilities outlined in Section HC-1.1, the Board of licenseesG must periodically assess its composition and size and, where appropriate, reconstitute itself and its committees by selecting new DirectorsG to replace long-standing members or those members whose contributions to the licenseeG or its committees is not adequate.

                    October 2010

                  • HC-1.2.4

                    The Board must ensure that collectively it has sufficient expertise to understand the important issues relating to the operation and control of its company.

                    October 2010

                  • HC-1.2.5

                    It is not expected that every Board member is proficient in all areas, but collectively the Board is expected to have the required expertise. There should also be agreed upon procedures by the Board for DirectorsG to take independent advice if necessary at the licensee'sG expense. CBB also expects Board members to undertake relevant training on a regular basis to help them fulfill their responsibilities as DirectorsG .

                    October 2010

                  • HC-1.2.6

                    The appointment of Board members is conditional on the approval of the CBB. (See Section AU-1.2).

                    October 2010

                  • HC-1.2.7

                    A Board member may have a maximum of two Directorships of financial institutions inside Bahrain. However, two Directorships of licenseesG within the same type of licenseesG would not be permitted. LicenseesG may approach the CBB for exemption from this limit where the Directorships concern financial institutions within the same groupG .

                    Amended: April 2016
                    October 2010

                  • HC-1.2.8

                    Unless otherwise agreed with the CBB, the chairman and/or deputy chairman must not be the same person as the CEOG or general managerG .

                    April 2016

                • HC-1.3 Meetings and Attendance

                  • HC-1.3.1

                    The Board must meet sufficiently often to enable it to discharge its responsibilities effectively, taking into account the licensee'sG scale and complexity.

                    October 2010

                  • HC-1.3.2

                    The CBB expects that the scale and complexity of most licenseesG will require meetings to be held at least quarterly. For the larger, most complex licenseesG , more frequent Board meetings may be more appropriate.

                    October 2010

                  • HC-1.3.2A

                    The Board must meet frequently but in no event less than four times a year. All directors must attend the meetings whenever possible and the directors must maintain informal communication between meetings.

                    April 2016

                  • HC-1.3.2B

                    Individual board members must attend at least 75% of all Board meetings in a given financial year to enable the Board to discharge its responsibilities effectively (see table below). Voting and attendance proxies for board meetings are prohibited at all times.

                    Meetings per year 75% Attendance requirement
                    4 3
                    5 4
                    6 5
                    7 5
                    8 6
                    9 7
                    10 8
                    April 2016

                  • HC-1.3.2C

                    The absence of Board members at Board and committee meetings must be noted in the meeting minutes. In addition, Board attendance percentage must be reported during any general assembly meeting when Board members stand for re-election (e.g. Board member XYZ attended 95% of scheduled meetings this year).

                    April 2016

                  • HC-1.3.2D

                    In the event that a Board member has not attended at least 75% of Board meetings in any given financial year, the licenseeG must immediately notify the CBB indicating which member has failed to satisfy this requirement, his level of attendance and any mitigating circumstances affecting his non-attendance. The CBB shall then consider the matter and determine whether disciplinary action, including disqualification of that Board member pursuant to Article 65 of the CBB Law, is appropriate. Unless there are exceptional circumstances, it is likely that the CBB will take disciplinary action.

                    April 2016

                  • HC-1.3.2E

                    Board members are reminded that non attendance at board meetings does not absolve them of their responsibilities as directors. It is important that each individual director should allocate adequate time and effort to discharge his responsibilities. All Directors are expected to contribute actively to the work of the Board in order to discharge their responsibilities and should make every effort to attend board meetings where major issues are to be discussed. In instances where telephonic or videoconference meetings are held, licenseesG are encouraged to amend their Articles of Association to provide for such meetings. Participation in board meetings by means of video or telephone conferencing is regarded as attendance and may be recorded as such.

                    April 2016

                  • HC-1.3.3

                    Board rules must require members to step down if they are not actively participating in Board meetings.

                    October 2010

                  • HC-1.3.4

                    The CBB expects Board members who fail to attend at least three-quarters of all Board meetings in any twelve-month period to step down, unless the Board is able to satisfy the CBB that there are valid reasons for the DirectorG concerned to remain a Board member.

                    October 2010

                  • HC-1.3.5

                    At least half the Board meetings of licenseesG in any twelve-month period must be held in the Kingdom of Bahrain.

                    October 2010

                  • HC-1.3.5A

                    The chairman must ensure that all directors receive an agenda, minutes of prior meetings, and adequate background information in writing before each Board meeting and when necessary between meetings. All directors must receive the same Board information. At the same time, directors have a legal duty to inform themselves and they must ensure that they receive adequate and timely information and must study it carefully.

                    April 2016

                  • HC-1.3.6

                    The Board must maintain adequate records of its meetings, such that key decisions and how they are arrived at can be traced.

                    Amended: April 2016
                    October 2010

                • HC-1.4 Directors' Communication with Management

                  • HC-1.4.1

                    The Board must encourage participation by management regarding matters the Board is considering, and also by management members who by reason of responsibilities or succession, the CEO or general manager (as the case may be) believes should have exposure to the directors.

                    April 2016

              • HC-2 Approved Persons Loyalty

                • HC-2.1 Personal Accountability

                  • HC-2.1.1

                    The Board and its members must act with honesty, integrity, due skill and care, and in the best interests of the licenseeG , its shareholdersG and clientsG .

                    Amended: April 2016
                    October 2010

                  • HC-2.1.2

                    In assessing compliance with Paragraph HC-2.2.1, the CBB will take into account all actions of the Board and its members. The interest of the licenseeG includes the licensee'sG continued compliance with all relevant rules and regulations, and the interests of employees, clients and other stakeholders. The interest of shareholdersG includes the current and future value of the licenseeG , its status as a going concern, transparency and disclosure of information to the market. The interest of clients includes ensuring that the licenseeG fulfils its obligations under its terms of businessG and treats all clients fairly and pays equal regard to the interests of all clients.

                    Amended: April 2016
                    October 2010

                  • HC-2.1.3

                    Each member of the board must understand that under the Company Law he is personally accountable to the licenseeG and the shareholders if he violates his legal duty of loyalty to the licenseeG , and that he can be personally sued by the licenseeG or the shareholders for such violations.

                    Amended: April 2016
                    October 2010

                  • HC-2.1.4

                    The duty of loyalty includes a duty not to use property of the licensee for his personal needs as though it was his own property, not to disclose confidential information of the licensee or use it for his personal profit, and to serve the licensee's interest in any transactions with the company in which he has a personal interest.

                    April 2016

                  • HC-2.1.5

                    For purposes of Paragraph HC-2.1.4, an approved person is considered to have a "personal interest" in a transaction with the company if:

                    (a) He himself;
                    (b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or
                    (c) Another company of which he is a director or controller,

                    is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)

                    April 2016

                  • HC-2.1.6

                    A licensee'sG Board must establish and disseminate to all employees of the licenseeG a corporate code of conduct.

                    April 2016

                  • HC-2.1.7

                    The code of conduct must establish standards by giving examples or expectations as regards:

                    (a) Honesty;
                    (b) Integrity;
                    (c) The avoidance or disclosure of conflicts of interest;
                    (d) Maintaining confidentiality;
                    (e) Professionalism;
                    (f) Commitment to the law and best practices; and
                    (g) Reliability.
                    April 2016

                  • HC-2.1.8

                    A Board must ensure that policies and procedures are in place to ensure that necessary customer confidentiality is maintained.

                    April 2016

                • HC-2.2 Segregation of Duties/Avoidance of Conflicts of Interest

                  • HC-2.2.1

                    LicenseesG must maintain an organisational structure that segregates duties in order to minimise the risk of conflicts of interest arising.

                    Amended: April 2016
                    October 2010

                  • HC-2.2.2

                    Each approved personG must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the licenseeG .

                    Amended: April 2016
                    October 2010

                  • HC-2.2.3

                    Board members must absent themselves from any discussion or decision-making that involves a subject where they are incapable of providing objective advice, or which involves a subject, transaction or proposed transaction where there is a potential conflict of interest.

                    Amended: April 2016
                    October 2010

                • HC-2.3 Disclosure of Conflicts of Interest

                  • HC-2.3.1

                    Each approved person must inform the entire Board of conflicts of interest as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Company Law. This disclosure must include all material facts in the case of a contract or transaction involving the approved person. The approved persons must understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision.

                    Amended: April 2016
                    October 2010

                  • HC-2.3.2

                    Board members must declare annually in writing all of their interests (and those of their family) in other enterprises or activities (whether as a Director, shareholder, senior executive or other form of participation) to the Board (or appropriate Board sub-Committee).

                    Amended: April 2016
                    October 2010

                  • HC-2.3.3

                    Bahraini licenseesG must have in place a board approved policy on the employment of relatives of approved personsG and a summary of such policy must be disclosed in the annual report of the Bahraini licenseeG .

                    Amended: July 2016
                    Amended: April 2016
                    October 2010

                  • HC-2.3.4

                    Overseas licenseesG must have in place a policy on the employment of relatives of approved personsG pertaining to their Bahrain operations.

                    Added: July 2016

                • HC-2.4 Disclosure of Conflicts of Interest to Shareholders

                  • HC-2.4.1

                    The licenseeG must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Company Law.

                    Amended: April 2016
                    October 2010

                  • HC-2.4.2

                    The chief executiveG /general managerG of the Bahraini licenseeG must disclose to the board of directors on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG within the Bahraini licenseeG .

                    Amended: July 2016
                    Amended: April 2016
                    October 2010

                  • HC-2.4.3

                    The chief executiveG /general managerG of the overseas licenseesG must disclose to a designated officer at its head office or regional manager on an annual basis those individuals who are occupying controlled functionsG and who are relatives of any approved personsG within the overseas licenseeG .

                    Added: July 2016

              • HC-3 Financial Statements Certification

                • HC-3.1 Internal Control

                  • HC-3.1.1

                    The Board must have rigorous controls for financial audit and reporting, internal control, and compliance with law.

                    April 2016

                  • HC-3.1.2

                    To encourage management accountability for the financial statements required by the directors, the licensee'sG CEOG or general managerG and chief financial officer must state in writing to the Board as a whole that the licensee'sG interim and annual financial statements present a true and fair view, in all material respects, of the licensee'sG financial condition and results of operations in accordance with applicable accounting standards.

                    April 2016

              • HC-4 Directors’ Remuneration

                • HC-4.1 Remuneration Policies

                  • HC-4.1.1

                    The review of Directors'G remuneration must be a standing item on the licensee'sG Annual General Meeting agenda, and must be considered by shareholdersG at every Annual General Meeting. Directors'G remuneration (including pension and severance arrangements) and bonuses must be clearly disclosed in the annual financial statements.

                    April 2016

                  • HC-4.1.2

                    Directors'G remuneration should also comply with all applicable laws, such as Legislative Decree No. 21 of 2001 (and its amendments), with respect to promulgating the Commercial Companies Law.

                    April 2016

              • HC-5 Management Structure

                • HC-5.1 Establishment of Management Structure

                  • HC-5.1.1

                    The Board must approve and review at least annually the licensee'sG management structure and responsibilities.

                    April 2016

                  • HC-5.1.2

                    The Board must appoint senior managementG whose authority must include management and operation of current activities of the licenseeG , reporting to and under the direction of the Board. The senior managersG must include at a minimum:

                    (a) A CEOG or general managerG ;
                    (b) A chief financial officer;
                    (c) An internal auditor (see HC-5.4 and AU-1.2); and
                    (d) A compliance officer (see HC-5.5 and AU-1.2).

                    and must also include such other approved personsG as the Board considers appropriate and as a minimum must include persons occupying controlled functionsG as outlined in Paragraph AU-1.2.2.

                    April 2016

                  • HC-5.1.3

                    The licenseeG may appoint a corporate secretary. Whenever practical, the corporate secretary should be a person with legal or similar professional experience and training. The corporate secretary's duties include:

                    (a) Arranging, recording and following up on the actions, decisions and meetings of the Board and of the shareholders (both at annual and extraordinary meetings) in books to be kept for that purpose; and
                    (b) Reviewing the licensee'sG procedures and advising the Board directly on such matters.
                    April 2016

                • HC-5.2 Titles, Authorities, Duties and Reporting Responsibilities

                  • HC-5.2.1

                    LicenseesG must maintain clearly documented and communicated staff responsibilities and reporting lines.

                    April 2016

                  • HC-5.2.2

                    For the purposes of Rule HC-5.2.1, licenseesG should maintain and document their delegated authority structure as well as written terms of reference for staff positions.

                    April 2016

                  • HC-5.2.3

                    The Board must adopt by-laws prescribing each senior manager'sG title, authorities, duties and internal reporting responsibilities. This must be done in consultation with the CEOG or general managerG , to whom the other senior managersG should normally report.

                    April 2016

                  • HC-5.2.4

                    These provisions must include but should not be limited to the following:

                    (a) The CEOG or general managerG must have authority to act generally in the licensee'sG name, representing the licensee'sG interests in concluding transactions on the licensee'sG behalf and giving instructions to other senior managersG and licenseeG employees;
                    (b) The chief financial officer must be responsible and accountable for:
                    (i) The complete, timely, reliable and accurate preparation of the licensee'sG financial statements, in accordance with the accounting standards and policies of the licenseeG (see HC-3.1.2); and
                    (ii) Presenting the Board with a balanced and understandable assessment of the licensee'sG financial situation;
                    (c) The internal auditor's (see HC-5.4) duties must include providing an independent and objective review of the efficiency of the licensee'sG operations. This would include a review of the accuracy and reliability of the licensee'sG accounting records and financial reports as well as a review of the adequacy and effectiveness of the licensee'sG risk management, control, and governance processes; and
                    (d) The compliance officer's (see HC-5.5) duties include maintaining effective systems and controls for compliance with applicable requirements in the Kingdom's legislation and those set by the CBB, and those established under any other statute or regulator to which they are subject.
                    April 2016

                  • HC-5.2.5

                    The Board should also specify any limits which it wishes to set on the authority of the CEOG or general managerG or other senior managersG , such as monetary maximums for transactions which they may authorize without separate Board approval.

                    April 2016

                  • HC-5.2.6

                    At least annually the Board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEOG or general managerG , both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the CEOG or general managerG .

                    April 2016

                • HC-5.3 Chief Executive/General Manager

                  • HC-5.3.1

                    LicenseesG must appoint a person to undertake the function of Chief ExecutiveG or General ManagerG .

                    April 2016

                  • HC-5.3.2

                    The Chief ExecutiveG or General ManagerG (as appropriate), is responsible for the executive management and performance of the licenseeG , within the framework of delegated authorities set by the Board. The function of Chief ExecutiveG or General ManagerG is a controlled functionG , and the person nominated to that post therefore requires prior CBB approval (see Module AU (Authorisation)).

                    April 2016

                  • HC-5.3.3

                    Residency requirements apply to Chief ExecutivesG and General ManagersG (see Section AU-2.2.)

                    April 2016

                • HC-5.4 Internal Audit

                  • HC-5.4.1

                    Unless otherwise agreed with the CBB, licenseesG must establish an internal audit function to monitor the adequacy of their systems and controls.

                    April 2016

                  • HC-5.4.2

                    The CBB would normally expect larger licenseesG to maintain the internal audit function within the organisation. The CBB will however consider allowing small licenseesG to outsource part or all of their internal audit function to third party providers.

                    April 2016

                  • HC-5.4.3

                    LicenseesG may outsource part or all of their internal audit function, after obtaining the prior approval of the CBB. The outsourcing arrangements must provide for an adequate level of scrutiny of the licenseeG , and must comply with the requirements contained in Section RM-2.4. A licenseeG cannot outsource its internal audit function to its external auditor.

                    April 2016

                  • HC-5.4.4

                    Prior approval from the CBB is required for significant outsourcing arrangements, including all outsourcing of internal audit. Note that in all such cases, the licenseeG retains ultimate responsibility for the adequacy of its outsourcing function, and is required to identify the person within the licenseeG responsible for internal audit: this person should be an approved personG (see Section AU-1.2 and Chapter RM-2).

                    April 2016

                  • HC-5.4.5

                    Internal audit functions must have terms of reference that clearly indicate:

                    (a) The scope and frequency of audits;
                    (b) Reporting lines; and
                    (c) The review and approval process applied to audits.
                    April 2016

                  • HC-5.4.6

                    Paragraph HC-5.4.5 applies irrespective of whether the internal audit function is outsourced. Where it is outsourced, the CBB would expect to see these matters addressed in the contract with the outsourcing providerG .

                    April 2016

                  • HC-5.4.7

                    Internal audit functions must report directly to the Board. They must have unrestricted access to all the appropriate records of the licenseeG . They must have open and regular access to the Board, the Chief ExecutiveG or general managerG , and the licensee'sG external auditor.

                    April 2016

                  • HC-5.4.8

                    Internal audit functions must have adequate staff levels with appropriate skills and knowledge, such that they can act as an effective challenge to the business. Where the function is not outsourced, the head of functionG should be a senior and experienced employee. Internal audit functions must not perform other activities that compromise their independence.

                    April 2016

                  • HC-5.4.9

                    The CBB would expect to see in place a formal audit plan that:

                    (a) Is reviewed and approved at least annually by the Board;
                    (b) Is risk-based, with an appropriate scoring system; and
                    (c) Covers all material areas of a licensee'sG operations over a reasonable timescale.
                    April 2016

                  • HC-5.4.10

                    Internal Audit reports should also be:

                    (a) Clear and prioritised, with action points directed towards identified individuals;
                    (b) Timely; and
                    (c) Distributed to the Board and appropriate senior management.
                    April 2016

                  • HC-5.4.11

                    LicenseesG should also have processes in place to deal with recommendations raised by internal audit to ensure that they are:

                    (a) Dealt with in a timely fashion;
                    (b) Monitored until they are settled; and
                    (c) Raised with senior management if they have not been adequately dealt with.
                    April 2016

                • HC-5.5 Compliance

                  • HC-5.5.1

                    LicenseesG must take reasonable care to establish and maintain effective systems and controls for compliance with applicable requirements in the Kingdom's legislation and those set by the CBB, and those established under any other statute or regulator to which they are subject.

                    April 2016

                  • HC-5.5.2

                    Depending on the nature, scale and complexity of its business, a licenseeG should consider having a separate compliance function. A compliance function should:

                    (a) Document its organisation and responsibilities;
                    (b) Be appropriately staffed with competent individuals;
                    (c) Have unrestricted access to the licensee'sG relevant records; and
                    (d) Have ultimate recourse to the Board.
                    April 2016

                  • HC-5.5.3

                    LicenseesG must designate an employee, of appropriate standing and resident in Bahrain, as Compliance OfficerG . The duties of the Compliance OfficerG include:

                    (a) Having responsibility for oversight of the licensee'sG compliance with the requirements of the CBB; and
                    (b) Reporting to the licensee'sG Board in respect of that responsibility.
                    April 2016

                  • HC-5.5.4

                    The Compliance OfficerG is a controlled functionG and the requirements relating to approved personsG must be met (see Chapter AU-1.2). If the scale and nature of the licensee'sG operations are limited, then the individual who performs the function of Compliance OfficerG may also take on other responsibilities, providing this does not create a potential conflict of interest. The compliance function may not be combined with the internal audit function or any operational function as they are incompatible and may create a conflict of interest.

                    April 2016

            • GR Money Changers General Requirements Module

              • GR-A Introduction

                • GR-A.1 Purpose

                  • Executive Summary

                    • GR-A.1.1

                      The General Requirements Module presents a variety of different requirements that are not extensive enough to warrant their own stand-alone Module, but for the most part are generally applicable. These include requirements on books and records; on the use of corporate and trade names; on controllersG and close links,G on security measures, counterfeit currency detection measures and loans extended to related parties.

                      October 2010

                  • Legal Basis

                    • GR-A.1.2

                      This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding general requirements applicable to licenseesG , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding controllers (see Chapter GR-5) also included in Regulations, to be issued by the CBB. Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • GR-A.1.3

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

                      October 2010

                • GR-A.2 Module History

                  • Evolution of Module

                    • GR-A.2.1

                      This Module was first issued in October 2010 by the CBB. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • GR-A.2.2

                      A list of recent changes made to this Module is detailed in the table below:

                      Module Ref. Change Date Description of Changes
                      GR-A.1.2 01/2011 Clarified legal basis.
                      GR-2.1.1 01/2011 Clarified Rule regarding money in transfer.
                      GR-7.1.2 01/2011 Clarified Guidance.
                      GR-5.3.1A 04/2011 New Rule added for suitability of controllers.
                      GR-9.1 07/2011 Several amendments made to be in line with other Volumes of the CBB Rulebook.
                      GR-5.3.1 04/2012 Amended to be in line with other Volumes of the CBB Rulebook.
                      GR-6 04/2012 Clarified language on cessation of business to be in line with other Volumes of the CBB Rulebook.
                      GR-11.1 and GR-11.1.1A 01/2013 Clarified Rules and added Guidance dealing with credit facilities extended to related parties.
                      GR-1.1.3 04/2013 Corrected reference to 'transaction' records.
                      GR-7.1.4 10/2014 Added due date for Insurance Coverage Form
                      GR-6.1.11 10/2016 Added an additional requirement for cessation of business to be consistent with other Volumes of the CBB Rulebook.
                      GR-5.1.4 01/2017 Consistency of notification timeline rule on controllers with other Volumes of the CBB Rulebook.
                      GR-1.2.1 07/2017 Amended paragraph according to the Legislative Decree No. (28) of 2002.
                      GR-1.2.2 07/2017 Deleted paragraph.
                      GR-4.1.3 10/2017 Added additional requirements to submit when requesting no-objection letter for proposed dividends.
                      GR-1.1.1 10/2018 Amended Paragraph to be consistent with other Volumes.
                      GR-5.1.1A 04/2019 Added a new Paragraph on exposure to controllers.
                      GR-5.1.1B 04/2019 Added a new Paragraph on exposure to controllers.

                  • Superseded Requirements

                    • GR-A.2.3

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

                      Circular Ref. Subject
                      BS/07/2004 Record-keeping requirements.
                      BC/24/1999 Accounts of Money Changers.
                      BS/08/2004 Controllers of, and holdings and transfers of significant ownership or controlling interests in, Agency licensees
                      OD/080/2007 Directives on Measures to Detect Counterfeit Currency
                      FIS/C/001/2005 Security Measures for Money Changers
                      ODG/118/2004 Review of Security Measures
                      BC/6/99 Requirement of Bank Guarantee
                      October 2010

              • GR-B Scope of Application

                • GR-B.1 Scope of Application

                  • GR-B.1.1

                    The scope of application of Module GR (General Requirements) applies to all Money Changer LicenseesG , thereafter referred to in this Module as licenseesG .

                    October 2010

              • GR-1 Books and Records

                • GR-1.1 General Requirements

                  • GR-1.1.1

                    In accordance with Articles 59 and 60 of the CBB Law, all licenseesG must maintain books and records (whether in electronic or hard copy form) sufficient to produce financial statements and show a complete record of the business undertaken by a licenseeG . These records must be maintained for at least 10 years according to Article 60 of the CBB Law.

                    Amended: October 2018
                    October 2010

                  • GR-1.1.2

                    GR-1.1.1 includes accounts, books, files and other records (e.g. trial balance, general ledger, nostro/vostro statements, reconciliations, list of counterparties). It also includes records that substantiate the value of the assets and liabilities activities of the licenseeG .

                    October 2010

                  • GR-1.1.3

                    Bahrain Law currently requires other transaction records to be retained for at least 5 years (see Ministerial Order No. 23 of 2002, made pursuant to Amiri Decree Law No. 4 of 2001).

                    Amended: April 2013
                    October 2010

                  • GR-1.1.4

                    Unless otherwise agreed to by the CBB in writing, records must be kept in either English or Arabic. Any records kept in languages other than English or Arabic must be accompanied by a certified English or Arabic translation. Records must be kept current. The records must be sufficient to allow an audit of the licensee'sG business or an on-site examination of the licenseeG by the CBB.

                    October 2010

                  • GR-1.1.5

                    Translations produced in compliance with Rule GR-1.1.4 may be undertaken inhouse, by an employee or contractor of the licenseeG , provided they are certified by an appropriate officer of the licenseeG .

                    October 2010

                  • GR-1.1.6

                    Records must be accessible at any time from within the Kingdom of Bahrain, or as otherwise agreed with the CBB in writing.

                    October 2010

                  • GR-1.1.7

                    Where older records have been archived, the CBB may accept that records be accessible within a reasonably short time frame (e.g. within 5 business days), instead of immediately.

                    October 2010

                  • GR-1.1.8

                    Paragraphs GR-1.1.1 to GR-1.1.6 apply to licenseesG , with respect to all their business activities.

                    October 2010

                • GR-1.2 Transaction Records

                  • GR-1.2.1

                    LicenseesG must keep completed transaction records for as long as they are relevant for the purposes for which they were made (with a minimum period in all cases of five years from the date when the transaction was terminated). Records of terminated transactions must be kept whether in hard copy or electronic format as per the Legislative Decree No.(28) of 2002 with respect to Electronic Transactions "The Electronic Transaction Law" and its amendments.

                    Amended: July 2017
                    October 2010

                  • GR-1.2.2

                    [This Paragraph has been deleted in July 2017].

                    Deleted: July 2017
                    October 2010

                • GR-1.3 Other Records

                  • Corporate Records

                    • GR-1.3.1

                      LicenseesG must maintain the following records in original form or in hard copy at their premises in Bahrain:

                      (a) Internal policies, procedures and operating manuals;
                      (b) Corporate records, including minutes of shareholdersG ', DirectorsG ' and management meetings;
                      (c) Correspondence with the CBB and records relevant to monitoring compliance with CBB requirements;
                      (d) Reports prepared by the licensee'sG internal and external auditors; and
                      (e) Employee training manuals and records.
                      October 2010

                  • Customer Records

                    • GR-1.3.2

                      Record-keeping requirements with respect to customerG records, including customerG identification and due diligence records, are contained in Module FC (Financial Crime).

                      October 2010

              • GR-2 Money in Transfer

                • GR-2.1 Money in Transfer

                  • GR-2.1.1

                    All remittances must be pre-funded. In instances where remittances are not pre-funded, they must be channelled through a designated customer account at a retail bankG in the Kingdom of Bahrain. No claims by the licenseeG can be made against this account.

                    Amended: January 2011
                    October 2010

              • GR-3 Corporate and Trade Names

                • GR-3.1 Vetting of Names

                  • GR-3.1.1

                    LicenseesG must seek prior approval from the CBB for their corporate name and any trade names.

                    October 2010

                  • GR-3.1.2

                    In approving a corporate or trade name, the CBB seeks to ensure that it is sufficiently distinct as to reduce possible confusion with other unconnected businesses, particularly those operating in the financial services sector.

                    October 2010

              • GR-4 Dividends

                • GR-4.1 CBB Prior Approval

                  • GR-4.1.1

                    LicenseesG must obtain the CBB's prior written approval to any dividend proposed to be distributed to the shareholders, before announcing the proposed dividend by way of press announcement or any other means of communication and prior to submitting a proposal for a distribution of profits to a shareholder vote.

                    October 2010

                  • GR-4.1.2

                    The CBB will grant approval where it is satisfied that the level of dividend proposed is unlikely to leave the licenseeG vulnerable — for the foreseeable future — to breaching the CBB's financial resources requirements, taking into account (as appropriate) trends in the licensee'sG business volumes, expenses and performance.

                    October 2010

                  • GR-4.1.3

                    To facilitate the prior approval required under Paragraph GR-4.1.1, licenseesG subject to Paragraph GR-4.1.1 must provide the CBB with:

                    (a) The licensee'sG intended percentage and amount of proposed dividends for the coming year;
                    (b) A letter of no objection from the licensee'sG external auditor on such profit distribution; and
                    (c) A detailed analysis of the impact of the proposed dividend on the capital adequacy requirements outlined in Module CA (Capital Adequacy) and the liquidity position of the licensee.
                    Amended: October 2017
                    October 2010

              • GR-5 Controllers

                • GR-5.1 Key Provisions

                  • GR-5.1.1

                    LicenseesG must obtain prior approval from the CBB for any of the following changes to their controllersG (as defined in Section GR-5.2):

                    (a) A new controllerG ;
                    (b) An existing controllerG increasing its holding from below 20% to above 20%;
                    (c) An existing controllerG increasing its holding from below 50% to above 50%; and
                    (d) An existing controllerG reducing its holding from above 50% to below 50%.
                    October 2010

                  • GR-5.1.1A

                    LicenseesG must not incur or otherwise have an exposure (either directly or indirectly) to their controllersG , including subsidiariesG and associatedG companies of such controllersG .

                    Added: April 2019

                  • GR-5.1.1B

                    For the purpose of Paragraph GR-5.1.1A, licenseesG that already have an exposure to controllersG must have an action plan agreed with the CBB's supervisory point of contact to address such exposures within a timeline agreed with the CBB.

                    Added: April 2019

                  • GR-5.1.2

                    Articles 52 to 56 of the CBB Law require notification to the CBB of all controllersG of licenseesG and of listed companies; it further gives the CBB the right to refuse approval of controllersG if deemed damaging to the interests of the market, customers, or in contravention of the criteria set by the CBB.

                    October 2010

                  • GR-5.1.3

                    Requests for approval under Paragraph GR-5.1.1 must be made by submitting a duly completed Form 2 (Application for Authorisation of Controller) to the CBB. Notification must be made by the controllerG or intended controllerG , and by the licenseeG where it is aware of the change.

                    October 2010

                  • GR-5.1.4

                    If, as a result of circumstances outside the licensee'sG knowledge and/or control, one of the changes specified in Paragraph GR-5.1.1 is triggered prior to CBB approval being sought or obtained, the licenseeG must notify the CBB no later than 15 calendar days from the date on which those changes have occurred.

                    Amended: January 2017
                    October 2010

                  • GR-5.1.5

                    For approval under Rule GR-5.1.1 to be granted, the applicant must satisfy the CBB that the proposed change in controllerG poses no undue risks to the licenseeG or its customers, and is not damaging to the interests of the market, as defined in the suitability criteria for controllersG , contained in Section GR-5.3.

                    October 2010

                  • GR-5.1.6

                    An approval of controllerG is valid for the period specified in the approval letter issued by the CBB. The CBB may impose any restrictions that it considers necessary to be observed when granting its approval.

                    October 2010

                  • GR-5.1.7

                    The approval process is specified in Section GR-5.4.

                    October 2010

                • GR-5.2 Definition of Controller

                  • GR-5.2.1

                    A controllerG of a licenseeG is a natural or legal person who, either alone or with his associates:

                    (a) Holds 10% or more of the shares in the licenseeG ('L'), or is able to exercise (or control the exercise of) more than 10% of the voting power in L;
                    (b) Holds 10% or more of the shares in a parent undertakingG ('P') of L, or is able to exercise (or control the exercise of) more than 10% of the voting power in P; or
                    (c) Is able to exercise significant influence over the management of L or P.
                    October 2010

                  • GR-5.2.2

                    For the purposes of Paragraph GR-5.2.1, 'associate' includes:

                    (a) In the case of natural persons, a member of the controller's familyG ;
                    (b) An undertaking of which a controllerG is a DirectorG ;
                    (c) A person who is an employee or partner of the controllerG ; or
                    (d) If the controllerG is a corporate entity, a DirectorG of the controllerG , a subsidiary of the controllerG , or a DirectorG of any subsidiary undertaking of the controllerG .
                    October 2010

                  • GR-5.2.3

                    Associate also includes any other person or undertaking with which the controllerG has entered into an agreement or arrangement as to the acquisition, holding or disposal of shares or other interests in the licenseeG , or under which they undertake to act together in exercising their voting power in relation to the licenseeG .

                    October 2010

                • GR-5.3 Suitability of Controllers

                  • GR-5.3.1

                    All new controllersG or prospective controllersG (as defined in Section GR-5.2) of a Bahraini specialised licenseeG must obtain the approval of the CBB. Any increases to existing controllers'G holdings or voting control (as outlined under Paragraph GR-5.1.1) must also be approved by the CBB and are subject to the conditions outlined in this Section. Such changes in existing controllersG (as defined in the Section GR-5.2) or new/prospective controllersG of a licenseeG must satisfy the CBB of their suitability and appropriateness according to the criteria outlined in Paragraphs GR-5.3.2 to GR-5.3.5. The CBB will issue an approval notice or notice of refusal of a controller according to the approval process outlined in Section GR-5.4 and Paragraph GR-5.1.6.

                    Amended: April 2012
                    October 2010

                  • GR-5.3.1A

                    For those licenseesG authorised after 1st January 2011, at least one controllerG must be a regulated financial institution owning or controlling 20% or more of the voting capital.

                    Added: April 2011

                  • GR-5.3.2

                    In assessing the suitability of controllersG who are natural persons, the CBB has regard to their professional and personal conduct, including, but not limited to, the following:

                    (a) The propriety of a person's conduct, whether or not such conduct resulted in conviction for a criminal offence, the contravention of a law or regulation, or the institution of legal or disciplinary proceedings;
                    (b) A conviction or finding of guilt in respect of any offence, other than a minor traffic offence, by any court or competent jurisdiction;
                    (c) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct in connection with the formation or management of a corporation or partnership;
                    (d) Whether the person has been the subject of any disciplinary proceeding by any government authority, regulatory agency or professional body or association;
                    (e) The contravention of any financial services legislation or regulation;
                    (f) Whether the person has ever been refused a license, authorisation, registration or other authority;
                    (g) Dismissal or a request to resign from any office or employment;
                    (h) Disqualification by a court, regulator or other competent body, as a DirectorG or as a manager of a corporation;
                    (i) Whether the person has been a DirectorG , partner or manager of a corporation or partnership which has gone into liquidation or administration or where one or more partners or managers have been declared bankrupt whilst the person was connected with that partnership or corporation;
                    (j) The extent to which the person, has been truthful and open with regulators;
                    (k) Whether the person has ever been adjudged bankrupt, entered into any arrangement with creditors in relation to the inability to pay due debts, or failed to satisfy a judgement debt under a court order or has defaulted on any debts;
                    (l) The financial resources of the person and the likely stability of their shareholding, and their track record as a controllerG or significant investor in financial institutions;
                    (m) Existing Directorships or ownership of more than 20% of the capital or voting rights of any financial institution in the Kingdom of Bahrain or elsewhere, and the potential for conflicts of interest that such Directorships or ownership may imply;
                    (n) The legitimate interests of customersG , creditors and shareholdersG (including minority shareholders) of the licenseeG ;
                    (o) Whether the approval of a controllerG is or could be detrimental to Bahrain's financial sector; and
                    (p) Whether the person is able to deal with existing shareholdersG and the Board in a constructive and cooperative manner.
                    October 2010

                  • GR-5.3.3

                    Natural persons who intend to take a stake of 20% or more in a licenseeG are subject to enhanced scrutiny. The level of scrutiny and the expected compliance with the above standards become more onerous as the level of proposed ownership increases.

                    October 2010

                  • GR-5.3.4

                    Legal persons who intend to take a stake of 20% or more in a licenseeG are subject to enhanced scrutiny, given the CBB's position as home supervisor of such licenseesG . The level of scrutiny and of expected compliance with the above standards becomes more onerous as the level of proposed ownership increases. Regulated legal persons will normally only be approved to take majority control where — in addition to the above conditions — the resulting group would be subject to effective consolidated supervision in accordance with relevant international standards; and the home supervisor of the parent entity has agreed to the proposed acquisition, as well as to the sharing of relevant prudential information for supervisory purposes (expressed, if necessary, through the signing of a Memorandum of Understanding between the CBB and the home supervisor, setting out their respective supervisory responsibilities).

                    October 2010

                  • GR-5.3.5

                    In assessing the suitability of controllersG who are legal persons, CBB has regard to their financial standing, judicial and regulatory record, and standards of business practice and reputation, including, but not limited to, the following:

                    (a) The financial strength of the controllerG , its parent(s) and other members of its group, its implications for the licenseeG and the likely stability of the controller'sG shareholding;
                    (b) Whether the controllerG or members of its group has ever entered into any arrangement with creditors in relation to the inability to pay due debts;
                    (c) The controller'sG jurisdiction of incorporation, location of Head Office, group structure, and the implications for the licenseeG as regards effective supervision of the licenseeG and potential conflicts of interest;
                    (d) The controller'sG (and other group members') propriety and general standards of business conduct, including the contravention of any laws or regulations, or the institution of disciplinary proceedings by a government authority, regulatory agency or professional body;
                    (e) Any adverse finding in a civil action by any court or competent jurisdiction, relating to fraud, misfeasance or other misconduct;
                    (f) Any criminal actions instigated against the controllerG or other members of its group, whether or not this resulted in an adverse finding;
                    (g) The extent to which the controllerG or other members of its group have been truthful and open with regulators and supervisors;
                    (h) Whether the person has ever been refused a license, authorisation, registration or other authority;
                    (i) The person's track record as a controllerG or investor in financial institutions;
                    (j) The legitimate interests of customersG , creditors and shareholdersG of the licenseeG ;
                    (k) Whether their approval as a controllerG is or could be detrimental to Bahrain's financial sector; and
                    (l) Whether the person is able to deal with existing shareholdersG and the Board in a constructive manner.
                    October 2010

                  • GR-5.3.6

                    The CBB may contact references and supervisory bodies in connection with any information provided to support an application for controllerG . The CBB may also ask for further information, in addition to that provided in the Form 2, if required to satisfy itself as to the suitability of the applicant.

                    October 2010

                • GR-5.4 Approval Process

                  • GR-5.4.1

                    Within 3 months of receipt of an approval request under Paragraph GR-5.1.1, the CBB will issue a written notice of approval (or of refusal, if it is not satisfied that the person concerned is suitable to become a controllerG of the licensee)G . The notice of refusal will specify the reasons for the objection and specify the applicant's right of appeal. Where an approval notice is given, it will specify the period for which it is valid and any conditions that may be applied.

                    October 2010

                  • GR-5.4.2

                    Article 53 allows the CBB up to 3 months in which to respond to an application, although the CBB normally aims to respond within 30 calendar days. Notices of refusal have to be approved by an Executive Director of the CBB. The applicant has 30 calendar days from the date of a notice in which to appeal a decision to refuse the application or any conditions imposed as a condition of approval. The CBB then has 30 calendar days from the date of the appeal in which to consider any mitigating evidence submitted and make a final determination. See Module EN (Enforcement).

                    October 2010

                  • GR-5.4.3

                    Where a person has become a controllerG by virtue of their shareholding in contravention of Paragraph GR-5.1.1, or a notice of refusal has been served on them under Paragraph GR-5.4.1 and the period of appeal has expired, the CBB may, by notice in writing served on the person concerned, instruct the person concerned to transfer such shares, or refrain from exercising voting rights in respect of such shares.

                    October 2010

                  • GR-5.4.4

                    If the person concerned fails to take the action specified under Paragraph GR-5.4.3, then the CBB may seek a court order to take appropriate measures: these may include forcing the person to sell their shares.

                    October 2010

                  • GR-5.4.5

                    The powers available to the CBB that are described in Paragraphs GR-5.4.3 and GR-5.4.4 are specified in Article 56 of the CBB Law.

                    October 2010

                  • GR-5.4.6

                    In addition to the above requirements, licenseesG are encouraged to notify the CBB as soon as they become aware of events that are likely to lead to major changes in their controllersG . Any supervisory implications of such changes can then be discussed prior to the filing of a formal approval request.

                    October 2010

              • GR-6 Cessation of Business

                • GR-6.1 CBB Approval

                  • GR-6.1.1

                    As specified in Article 50 of the CBB Law, a licenseeG wishing to cease to provide or suspend all or any of its licensed regulated services, completely or at any of its branches, must obtain prior written approval from the CBB.

                    Amended: April 2012
                    October 2010

                  • GR-6.1.2

                    LicenseesG seeking to obtain the CBB's permission to cease business must apply to the CBB in writing, in the form of a formal request together with supporting documents. Unless otherwise directed by the CBB, the following requirements must be provided in support of the request:

                    (a) Full details of the business to be terminated;
                    (b) The rationale for the cessation;
                    (c) How the licenseeG proposes to cease business;
                    (d) Notice of an Extraordinary Meeting setting out the agenda to discuss and approve the cessation, and inviting the CBB for such meeting;
                    (e) Evidence that the proposed cessation has been duly authorised by the licenseeG (such as a certified copy of a Board resolution approving the cessation);
                    (f) Formal request to the CBB for the appointment of a liquidator acceptable to the CBB;
                    (g) A cut-off date by which the licenseeG will stop its operations;
                    (h) If the licenseeG wishes to cease its whole business, confirmation that the licenseeG will not enter into new business with effect from the cut-off date;
                    (i) Once the CBB has given its approval to an application to cease business, the licenseeG must publish a notice of its intention to cease business in two local daily newspapers (one in Arabic, the other in English). Notices must also be displayed in the premises (including any branch offices) of the licenseeG concerned. These notices must be given not less than 30 calendar days before the cessation is to take effect, and must include such information as the CBB may specify;
                    (j) The audited accounts of the licenseeG as of the last date on which it stopped operations. The commencement of such accounts should be the beginning of the financial year of the licenseeG ; and
                    (m) The final liquidator's report of the licensee.G
                    October 2010

                  • GR-6.1.3

                    LicenseesG intending to apply to cease business are advised to contact the CBB at the earliest possible opportunity, prior to submitting a formal application, in order that the CBB may determine the nature and level of documentation to be provided and the need for an auditor or other expert opinion to be provided to support the application. The documentation specified in Paragraph GR-6.1.2 may be varied by the CBB, depending on the nature of the proposed cessation, such as the materiality of the business concerned and its impact on customers.

                    October 2010

                  • GR-6.1.4

                    Approval to cease business will generally be given where adequate arrangements have been made to offer alternative arrangements to any affected customers. The CBB's approval may be given subject to any conditions deemed appropriate by the CBB. In all cases where additional requirements are imposed, the CBB shall state the reasons for doing so.

                    October 2010

                  • GR-6.1.5

                    The notice referred to in Subparagraph GR-6.1.2 (i) must include a statement that written representations concerning the liquidation may be submitted to the CBB before a specified day, which shall not be later than thirty calendar days after the day of the first publication of the notice. The CBB will not decide on the application until after considering any representations made to the CBB before the specified day.

                    Amended: April 2012
                    October 2010

                  • GR-6.1.6

                    Upon satisfactorily meeting the requirements set out in GR-6.1.2, the licenseeG must surrender the original license certificate issued by the Licensing & Policy Directorate at the time of establishment, and submit confirmation of the cancellation of its Commercial Registration from the Ministry of Industry and Commerce.

                    October 2010

                  • GR-6.1.7

                    Where the CBB has given its approval to cancel or amend a license, then it will also publish its decision in the Official Gazette, as well as in two local daily newspapers (one in Arabic, the other in English), once this decision has been implemented.

                    Amended: April 2012
                    October 2010

                  • GR-6.1.7A

                    The publication cost of the notices referred to in Paragraph GR-6.1.7 is to be met by the licenseeG concerned.

                    Added: April 2012

                  • GR-6.1.8

                    The licenseeG must continue to comply with all applicable CBB requirements until such time as it is formally notified by the CBB that its obligations have been discharged.

                    October 2010

                  • GR-6.1.9

                    A licenseeG in liquidation must continue to meet its contractual and regulatory obligations to customers and creditors.

                    October 2010

                  • GR-6.1.9A

                    If no objections to the liquidation are upheld by the CBB, the CBB may then issue a written notice of approval for the surrender of the license.

                    Added: April 2012

                  • GR-6.1.10

                    If a licenseeG applies to the CBB for voluntary surrender of its authorisation, it must ensure that suitable arrangements are in place for insurance coverage, to continue in respect of any unreported claims arising from past transactions, in accordance with Rule GR-7.1.7.

                    October 2010

                  • GR-6.1.11

                    Upon satisfactorily meeting the requirements set out in GR-6.1.2, the licenseesG must surrender the original license certificate issued by the Licensing & Policy Directorate at the time of establishment, and submit confirmation of the cancellation of its commercial registration from the Ministry of Industry, Commerce and Tourism.

                    Added: October 2016

              • GR-7 Insurance Coverage

                • GR-7.1 Insurance Coverage Requirements

                  • GR-7.1.1

                    LicenseesG are required to maintain the following insurance coverage at all times:

                    (a)Money in transit insurance;
                    (b)Fire, theft and other perils; and
                    (c)Fidelity.
                    October 2010

                  • GR-7.1.2

                    A licenseeG is encouraged to assess its insurance needs, through professional advice, to ensure its adequacy to the level of business undertaken.

                    Amended: January 2011
                    October 2010

                  • GR-7.1.3

                    The insurance coverage must be obtained from an insurance firm acceptable to the CBB and licensed in the Kingdom of Bahrain.

                    October 2010

                  • GR-7.1.4

                    LicenseesG must submit an Insurance Coverage Return (Form ICR) on an annual basis, within 3 months of the end of the financial year. Additionally, they must provide, upon request, evidence to the CBB of the coverage in force.

                    Amended: October 2014
                    October 2010

                  • GR-7.1.5

                    In accordance with Paragraph EN-B.3.1, licenseesG may not enter into or make a claim under a contract of insurance that is intended to, or has the effect of, indemnifying them from the financial penalties provided for in Module EN.

                    October 2010

                  • GR-7.1.6

                    The requirement to maintain insurance coverage will normally be met by the licenseeG concerned obtaining an insurance policy from an insurance firm. The CBB may also accept an insurance policy issued at group level, e.g. issued with respect to the parent of the licenseeG , provided the terms of the policy explicitly provide coverage with respect to the licenseeG .

                    October 2010

                  • GR-7.1.7

                    Unless otherwise agreed in writing with the CBB, the policy must contain a clause that it may not be cancelled or lapsed without the prior approval of the CBB. The policy must also contain a provision for an automatic extended reporting period in the event that the policy is cancelled or lapsed, such that claims relating to the period during which the policy was in force may subsequently still be reported.

                    October 2010

                  • GR-7.1.8

                    As provided for in Module ES, insurance coverage requirements must be met by licenseesG which were licensed prior to the introduction of Volume 5 (Specialised LicenseesG ) in October 2010, by June 2011. LicenseesG licensed after October 2010 are required to comply with the CBB's professional indemnity coverage requirements, from the point they are given a license.

                    October 2010

              • GR-8 Display of License and Exchange Rates

                • GR-8.1 Display of License and Exchange Rates

                  • GR-8.1.1

                    LicenseesG must display the license granted to them by the CBB, and declare the exchange rates applied by them in a prominent position in their premises, including all of their branches.

                    October 2010

              • GR-9 Security Measures

                • GR-9.1 Security Measures for Money Changers

                  • GR-9.1.1

                    LicenseesG must apply the following security measures as a minimum:

                    October 2010

                  • GR-9.1.2

                    External Measures

                    (a) All offices must be located in heavy customer traffic areas, e.g. souqs. Not all malls may be considered heavy traffic areas. No branches should operate in isolated areas.
                    (b) Main entrance doors must be protected by a grill type steel rolling shutter during off hours.
                    (c) Branch alarm systems should have the following features:
                    (1) PIR Motion detectors;
                    (2) External audible siren or visible alarm. The choice of whether to use an audible alarm is left to the licenseesG concerned; and
                    (3) The intrusion detection system must be linked to the licensee'sG (i.e. head office) monitoring unit.
                    Amended: July 2011
                    October 2010

                  • GR-9.1.3

                    Internal Measures

                    (a) Teller counters must be fully screened off from customers by glass screens. Cash should not be directly exchanged through screens. Special purpose trays (i.e. half-rounded trays) should be fitted for the exchange of cash;
                    (b) Access to teller areas must be restricted to authorised staff only;
                    (c) Front doors to teller areas must be eliminated as much as possible. When used, they must be full length, solid, secure and kept locked at all times; and
                    (d) Customers dealing with Branch Managers should not enter or pass through teller areas to get to the Branch Manager's office.
                    Amended: July 2011
                    October 2010

                  • Teller Area

                    • GR-9.1.4

                      Panic alarm systems for staff handling cash may be installed. The choice between silent or audible panic alarms is left to individual licenseesG . Kick bars and/or hold up buttons may be spread throughout the teller and customer service areas and the branch manager's office.

                      Amended: July 2011
                      October 2010

                    • GR-9.1.5

                      Cash Safety

                      (a) Cash must be kept in safes up to international standards and preferably secured to a solid floor;
                      (b) All property in vaults and safes must be under the joint custody of two people;
                      (c) Safes should be located out of the sight of customers wherever possible; and
                      (d) Insurance coverage must be maintained in accordance with Section GR-7.1.
                      Amended: July 2011
                      October 2010

                    • GR-9.1.5A

                      All cash movements between branches, or to and from banks should be performed by a special purpose vehicle.

                      Added: July 2011

                    • GR-9.1.6

                      CCTV Network Systems

                      (a) All branches must have CCTV cameras in place. The following locations are recommended:
                      (1) Customer areas (hall, reception etc);
                      (2) Teller areas (cameras located at the rear of tellers); and
                      (3) Vault entrance/area; and
                      (b) Notices of CCTV cameras in operation must be put up for the attention of the public. CCTV records must be maintained for a minimum of 30 days. The CCTV system must be operational 24 hours per day.
                      Amended: July 2011
                      October 2010

                    • GR-9.1.7

                      Formal Security Training

                      (a) LicenseesG must establish the position of security manager. For licenseesG with three or more branches, this position must be a formally identified position. For licenseesG with one or two branches, the responsibilities of this position may be added to the duties of a member of management. This person will be responsible for ensuring that all staff are given annual, comprehensive security training. Training should form part of the induction program for new staff. Training should be given to all staff when new security measures are introduced; and
                      (b) LicenseesG should produce a security manual or procedures for staff, especially those dealing directly with customers.
                      Amended: July 2011
                      October 2010

                    • GR-9.1.8

                      Other Issues

                      (a) Opening and closing procedures must be put in place for those responsible for opening and closing the premises; and
                      (b) Rotation of tellers must be implemented on a regular basis.
                      Amended: July 2011
                      October 2010

                    • GR-9.1.9

                      The security manager must maintain records on documented security related complaints by customers and take corrective action or make recommendations for action on a timely basis. Actions and recommendations must also be documented.

                      Added: July 2011

                    • GR-9.1.10

                      LicenseesG must consider safety and security issues when selecting premises for new branches. Key security issues include prominence of location (i.e. is the branch on a main street or a back street?), accessibility for emergency services, and assessment of surrounding premises (in terms of their safety or vulnerability), and the number of entrances to the branch. All licenseesG are required to hold an insurance blanket bond (which includes theft of cash in its cover).

                      Added: July 2011

              • GR-10 Measures to Detect Counterfeit Currency

                • GR-10.1 Measures to Detect Counterfeit Currency

                  • GR-10.1.1

                    LicenseesG are required to apply the measures in this Section to detect counterfeit currency:

                    October 2010

                  • GR-10.1.2

                    Licensees must have in place counterfeit detection machines that comply with the following requirements:

                    (a) The detection machines must be used to verify the validity of all Bahraini currency submitted to licenseesG (including any branch);
                    (b) LicenseesG should have a suitable number of machines at each outlet to handle the volume of banknotes they ordinarily receive. Every outlet must have at least one such detection machine.
                    (c) A teller (or any other person who accepts cash from the public) must check the validity of all the banknotes he receives on a detection machine. LicenseesG should ensure that tellers have been given adequate training in receiving banknotes and are familiar with the security features of Bahraini notes; and
                    (d) LicenseesG should endeavour to have detection machines that employ state-of-the-art detection technology. What constitutes 'state-of-the-art detection technology' shall be left for the determination of licenseesG , but the management of such licenseesG must apply their judgement as to the suitability of the technology they are employing and be prepared to justify their choices to the CBB upon request.
                    October 2010

                  • Reporting

                    • GR-10.1.3

                      When a licenseeG discovers a counterfeit note (or what appears to be an item intended to be passed-off as a lawful banknote of the Kingdom) it should remit the same to the Currency Issue Directorate at the CBB, together with a report as required in Rules BR-1.5.14 and BR-1.5.15.

                      October 2010

                    • GR-10.1.4

                      When a licenseeG discovers a counterfeit note of a foreign currency, it should remit the same to Director of the Compliance Directorate at the CBB and copied to the Director of the Financial Intelligence Unit at the Ministry of Interior, together with a report as required in Rules BR-1.5.14 and BR-1.5.15.

                      October 2010

                    • GR-10.1.5

                      LicenseesG are reminded that inadvertent receipt of counterfeit currency remains their responsibility and their liability alone. The CBB has no obligation to give value for any counterfeit currency.

                      October 2010

              • GR-11 Credit Facilities Extended to Related Parties

                • GR-11.1 Credit Facilities Extended to Related Parties

                  • GR-11.1.1

                    LicenseesG are prohibited from extending credit facilities to proprietors, partners and shareholders of the business.

                    Amended: January 2013
                    October 2010

                  • GR-11.1.1A

                    Credit facilities include but are not limited to loans and shari'a compliant financing facilities.

                    Added: January 2013

                  • GR-11.1.2

                    Credit facilities may be extended to employees of the licenseeG , other than proprietors, partners and shareholders of the business.

                    Amended: January 2013
                    October 2010

                  • GR-11.1.3

                    LicenseesG must obtain the CBB's prior written approval for any credit facility in excess of BD15,000, extended to the employees of the business.

                    Amended: January 2013
                    October 2010

                  • GR-11.1.4

                    LicenseesG must obtain the CBB's prior written approval before writing-off any credit facility extended to the employees of the business.

                    Amended: January 2013
                    October 2010

          • Business Standards

            • CA Money Changers Capital Adequacy Module

              • CA-A Introduction

                • CA-A.1 Purpose

                  • Executive Summary

                    • CA-A.1.1

                      This Module lays down requirements that apply to all licenseesG , with respect to the minimum level of capital they must maintain.

                      October 2010

                    • CA-A.1.2

                      Principle 9 of the Principles of Business requires that licenseesG maintain adequate human, financial and other resources, sufficient to run their business in an orderly manner (see Section PB-1.1.9).

                      October 2010

                  • Legal Basis

                    • CA-A.1.3

                      This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) relating to the capital adequacy of licenseesG , and is issued under the powers available to the CBB under Article 38 of the CBB Law. The Directive in this Module is applicable to all licenseesG . Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • CA-A.1.4

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

                      October 2010

                • CA-A.2 Module History

                  • Evolution of Module

                    • CA-A.2.1

                      This Module was first issued in October 2010 by the CBB. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • CA-A.2.2

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

                      Module Ref. Change Date Description of Changes
                      CA-A.1.3 01/2011 Clarified legal basis.
                      CA-1.2.2 and CA-1.2.3 01/2011 Clarified minimum capital requirements for licensees authorised prior to 1st January 2011.
                      CA-1.4.1 01/2011 Added cross reference.
                      CA-1.4.1 07/2011 Clarified Rule pertaining to capital required for any additional branch.
                           

                  • Superseded Requirements

                    • CA-A.2.3

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

                      Document Ref. Document Subject
                      Standard Conditions and Licensing Criteria: Money Changers Capital Funds
                      BC/24/99 Accounts of Money Changers
                      BC/6/99 Bank Guarantee
                      October 2010

              • CA-B Scope of Application

                • CA-B.1 Scope of Application

                  • CA-B.1.1

                    The content of this Module applies to all Money Changer licenseesG authorised in the Kingdom, thereafter referred to in this Module as licenseesG .

                    October 2010

              • CA-1 Capital Adequacy Requirements

                • CA-1.1 General Requirements

                  • Obligation to Maintain Adequate Capital

                    • CA-1.1.1

                      In accordance with Principle of Business 9 (Section PB-1.1.9), licenseesG must maintain adequate human, financial and other resources sufficient to run their business in an orderly manner.

                      October 2010

                    • CA-1.1.2

                      LicenseesG are required to maintain, at all times, the minimum capital requirement specified in Section CA-1.2.

                      October 2010

                    • CA-1.1.3

                      In addition to the minimum capital requirements specified in Section CA-1.2 onwards, the CBB may, at its discretion, require licenseesG to hold additional capital, should this be necessary (in the CBB's view) to meet additional liquidity requirements. (refer to CA-1.5.2)

                      October 2010

                    • CA-1.1.4

                      No funds may be withdrawn by shareholders from the licenseeG without the necessary prior written approval of the CBB.

                      October 2010

                    • CA-1.1.5

                      In the event that a licenseeG fails to meet any of the requirements specified in this Module, it must, on becoming aware that it has breached these requirements, immediately notify the CBB in writing. Unless otherwise directed, the licenseeG must in addition submit to the CBB, within 30 calendar days of its notification, a plan demonstrating how it will achieve compliance with these requirements.

                      October 2010

                    • CA-1.1.6

                      Should a licenseeG fail to comply with the requirements of this Module, the CBB may impose enforcement measures, as described in Module EN.

                      October 2010

                • CA-1.2 Minimum Capital Requirements

                  • Key Requirements

                    • CA-1.2.1

                      LicenseesG must ensure that, at all times, their Minimum Capital meets the requirement stipulated in Rule CA-1.2.2 below.

                      October 2010

                    • CA-1.2.2

                      Minimum Capital RequirementsG are:

                      (a) Paid-up Capital of not less than BD500,000;
                      (b) Additional Paid-up Capital of BD30,000 for each branch; and
                      (c) A Bank Guarantee of not less than BD50,000.
                      Amended: January 2011
                      October 2010

                    • CA-1.2.3

                      For those licenseesG authorised prior to 1st January 2011, the minimum paid-up capital noted in Subparagraph CA-1.2.2 (a) must be not less than BD200,000. In addition, such licensees must comply with Subparagraphs CA-1.2.2 (b) and (c).

                      January 2011

                • CA-1.3 Guarantee Requirements

                  • CA-1.3.1

                    LicenseesG are required to provide the CBB with a guarantee in respect of their liabilities. The guarantee must be:

                    a) In favor of and callable by the CBB at the CBB's sole discretion;
                    b) Unconditional and irrevocable;
                    c) Issued by a retail bank licensed by the CBB;
                    d) Valid at all times for a period of one year; and
                    e) Renewed at least one week before its expiry and submitted to the CBB.
                    October 2010

                  • CA-1.3.2

                    If the guarantee is not renewed within the stipulated timeframe, the CBB may call the guarantee.

                    October 2010

                • CA-1.4 Capital Requirement for Branches

                  • CA-1.4.1

                    In addition to the minimum paid-up capital required under Section CA-1.2, licenseesG must inject capital in the amount of BD30, 000 in respect of any additional branch (see CA-1.2.2 for additional details).

                    Amended: July 2011
                    Amended: January 2011
                    October 2010

                  • CA-1.4.2

                    LicenseesG must provide the CBB with evidence of the deposited amount of capital as part of the application for a branch outlined in Section 4.2 of the Module AU (Authorisation).

                    October 2010

                • CA-1.5 Additional Requirements

                  • CA-1.5.1

                    A licenseeG 's liabilities should not exceed threefold its capital and reserves.

                    October 2010

                  • CA-1.5.2

                    A licenseeG 's liquid assets must be held in a form acceptable to the CBB, in a minimum amount of three months estimated expenditures including salaries, rent, general utilities and other operating costs.

                    October 2010

                  • CA-1.5.3

                    Liquid assets comprise of cash, cash equivalents, and placements or deposits maturing within 30 days.

                    October 2010

            • BC Money Changers Business Conduct Module

              • BC-A Introduction

                • BC-A.1 Purpose

                  • Executive Summary

                    • BC-A.1.1

                      This Module contains requirements that have to be met by licenseesG with regards to their dealings with customersG .

                      October 2010

                    • BC-A.1.2

                      The Rules contained in this Module aim to ensure that licenseesG deal with their customersG in a fair and open manner, and address their customersG ' information needs.

                      October 2010

                    • BC-A.1.3

                      The Rules build upon several of the Principles of Business (see Module PB (Principles of Business)). Principle 1 (Integrity) requires licenseesG to observe high standards of integrity and fair dealing, and to be honest and straightforward in their dealings with customersG . Principle 3 (Due skill, care and diligence) requires licenseesG to act with due skill, care and diligence when acting on behalf of their customersG . Principle 7 (Customer Interests) requires licenseesG to pay due regard to the legitimate interests and information needs of their customersG , and to communicate with them in a fair and transparent manner.

                      October 2010

                    • BC-A.1.4

                      The Rules contained in this Module are largely principles-based and focus on desired outputs rather than on prescribing detailed processes. This gives licenseesG flexibility in how to implement the basic standards prescribed in this Module.

                      October 2010

                  • Legal Basis

                    • BC-A.1.5

                      This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) on business conduct by licenseesG , and is issued under the powers available to the CBB under Article 38 of the CBB Law. The directive in this Module is applicable to all licenseesG . Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • BC-A.1.6

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

                      October 2010

                • BC-A.2 Module History

                  • Evolution of the Module

                    • BC-A.2.1

                      This Module was first issued in October 2010 by the CBB. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • BC-A.2.2

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

                      Module Ref. Change Date Description of Changes
                      BC-A.1.5 01/2011 Clarified legal basis.
                           
                           
                           
                           

                  • Superseded Requirements

                    • BC-A.2.3

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

                      Document Ref. Document Subject
                      EDBC/73/96 Explanatory note on the promotion of banking and financial products offered in/from Bahrain by means of incentives.
                         
                      October 2010

              • BC-B Scope of Application

                • BC-B.1 Scope of Application

                  • BC-B.1.1

                    The content of this Module applies to all Money Changer licenseesG authorised in the Kingdom, thereafter referred to in this Module as licenseesG .

                    October 2010

              • BC-1 Base Requirements

                • BC-1.1 General Rules

                  • BC-1.1.1

                    This Module applies to all licenseesG .

                    October 2010

                  • BC-1.1.2

                    This Module aims to encourage high standards of business conduct, which are broadly applicable to all licenseesG , all types of regulated money changer servicesG , and all types of customersG .

                    October 2010

                  • BC-1.1.3

                    LicenseesG must comply with the Money Changers' Business Code of Practice ('the Code'G ), under Chapter 2 of this Module, throughout the lifetime of their relationship with a customerG .

                    October 2010

                  • BC-1.1.4

                    LicenseesG must take responsibility for compliance with the CodeG by all persons carrying out regulated money changer servicesG on their behalf. LicenseesG must put in place appropriate measures across all their business operations to ensure compliance with the CodeG .

                    October 2010

                  • BC-1.1.5

                    The Business CodeG of Practice comprises a number of overarching principles of business conduct, with respect to the conduct of regulated money changer servicesG by licenseesG ; these cover the various stages of the life of a customerG relationship.

                    October 2010

                  • BC-1.1.6

                    LicenseesG must maintain adequate records to demonstrate compliance with the CodeG .

                    October 2010

                  • BC-1.1.7

                    The CodeG focuses on desired outcomes, rather than prescribing detailed measures to achieve those outcomes.

                    October 2010

                  • BC-1.1.8

                    The CBB will monitor compliance with the CodeG and business conduct standards. If required, the CBB may develop more detailed rules and guidance to supplement the existing CodeG .

                    October 2010

              • BC-2 The Business Code of Practice

                • BC-2.1 Overarching Principles

                  • BC-2.1.1

                    In the course of regulated money changer servicesG , licenseesG must:

                    (a) Act with due skill, care and diligence in all dealings with customersG ;
                    (b) Act fairly and reasonably in all dealings with customersG ;
                    (c) Identify customersG ' specific requirements in relation to the services about which they are enquiring;
                    (d) Provide sufficient information to enable customersG to make informed decisions when purchasing services offered to them, as listed under Paragraph BC-2.5.2 of the Appendix;
                    (e) Provide sufficient and timely documentation to customersG to confirm that their transaction arrangements are in place and provide all necessary information about their rights and responsibilities, as listed under Paragraph BC-2.5.3 of the Appendix;
                    (f) Maintain fair treatment of customersG through the lifetime of the customerG relationships, and ensure that customersG are kept informed of important events;
                    (g) Ensure complaints from customersG are dealt with fairly and promptly, in accordance with the Rules under Section BC-2.3;
                    (h) Ensure that all information provided to customersG is clear, fair and not misleading, and appropriate to customersG ' information needs; and
                    (i) Take appropriate measures to safeguard any money and precious metals handled on behalf of customersG and maintain confidentiality of customerG information.
                    October 2010

                • BC-2.2 Marketing and Promotion

                  • BC-2.2.1

                    LicenseesG must ensure that all advertising and promotional material is fair, clear and not misleading.

                    October 2010

                  • BC-2.2.2

                    In ensuring that the description of the service in the promotional material is fair, clear and not misleading, the licenseeG should send copies of the documentation relating to promotional schemes to the CBB at least 2 weeks prior to their launch and should, among other precautionary measures, ensure that:

                    a) The purpose, and to the extent practicable, the content, of the information or communication are likely to be understood by the average member of the group to whom the communication is addressed;
                    b) Key items contained in the information are given due prominence;
                    c) The method of presentation in the information does not disguise, diminish, or obscure important risks, warnings or information; and
                    d) The communication does not omit information that is material to ensure it is fair, clear and not misleading.
                    October 2010

                  • BC-2.2.3

                    LicenseesG must ensure that the accuracy of all material statements of fact in promotional materials is supported by adequate evidence.

                    October 2010

                  • BC-2.2.4

                    LicenseesG must not, in any form of communication with an individual customerG , attempt to limit or avoid any duty or liability it may have towards the individual customerG in relation to regulated money changing services.G

                    October 2010

                  • Content of Promotions

                    • BC-2.2.5

                      Before a licenseeG communicates any promotional material to a customerG or a potential customerG it must ensure the promotional material at the very least contains the information laid out in Paragraph BC-2.5.1 of the Appendix.

                    • BC-2.2.6

                      LicenseesG must not make use of the name of the CBB in any promotion in such a way that would indicate endorsement or approval of its services.

                    • BC-2.2.7

                      All documentation concerning promotional schemes must be in Arabic and English and, if relevant, any other language necessary for customers to fully understand and appreciate their terms and conditions. Such terms and conditions, including any related advertising, need to be clear, concise, truthful, unambiguous and complete so as to enable customersG to make a fully informed decision.

                    • BC-2.2.8

                      CustomersG to whom promotional schemes are directed should enjoy equal opportunity in terms of access to, and treatment within, such schemes.

                    • BC-2.2.9

                      No costs (including funding costs), charges or levies associated with promotional schemes should be concealed from prospective customersG .

                    • BC-2.2.10

                      Any raffles/lotteries etc. held as part of promotional schemes should be independently monitored (e.g. by the institution's external auditor) and adequate systems put in place to ensure fair play and impartiality.

                    • BC-2.2.11

                      An appropriate system should also exist for informing participants of the results of a raffle/lottery without delay.

                    • BC-2.2.12

                      Institutions should note that raffles/lotteries etc. may be subject to rules and requirements (including prior authorisation/approval) laid down by the Ministry of Industry and Commerce.

                  • Records

                    • BC-2.2.13

                      LicenseesG must maintain a record of all promotional materials issued by them or on their behalf, particularly where raffles/lotteries etc. are concerned.

                • BC-2.3 Complaints

                  • BC-2.3.1

                    LicenseesG must disclose, maintain and operate effective procedures for handling complaints in a reasonable and timely manner. These procedures include:

                    (a) Informing customersG in writing of any out of court complaint and redress mechanism and methods for having access to it;
                    (b) Paying compensation or other forms of redress to customersG where the licenseeG decides this is appropriate; and
                    (c) Regularly verifying if complaints are effectively processed.
                    October 2010

                  • BC-2.3.2

                    Upon receiving complaints from customersG (either orally or in writing), licenseesG must:

                    (a) Acknowledge complaints promptly, within 5 business days, and provide customersG with an explanation about how the complaint will be handled and any actions required of the customerG ;
                    (b) Consider and handle complaints fairly and promptly, keeping customersG informed of progress; and
                    (c) Provide final responses to customersG ' complaints without undue delay and within 20 business days.
                    October 2010

                  • BC-2.3.3

                    In their final responses to customersG ' complaints, licenseesG must:

                    (a) Accept (or partially accept) the complaint and where appropriate offer compensation or other forms of redress; or
                    (b) Reject (or partially reject) the complaint, informing customersG with a full explanation of the licenseeG 's position.
                    October 2010

                  • Records

                    • BC-2.3.4

                      LicenseesG must maintain adequate records of all complaints received, and how they were dealt with, to a level of detail sufficient to demonstrate compliance with this Section and in accordance with the Rules under Section GR-1.

                      October 2010

                    • BC-2.3.5

                      In recording complaints activity, licenseesG should consider the types of data and reports that will enable them to demonstrate compliance with the above Rules for handling complaints, together with the overarching principles requiring fair dealings with customersG .

                      October 2010

                • BC-2.4 Confidentiality

                  • BC-2.4.1

                    LicenseesG must ensure that any information obtained from their customersG is not used or disclosed unless:

                    (a) They have the customer'sG consent;
                    (b) Disclosure is made in accordance with the licensee'sG regulatory obligations; or
                    (c) The licenseeG is legally obliged to disclose the information in accordance with Article 117 of the CBB Law.
                    October 2010

                  • BC-2.4.2

                    LicenseesG must take appropriate steps to ensure the security of any information handled or held on behalf of their customersG .

                    October 2010

                • BC-2.5 Appendix

                  • BC-2.5.1

                    The minimum information that should be contained in promotional material includes:

                    (a) The name of the licenseeG communicating the promotional material;
                    (b) The licensee'sG address;
                    (c) A description of the main characteristics of the service offered;
                    (d) Suitable warning regarding the risks of the service offered; and
                    (e) A clear statement indicating that, if a customerG is in any doubt about the suitability of the agreement which is the subject of the promotion, he should consult the licenseeG .
                    October 2010

                  • BC-2.5.2

                    The minimum information that should be provided to customersG when purchasing regulated money changer servicesG include:

                    (a) The regulatory status of the licenseeG ;
                    (b) A statement that the licenseeG is bound by the CBB's regulation and licensing conditions;
                    (c) The licensee'sG name, address, e-mail and telephone number;
                    (d) A statement of the services provided by the licenseeG , as permitted by the CBB;
                    (e) The total price to be paid by the customerG to the licenseeG for its services, or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the customerG to verify it;
                    (f) A statement that clearly indicates the following:
                    (i) The customer'sG right to obtain copies of records relating to his business with the licenseeG ;
                    (ii) The customer'sG record will be kept for 10 years or as otherwise required by Bahrain Law; and
                    (g) The name and job title, address and telephone number of the person in the licenseeG to whom any complaint should be addressed (in writing) by the customerG .
                    October 2010

                  • BC-2.5.3

                    The minimum information that should be included in a transaction confirmation includes:

                    (a) The licensee'sG name and address;
                    (b) The customer'sG name or other identifier;
                    (c) Whether the transaction was a sale or purchase;
                    (d) The date and time of the transaction; and
                    (e) The amount the licenseeG charges in connection with the transaction, including commission charges.
                    October 2010

            • RM Money Changers Risk Management Module

              • RM-A Introduction

                • RM-A.1 Purpose

                  • Executive Summary

                    • RM-A.1.1

                      This Module contains requirements relating to the management of risk by licenceesG . It expands on certain high level requirements contained in other Modules. In particular, Section AU-2.6 of Module AU (Authorisation) specifies requirements regarding systems and controls that have to be met as a license condition; Principle 10 of the Principles of Business (ref. PB-1.10) requires licenceesG to have systems and controls sufficient to manage the level of risk inherent in their business; and Module HC (High-level Controls) specifies various requirements relating to the role and composition of Boards, and related high-level controls.

                      October 2010

                    • RM-A.1.2

                      This Module obliges licenseesG to recognise the range of risks that they face and the need to manage these effectively. Their risk management framework is expected to have the resources and tools to identify, monitor and control all material risks. The adequacy of a licensee'sG risk management framework is subject to the scale and complexity of its operations, however. In demonstrating compliance with certain Rules, licenseesG with very simple operational structures and business activities may need to implement less extensive or sophisticated risk management systems, compared to licenseesG with a complex and/or extensive customer base or operations.

                      October 2010

                  • Legal Basis

                    • RM-A.1.3

                      This Module contains the Central Bank of Bahrain's ('CBB') Directive (as amended from time to time) regarding Risk Management requirements applicable to licenseesG , and is issued under the powers available to the CBB under Article 38 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • RM-A.1.4

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

                      October 2010

                • RM-A.2 Module History

                  • Evolution of the Module

                    • RM-A.2.1

                      This Module was first issued in October 2010. Any material changes that have subsequently been made to this Module are annotated with the calendar quarter date in which the change was made: Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • RM-A.2.2

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

                      Module Ref. Change Date Description of Changes
                      RM-A.1.3 01/2011 Clarified legal basis.
                      RM-2.1.2 10/2017 Amended Paragraph to allow the utilization of cloud services.
                      RM-2.1.4A 10/2017 Added a new Paragraph on outsourcing requirements.
                      RM-2.1.7 10/2017 Amended Paragraph.
                      RM-2.1.9 10/2017 Amended Paragraph.
                      RM-2.1.11 10/2017 Amended Paragraph.
                      RM-2.1.13 10/2017 Added a new Paragraph on outsourcing.
                      RM-2.1.15 10/2017 Amended Paragraph.
                      RM-2.2.9 10/2017 Amended Paragraph.
                      RM-2.2.15 10/2017 Amended Paragraph.
                      RM-2.2.16 10/2017 Added a new Paragraph on security measures related to cloud services.
                      RM-2.3.2 10/2017 Amended Paragraph.

                  • Superseded Requirements

                    • RM-A.2.3

                      This Module does not replace any regulations or circulars in force prior to month year.

                      Document Ref. Date of Issue Module Ref. Document Subject
                             
                             
                      October 2010

              • RM-B Scope of Application

                • RM-B.1 Scope of Application

                  • RM-B.1.1

                    The content of this Module applies to all Money Changer licenseesG authorised in the Kingdom, thereafter referred to in this Module as licenseesG .

                    October 2010

              • RM-1 General Requirements

                • RM-1.1 Risk Management

                  • Board of Directors' Responsibility

                    • RM-1.1.1

                      The Board of DirectorsG of licenseesG must take responsibility for the establishment of an adequate and effective framework for identifying, monitoring and managing risks across all its operations.

                      October 2010

                    • RM-1.1.2

                      The CBB expects the Board to be able to demonstrate that it provides suitable oversight and establishes, in relation to all the risks the licenceeG is exposed to, a risk management framework that includes setting and monitoring policies, systems, tools and controls.

                      October 2010

                    • RM-1.1.3

                      Although authority for the management of a firm's risks is likely to be delegated, to some degree, to individuals at all levels of the organisation, the overall responsibility for this activity should not be delegated from its governing body and relevant senior managers.

                      October 2010

                    • RM-1.1.4

                      A licencees'sG failure to establish, in the opinion of the CBB, an adequate risk management framework will result in it being in breach of Condition 6 of the Licensing Conditions of Section AU-2.6. This failure may result in the CBB withdrawing or imposing restrictions on the licenseeG , or the licenseeG being required to inject more capital.

                      October 2010

                    • RM-1.1.5

                      The Board of DirectorsG must also ensure that there is adequate documentation of the licensee'sG risk management framework.

                      October 2010

                  • Systems and Controls

                    • RM-1.1.6

                      The risk management framework of licenseesG must provide for the establishment and maintenance of effective systems and controls as are appropriate to their business, so as to identify, measure, monitor and manage risks.

                      October 2010

                    • RM-1.1.7

                      An effective framework for risk management should include systems to identify, measure, monitor and control all major risks on an on-going basis. The risk management systems should be approved and periodically reviewed by the Board as outlined in HC-1.1.5.

                      October 2010

                    • RM-1.1.8

                      The systems and controls required by Paragraph RM-1.1.6 must be proportionate to the nature, scale and complexity of the firm's activities.

                      October 2010

                    • RM-1.1.9

                      The processes and systems required must enable the licenseeG to identify the major sources of risk to its ability to meet its liabilities as they fall due, which include but are not limited to the following:

                      (a) Counterparty Risk;
                      (b) Liquidity Risk;
                      (c) Market Risk; and
                      (d) Operational Risk.
                      October 2010

                • RM-1.2 Counterparty Risk

                  • RM-1.2.1

                    LicenseesG must adequately document the necessary policies and procedures for identifying, measuring, monitoring and controlling counterparty risk. This policy must be approved and regularly reviewed by the Board of DirectorsG of the licenseeG .

                    October 2010

                  • RM-1.2.2

                    Among other things, the licensee'sG policies and procedures must identify the limits it applies to counterparties, how it monitors movements in counterparty risk and how it mitigates loss in the event of counterparty failure.

                    October 2010

                • RM-1.3 Liquidity Risk

                  • RM-1.3.1

                    LicenseesG must maintain a liquidity risk policy for the management of liquidity risk, which is appropriate to the nature, scale and complexity of its activities. This policy must be approved and regularly reviewed by the Board of DirectorsG of the licenseeG .

                    October 2010

                  • RM-1.3.2

                    Among other things, the licensee'sG liquidity risk policy must identify the limits it applies, how it monitors movements in risk and how it mitigates loss in the event of unexpected liquidity events.

                    October 2010

                • RM-1.4 Market Risk

                  • RM-1.4.1

                    LicenseesG must document their framework for the proactive management of market risk. This policy must be approved and regularly reviewed by the Board of DirectorsG of the licenseeG .

                    October 2010

                • RM-1.5 Operational Risk

                  • RM-1.5.1

                    LicenseesG must document their framework for the proactive management of operational risk. This policy must be approved and regularly reviewed by the Board of DirectorsG of the licenseeG .

                    October 2010

                  • RM-1.5.2

                    LicenseesG must consider the impact of operational risks on their financial resources and solvency.

                    October 2010

                  • RM-1.5.3

                    Licensees'G business continuity planning, risk identification and reporting must cover reasonably foreseeable external events and their likely impact on the licenseeG and its business portfolio.

                    October 2010

                  • RM-1.5.4

                    Business continuity management includes policies, standards, and procedures for ensuring that specified operations can be maintained or recovered in a timely fashion in the event of a disruption. Its purpose is to minimise the operational, financial, legal, reputational and other material consequences arising from a disruption. Effective business continuity management concentrates on the impact, as opposed to the source, of the disruption, which affords financial industry participants and financial authorities greater flexibility to address a broad range of disruptions. At the same time, however, licenceesG cannot ignore the nature of risks to which they are exposed.

                    October 2010

              • RM-2 Outsourcing of Risk

                • RM-2.1 Outsourcing of Risk

                  • RM-2.1.1

                    LicenseesG must identify all material outsourcing contracts and ensure that the risks associated with such contracts are adequately controlled. In particular, licenseesG must comply with the specific requirements set out in this Chapter.

                    October 2010

                  • RM-2.1.2

                    LicenseesG may not outsource their core business activities to a third party.

                    October 2010

                  • RM-2.1.3

                    OutsourcingG means an arrangement whereby a third party performs on behalf of a licenseeG an activity that was previously undertaken by the licenseeG itself (or in the case of a new activity, one which ordinarily would have been performed internally by the licenseeG ). Examples of services that are typically outsourced include data processing, cloud services, customer call centres and back-office related activities.

                    Amended: October 2017
                    October 2010

                  • RM-2.1.4

                    For purposes of Paragraph RM-2.1.1, a contract is 'material' where, if it failed in any way, it would pose significant risks to the on-going operations of a licenseeG , its reputation and/or the quality of service provided to its customersG . For instance, the outsourcing of all or a substantial part of functions such as customer sales and relationship management, settlements and processing, IT and data processing and financial control, would normally be considered "material". Management should carefully consider whether a proposed outsourcing arrangement falls under this Module's definition of "material". If in doubt, management should consult with the CBB.

                    October 2010

                  • RM-2.1.4A

                    For outsourcing services that are not considered material outsourcing arrangements, licenses must submit a written notification to the CBB before committing to the new outsourcing arrangement.

                    Added: October 2017

                  • RM-2.1.5

                    LicenseesG must retain ultimate responsibility for functions or activities that are outsourced. In particular, licenseesG must ensure that they continue to meet all their regulatory obligations with respect to outsourced activities.

                    October 2010

                  • RM-2.1.6

                    LicenseesG must not contract out their regulatory obligations and must take reasonable care to supervise the discharge of outsourced functions, if any.

                    October 2010

                  • Supervisory Approach

                    • RM-2.1.7

                      LicenseesG must seek the CBB's prior written approval before committing to a new material outsourcing arrangement.

                      Amended: October 2017
                      October 2010

                    • RM-2.1.8

                      The prior approval request in Paragraph RM-2.1.7 must:

                      (a) Be made in writing to the licensee'sG normal supervisory contact;
                      (b) Contain sufficient detail to demonstrate that relevant issues raised in this Chapter have been addressed; and
                      (c) Be made at least 6 weeks before the licensee intends to commit to the arrangement.
                      October 2010

                    • RM-2.1.9

                      The CBB will review the information provided and provide a definitive response within a reasonable period of time of receiving the request for approval.

                      Amended: October 2017
                      October 2010

                    • RM-2.1.10

                      Once an activity has been outsourced, a licenseeG must continue to monitor the associated risks and the effectiveness of its mitigating controls.

                      October 2010

                    • RM-2.1.11

                      LicenseesG must immediately inform their normal supervisory contact at the CBB of any material problems encountered with an outsourcing provider. The CBB may direct the licenseesG to make alternative arrangements for the outsourced activity.

                      Amended: October 2017
                      October 2010

                    • RM-2.1.12

                      The CBB requires ongoing access to the outsourced activity, which it may occasionally want to examine, through management meetings or on-site examinations.

                      October 2010

                    • RM-2.1.13

                      The CBB reserves the right to require a licensee to terminate or make alternative outsourcing arrangements if, among other reasons, the confidentiality of its customer information was, or is likely to be, breached or the ability of the CBB to carry out its supervisory functions in view of the outsourcing arrangement cannot be assured or executed.

                      Amended: October 2017
                      October 2010

                    • RM-2.1.14

                      LicenseesG must maintain and regularly review contingency plans to enable them to set up alternative arrangements — with minimum disruption to business — should the outsourcing contract be suddenly terminated or the outsourcing provider fail. This may involve the identification of alternative outsourcing providers or the provision of the service in-house. These plans should consider how long the transition would take and what interim arrangements would apply.

                      October 2010

                    • RM-2.1.15

                      A licenseeG must nominate a relevant approved personG within the licensee to handle the responsibility of the day-to-day relationship with the outsourcing provider and to ensure that relevant risks are addressed. The CBB should be informed of the designated individual as part of the request for prior approval required under Rule RM-2.1.7. Any subsequent replacement of such person must also be notified to the CBB.

                      Amended: October 2017
                      October 2010

                    • RM-2.1.16

                      All material outsourcing arrangements by licenseesG must be the subject of a legally enforceable contract. Where the outsourcing provider interacts directly with a licensee's customers, the contract must — where relevant — reflect the licensee's own standards regarding customerG care. Once an outsourcing agreement has been entered into, licenseesG must regularly review the suitability of the outsourcing provider and the on-going impact of the agreement on their risk profile and systems and controls framework.

                      October 2010

                • RM-2.2 Outsourcing Agreement

                  • RM-2.2.1

                    The activities to be outsourced and respective contractual liabilities and obligations of the outsourcing provider and licenseeG must be clearly specified in an outsourcing agreement. This agreement must — amongst other things — address the issues identified below in this Section.

                    October 2010

                  • Control Over Outsourced Activities

                    • RM-2.2.2

                      The Board and management of licenseesG are held ultimately responsible by the CBB for the adequacy of systems and controls in outsourced activities. LicenseesG must therefore ensure they have adequate mechanisms for monitoring the performance of, and managing the relationship with, the outsourcing provider.

                      October 2010

                    • RM-2.2.3

                      Clear reporting and escalation mechanisms must be specified in the agreement.

                      October 2010

                  • Customer Data Confidentiality

                    • RM-2.2.4

                      LicenseesG must ensure that outsourcing agreements comply with all applicable legal requirements regarding customerG confidentiality.

                      October 2010

                    • RM-2.2.5

                      LicenseesG must ensure that the outsourcing provider implements adequate safeguards and procedures.

                      October 2010

                    • RM-2.2.6

                      For the purposes of Paragraph RM-2.2.5, the implementation of adequate safeguards would include the proper segregation of customerG data from those belonging to other customersG of the outsourcing provider. Outsourcing providers should give suitable undertakings that the company and its staff will comply with all applicable confidentiality rules. LicenseesG should have contractual rights to take action against the service provider in the event of breach of confidentiality.

                      October 2010

                    • RM-2.2.7

                      LicenseesG must ensure that they retain title under any outsourcing agreements for data, information and records that form part of the prudential records of the licenseeG .

                      October 2010

                  • Access to Information

                    • RM-2.2.8

                      Outsourcing agreements must ensure that the licensees'G internal and external auditors have timely access to any relevant information they may require to fulfil their responsibilities. Such access must allow them to conduct on-site examinations of the outsourcing provider, if required.

                      October 2010

                    • RM-2.2.9

                      LicenseesG must also ensure that the CBB inspectors and appointed expertsG have timely access to any relevant information they may reasonably require to fulfil its responsibilities under the CBB Law. Such access must allow the CBB to conduct on-site examinations of the outsourcing provider, if required.

                      Amended: October 2017
                      October 2010

                    • RM-2.2.10

                      The outsourcing provider must commit itself, in the outsourcing agreement, to informing the licenseeG of any developments that may have a material impact on its ability to meet its obligations. These may include, for example, relevant control weaknesses identified by the outsourcing provider's internal or external auditors, and material adverse developments in the financial performance of the outsourcing provider.

                      October 2010

                  • Business Continuity

                    • RM-2.2.11

                      LicenseesG must ensure that service providers maintain, regularly review and test plans to ensure continuity in the provision of the outsourced service.

                      October 2010

                    • RM-2.2.12

                      LicenseesG must have an adequate understanding of the outsourcing provider's contingency arrangements, to understand the implications for the licensee'sG own contingency arrangements.

                      October 2010

                  • Termination

                    • RM-2.2.13

                      LicenseesG must have a right to terminate the agreement should the outsourcing provider:

                      (a) Undergo a change of ownership (whether direct or indirect) that poses a potential conflict of interest;
                      (b) Becomes insolvent; or
                      (c) Goes into liquidation or administration.
                      October 2010

                    • RM-2.2.14

                      Termination under any other circumstances allowed under the agreement must give licenseesG a sufficient notice period in which they can effect a smooth transfer of the service to another provider or bring it back in-house.

                      October 2010

                    • RM-2.2.15

                      In the event of termination, for whatever reason, the agreement must provide for the return of all customerG data — where required by licenseesG — or destruction of the records.

                      Amended: October 2017
                      October 2010

                    • Cloud services

                      • RM-2.2.16

                        For the purpose of outsourcing of cloud services, licensees must ensure that, at a minimum, the following security measures are in place:

                        (a) CustomerG information must be encrypted and licensees must ensure that all encryption keys or similar forms of authentication are kept secure within the licensee's control;
                        (b) A secure audit trail must be maintained for all actions performed at the cloud services outsourcing providerG ;
                        (c) A comprehensive change management procedure must be developed to account for future changes to technology with adequate testing of such changes;
                        (d) The licensee's data must be logically segregated from other entities data at the outsourcing service provider's platform;
                        (e) The cloud service provider must provide information on measures taken at its platform to ensure adequate information security, data security and confidentiality, including but not limited to forms of protection available against unauthorized access and incident management process in cases of data breach or data loss; and
                        (f) The right to release customer information/data in case of foreign government/court orders must be the sole responsibility of the licensee, subject to the CBB Law.
                        Added: October 2017

                • RM-2.3 Intragroup Outsourcing

                  • RM-2.3.1

                    As with outsourcing to non-group companies, the Board and management of licenseesG are held ultimately responsible by the CBB for the adequacy of systems and controls in activities outsourced to group companies.

                    October 2010

                  • RM-2.3.2

                    LicenseesG must obtain CBB's prior written approval before committing to a material intragroup outsourcing. The request for approval must be made in writing to the licensee'sG normal supervisory contact at least 6 weeks prior to committing to the outsourcing, and must set out a summary of the proposed outsourcing, its rationale, and an analysis of its associated risks and proposed mitigating controls. All other Rules in this Chapter apply to intragroup outsourcing.

                    Amended: October 2017
                    October 2010

                  • RM-2.3.3

                    LicenseesG may not outsource their core business activities, including the internal audit function, to their group. The outsourcing of certain functions is subject to the provisions of Modules RM (Risk Management), HC (High-Level Controls) and FC (Financial Crime).

                    October 2010

                • RM-2.4 Internal Audit Outsourcing

                  • RM-2.4.1

                    LicenseesG may not outsource their internal audit function to the same firm that acts as its external auditor.

                    October 2010

                  • RM-2.4.2

                    LicenseesG may outsource their internal audit function for a maximum period of one year, following which a licenseeG is expected to establish an internal audit function commensurate with the nature, scale and complexity of its business.

                    October 2010

                  • RM-2.4.3

                    Because of the critical importance of an effective internal audit function to a licenseeG 's control framework, all proposals to outsource internal audit operations are to be considered 'material outsourcing agreements'.

                    October 2010

                  • RM-2.4.4

                    In all circumstances, Board and management of licenseesG must retain responsibility for ensuring that an adequate internal audit programme is implemented, and will be held accountable in this respect by the CBB.

                    October 2010

            • TC Money Changers Training and Competency Module

              • TC-A Introduction

                • TC-A.1 Purpose

                  • Executive Summary

                    • TC-A.1.1

                      This Module presents requirements that have to be met by licenseesG with respect to training and competency of individuals undertaking controlled functionsG (i.e. approved personsG ).

                      October 2010

                    • TC-A.1.2

                      Module TC provides Rules and Guidance to licenseesG to ensure satisfactory levels of competence, in terms of an individual's knowledge, skills, experience, and professional qualifications. LicenseesG are required to demonstrate that individuals undertaking controlled functionsG are sufficiently competent, and are able to undertake their respective roles and responsibilities.

                      October 2010

                    • TC-A.1.3

                      The Rules build upon Principles 3 and 10 of the Principles of Business (see Module PB (Principles of Business)). Principle 3 (Due Skill, Care and Diligence) requires licenseesG to observe high standards of integrity and fair dealing, and to be honest and straightforward in its dealings with customers. Principle 9 (Adequate Resources) requires licenseesG to maintain adequate human, financial and other resources sufficient to run its business in an orderly manner.

                      October 2010

                    • TC-A.1.4

                      Condition 4 of the Central Bank of Bahrain's ('CBB') Licensing Conditions (Chapter AU-2.4) and Condition 1 of the Approved Persons regime (Chapter AU-3.1) impose further requirements. To satisfy Condition 4 of the CBB's Licensing Conditions, a licensees'G staff, taken together, must collectively provide a sufficient range of skills and experience to manage the affairs of the licenseeG in a sound and prudent manner (AU-2.4). This condition specifies that licenseesG must ensure their employees meet any training and competency requirements specified by the CBB. Condition 1 of the Approved Persons Conditions (AU-3.1) sets forth the 'fit and proper' requirements in relation to competence, experience and expertise required by approved personsG .

                      Amended: January 2011
                      October 2010

                  • Legal Basis

                    • TC-A.1.5

                      This Module contains the CBB's Directive (as amended from time to time) relating to Training and Competency and is issued under the powers available to the CBB under Articles 38 and 65 of the Central Bank of Bahrain and Financial Institutions Law 2006 ('CBB Law'). The Directive in this Module is applicable to all licenseesG (including their approved personsG ). Requirements regarding Money Changer LicenseesG are also included in the Regulation Organising Money Changing Business, issued in 1994 and included in this Module.

                      Amended: January 2011
                      October 2010

                    • TC-A.1.6

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

                      October 2010

                • TC-A.2 Module History

                  • Evolution of the Module

                    • TC-A.2.1

                      This Module was first issued in October 2010. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

                    • TC-A.2.2

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

                      Module Ref. Change Date Description of Changes
                      TC-A.1.5 01/2011 Clarified legal basis.
                           
                           
                           
                           

                  • Superseded Requirements

                    • TC-A.2.3

                      This Module does not replace any regulations or circulars in force prior to October 2010.

                      October 2010

              • TC-B Scope of Application

                • TC-B.1 Scope of Application

                  • TC-B.1.1

                    This Module applies to all Money Changer licenseesG authorised in the Kingdom, thereafter referred to in this Module as licensees