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Monday 25 January, 2021

Indicators Related to the Securities Sector

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Client Related Indicators
  1. The client is a politically exposed person, a prominent political figure, or is associated with such a person.
  2. The client is reluctant to meet company employees, and is secretive, vague, or defensive when asked to provide more information.
  3. The client changes his contact information frequently or unexpectedly, or gives contact details that do not match his contact information.
  4. The client uses the same address but changes the names associated with it, refuses to send any documents from the company, refuses to provide any original - often new - personal documents, or evades company attempts to contact him personally.
  5. The client is accompanied by people who do not have a clear role but show an influential role in shaping the business relationship.
  6. The client is tense in a way that is incompatible with the nature of the transaction.
  7. The client attempts to build close relationships with the employees.
  8. The client offers money or rewards for providing services that appear unusual or suspicious.
  9. The client is unemployed but often makes huge transactions or maintains a high account activity.
  10. The client faces severe financial difficulties.
  11. The client is unusually curious about systems, control mechanisms, internal policies, and monitoring.
  12. Exaggerates in justifying or explaining the transaction or the providing of documents that proves its authenticity.
  13. The client has intentionally provided false, misleading, incomplete or unclear information, or refuses to provide the necessary information and documents that show the business relationship, the relevant activity and the source of funds.
  14. The client is reluctant to provide the company with full information about the nature of his business or the actual beneficiaries of an account that he opened for a juridical person.
  15. The client paid a higher fee to the company for hiding some of his information.
  16. The client attempts to convince a company's employee not to submit a required report nor keep the necessary records.
  17. The client appears to be acting as a proxy for someone else, but is hesitant to provide additional information about the person he works for.
  18. The client is a juridical entity that is not included in the public records or official databases and it was not possible to obtain official certificates about it.
  19. The client's address or e-mail is linked to other accounts with which he has no clear relationship.
  20. The existence of pending criminal, civil or organizational lawsuits regarding crime, corruption, or misuse of public funds against the client, or his association with persons against whom similar lawsuits exist.
  21. The client's unusual interest in the company's compliance with the reporting requirements issued by the government and/or the company's anti-money laundering and terrorist financing policies.
  22. Law enforcement agencies issued subpoenas regarding the client's account with companies operating in the field of securities.
  23. The client acknowledges, mentions, or is known to be associated with criminal activities.
  24. The absence of important details in the client's personal documents, such as a phone number.
  25. The client is significantly late in submitting the company’s documents, or all the documents he provides are in a foreign language, or could not be verified.
  26. The client is non-cooperative in identifying the actual beneficiary according to Article (5) of the law.
  27. An unexpected or frequent change of the true beneficiary.
  28. The client does not show any interest in the amount of the transaction or the currency used for it.
Transaction Related Indicators
  1. There is no clear economic purpose for the transaction.
  2. The client performs transactions that appear to be outside the normal framework of commercial practices of the securities sector, or transactions that do not seem economically feasible to him.
  3. Carrying out orderly and sequential transactions to avoid censorship.
  4. udden activity in the transactions volume that is incompatible with the volume of previous transactions, or the transaction does not appear compatible with the current or usual financial situation.
  5. The client, who has a long history with the company, suddenly liquidates all his assets to get his wealth out of the region.
  6. The client refuses to invest in more suitable securities, where the investing in those securities requires enhanced procedures for the "Know Your Client" model.
  7. The client is reluctant to provide the company with the necessary information, or refuses to conduct a transaction once he is asked to provide documents or data for record-keeping.
  8. Early repayment of loans or installments before maturity, or withdrawing funds shortly after depositing them in the account.
  9. Transactions that show that the customer is acting on behalf of other parties.
  10. A sudden change in the pattern of the client’s transactions in a manner incompatible with his usual activities or his situation.
  11. Repetitive transactions of correct amounts without bankruptcy, or entering into very complex transactions.
  12. The existence of a transaction pattern whereby the value of transactions is below the approved limit as per the executive regulations.
  13. Funding the account to buy long-term investments, followed shortly by the client’s request to liquidate those investments and transfer the sale proceeds from the account.
  14. The customer transfers and receives money to and from a person who has suspicious criminal activities.
  15. There are indications that the client has performed actions punishable by law in the Kingdom of Bahrain.
Indicators Related to the Product / Service / Channels used
  1. The client works through intermediaries, such as money managers or advisors, so that his identity is not recorded.
  2. The client has commercial or other types of relationships with risky people or institutions, and the client refuses to give information when opening an account to complete the procedures of the “Know Your Customer” model such as: job, previous financial relationships, etc.
  3. The client provides the company with unusual or suspicious personal documents that cannot be easily verified. This indicator may apply to account opening procedures and any subsequent transactions after opening the account, such as: wire transfers or ongoing due diligence procedures.
  4. The financial history of the client (natural / juridical person) is suspicious or inconsistent with the expectations related to commercial activities.
  5. The client had his business relationship refused or terminated by other financial institutions, or the customer’s account information reflects liquidity and total wealth that is incompatible with the account activity.
  6. The customer owns or maintains many accounts in the names of family members or companies with no clear economic objective.
  7. Non-profit or charitable organizations carry out financial transactions without a clear economic purpose, or there is no link between the organization’s activity and the other parties of the transaction.
  8. The trading of shares between accounts managed by the same people.
  9. The actual activity significantly or quickly exceeds the expected activity upon opening the account.
  10. The structure of the client's business relationship with the company lacks economic logic.
  11. An official in a public joint stock company transfers the funds to his personal account or to the account of a private company he owns and is authorized to sign for it.
  12. Transferring funds to financial or banking institutions other than the ones for which the funds were originally intended.
  13. The client requests transferring some payments through the accounts of the trading company or correspondent accounts belonging to the financial broker, or from other accounts instead of his own account.
  14. Administrative personnel or asset managers execute payments by check without identifying the persons for whom the payments were made to, or provide very little information about the account holder or the beneficiary concerned.
  15. A company that uses cash to pay profits to investors, or uses shell companies to buy shares of a public company.
  16. Transferring assets without the adequate transfer of funds, such as: recording actual ownership or making a change in it.
  17. The sudden return of activity to the account without any logical explanation.
  18. The desire of the uninformed customer, regarding the performance of a financial product and its specifications, to invest in it or buy long-term investments followed by a liquidation of accounts after a short period, regardless of fees or fines.
  19. The client's use of his personal account for economic or commercial purposes, or for purposes other than what the account was opened for.
  20. The customer enters into a financial obligation that exceeds his financial capabilities.
  21. Frequent ownership transfer of shares, transferring funds/shares from a number of persons to one person or vice versa without justification.
  22. Intermediary companies in which the volume of current transactions is inconsistent with the volume of past transactions.
  23. The client's exploitation of investment portfolios in conducting his transactions to conceal his identity / the actual beneficiary.
Geographical location Related Indicators
  1. The client is a natural / juridical person (registered in an area known for its banking secrecy and as a safe tax haven or a high-risk geographical area, such as: areas producing narcotic substances.).
  2. Transactions related to countries known for their high crime rate, such as: (high corruption rates, terrorism, and massive drug production), or are considered high-risk countries in terms of money laundering or terrorist financing.
  3. There is no specific justification for the client’s use of the company's services or location, or no clear relationships between the client and other parties in the country where the company is located.
  4. Secured loans against commitments from foreign banks, with difficulty verifying the reality of these obligations.
  5. Selling / buying dual-listed shares in the capital markets of more than one country.
Other Indicators
  • Internal Trading
  1. The client is known to have friends or family members who work for the securities issuing authority.
  2. A client's trading patterns indicate that he may have inside information.
  3. The client undertakes a huge transaction to buy or sell securities or option contracts on securities shortly before the announcement of information affecting the price of the securities, or he sells his share of stocks in the same period in which it is announced.
  4. The client makes a purchase that does not match his investment history, or opens an account or feeds the account shortly before the purchase.
  • Manipulating the Markets
  1. A transaction in which one of the parties buys securities at a high price and then sells them at great loss to another party. This could be evidence of value transfer from one end to the other.
  2. The client enters into a securities trading transaction, pre-arranged in other types of non-competitive trading, including shell deals or the exchange of illiquid, low-priced or difficult-to-price securities.
  3. The client’s transactions involve a pattern of continuous losses.
  4. Buying and selling unlisted securities with a big difference in price over a short period.
  5. A pattern appears on the client’s transactions, whereby he transfers ownership of securities to him, then sells them, and transfers proceeds from the sales outside the account.
  6. The company issuing the shares does not have any clear business activity or returns, or has witnessed frequent and continuous changes in its business structure and/or faces continuous material changes in its business strategy or type of activity.
  7. The officials or persons with access to the company in question also have ties to other companies that are low-priced, illiquid, have low-volume work, or have a history of regulatory violations.
  8. The company issuing the shares has been previously subject to trading related penalties.
  9. It becomes apparent that there is sudden trading in illiquid or low-priced securities through two or more accounts in the company.
  10. The transactions between the same parties or between related parties are structured only for one party to incur a loss and the other party to be profitable.
  11. The client deposits the assets of securities, or requests that shares be recorded in multiple unconnected accounts, or sells or transfers the ownership of shares.
  12. Requesting to implement a sale or purchase of the same share or linked shares with a timeline present, or buying stocks in small quantities throughout the day.
  13. Entering into a trading process with prior knowledge of the client's pending orders that may affect the share price.
  • Fraud in Offering Securities for Subscription
  1. The client opens multiple accounts for different juridical entities that he manages, or receives a number of checks and money transfers from parties who are not connected with him.
  2. The client distributes the deposits made by a third party to a number of accounts, or makes payments to a third party at a time close to receiving from another party.
  3. The customer’s history does not indicate a clear economic purpose of receiving deposits from a third party.
  4. The client deposits a large number of securities assets with the company.
  5. The name of the securities assets is different from the name on the account.
  6. The securities assets do not carry a written explanation, although the date of the share and/or the size of the share indicates the necessity for this explanation, or that the explanation provided by the client regarding how he obtained the securities assets is illogical.