THE KINGDOM OF BAHRAIN’S NATIONAL RISK ASSESSMENT 2025

15 SECTION 1: MONEY LAUNDERING RISK ASSESSMENT Legal Persons and Arrangements ML Risk Assessment Overview – Risk and Context 34. Companies and other legal structures are inherently associated with significant ML and TF risks primarily from the ability to conceal the identities of individuals within the ownership structure that are engaged in illicit activities given their direct access to the global financial system. 35. The Kingdom of Bahrain provides various types of legal persons which are governed by specific regulations issued by supervisors. Primarily, legal persons for business purposes are governed by the Commercial Companies Law (Decree No. 21 of 2001) and are supervised by the Ministry of Industry and Commerce (MOIC). The non-governmental organizations are supervised by the Ministry of Social Development (MOSD) and are governed by the NPO Law (Decree No.21 of 1989). 36. Trusts are all registered with the Central Bank of Bahrain (CBB) and are subject to the Trust Law (Decree No. 23 of 2006). The CBB supervises the financial sector, including trust service providers (TSPs), and has strong controls to prevent criminals from beneficially owning a significant or controlling interest or holding a management function. Regarding other legal arrangements, Bahrain has waqfs, which are an Islamic type of legal arrangement where property or money can be kept in favor of (endowed to) the public or a particular individual, for a permanent period (normally a lifetime). It is regulated by Shari’a and supervised by the Ministry of Justice, Islamic Affairs & Waqf’s (MOJ), based on MO No. (3) of 2017 which includes the procedures for waqf creation. 37. The CBB issued directives to establish economic substance requirements for regulated financial activities, and the MOIC issued the Ministerial resolution (106) of 2018 to set economic substance requirements for commercial activities. These directives and the Ministerial Order require covered Bahraini entities (Corporations, Branches, Partnerships etc.) that carry out certain activities, as have been covered under the Economic Substance Regulation (ESR) law, to maintain, demonstrate and report on adequate “economic presence” in Bahrain. It also ensures that all registered commercial companies must have a real and effective economic substance in order to avoid establishing these companies as an umbrella for tax evasion or transfer of profits or illegal movements of funds. These requirements mitigate, to a great extent, the risk of shell companies. 38. The Kingdom of Bahrain possesses several features that make it attractive for non-residents to form an entity in the jurisdiction, such as its location, ease of doing business, and 100% foreign ownership appealing for setting up regional headquarters, branches, or subsidiaries, and the absence of corporate and personal income taxes (for most sectors). Nevertheless, legal structures are unattractive to perpetrators for ML given the stringent disclosure requirements. This extends to include mandatory local registration and natural person representative requirements which subsequently limit their attractiveness to criminals, including non-residents, by ensuring transparency and accountability. The requirements are similar to all legal structure types and operational activities.