THE KINGDOM OF BAHRAIN’S NATIONAL RISK ASSESSMENT 2025

29 Despite these vulnerabilities, the sector has implemented comprehensive measures to mitigate risks and enhance resilience. Overall Risks 105. In the Kingdom of Bahrain, retail banks are subject to stringent regulatory requirements, with D- SIBs receiving enhanced scrutiny and ongoing monitoring to mitigate ML risks. 106. Conventional Retail Banks must comply with the provisions set out in the Financial Crime Module of Volume 1 of the CBB Rulebook, while Islamic Retail Banks are required to follow the requirements outlined in Volume 2 of the CBB Rulebook. These requirements encompass customer due diligence, enhanced due diligence, suspicious transactions reporting and sanction screening obligations. 107. The CBB has taken steps to mitigate the ML risks arising from the increased use of digital channels. The CBB introduced new requirements related to digital onboarding and non-face to face business using advanced technologies. Retail banks are required, but not limited to, in the adoption of advanced biometric systems and capture the geo-location of any customer using their services. Furthermore, Retail Banks are required to verify the information captured through legitimate sources. As an example, the CBB leads the country’s digitalization efforts through circulating a circular mandating licensee to connect to the national EKYC platform. 108. The CBB adopts a risk-based approach to supervision, prioritizing resources based on the risk profile of licensees and sector type. Over the past four years, the CBB has conducted risk-based on- site examinations on retail banks. 109. To enhance industry practices and address recurring regulatory issues, the CBB organized round table discussions with the retail banking sector aiming at enhancing industry knowledge sharing typologies and addressing common concerns identified by Licensee. 110. Given the substantial ML threats faced by the sector, its vulnerabilities, and the effectiveness of its controls, the overall money laundering risk in the retail banking sector is classified as medium- high . Wholesale Banks Introduction 111. Bahrain’s wholesale banking sector is a critical component of the country’s financial system, serving as a core for corporate and institutional clients. The sector facilitates complex financial transactions that underpin regional and international trade, investment and economic growth. 112. The Wholesale Banking sector is a key pillar in the country’s financial system and comprises of licensed banks, including Islamic wholesale banks. 113. Given their key role in the financial system, wholesale banks enable economic development and serve as a potential target for ML threats.