THE KINGDOM OF BAHRAIN’S NATIONAL RISK ASSESSMENT 2025

47 SECTOR OVERALL RISK Virtual Assets Service Providers (VASPs) MEDIUM-HIGH Money Changers MEDIUM Banking MEDIUM Virtual Assets Service Providers (VASPs) 217. Virtual Asset Service Providers (VASPs) present an inherent risk of misuse for terrorism financing (TF) due to the features of virtual assets, including speed, global reach, pseudonymity, and the absence of physical transfer across borders. Terrorist financiers may exploit these characteristics to move funds quickly and discreetly, outside the traditional regulated financial system. In particular, peer-to-peer transfers, privacy-enhancing coins, and decentralized platforms heighten the difficulty of tracing beneficial ownership and transaction flows. 218. The Kingdom of Bahrain has implemented robust mitigating measures to ensure compliance with Anti-Money Laundering/Combating the Financing of Terrorism regulations. Bahrain's unwavering commitment to the AML/CFT regime fosters strong cooperation among competent authorities to effectively counter terrorism and its financing. 219. Despite the emergence of new technologies and evolving trends, Bahrain, through the CBB, has adopted a proactive approach to mitigate risks associated with virtual assets. All Virtual Asset Service Providers (VASPs) are required to implement robust sanctions screening systems to detect and prevent transactions involving designated individuals or entities. 220. VASPs are assessed as medium-high risk due to the potential for misuse in terrorism financing; however, this risk is mitigated by proactive measures, including continuous transaction monitoring, regular on-site and off-site inspections, and a requirement for immediate reporting of suspicious activities to the relevant authorities. Money Changers 221. Money Changers and Money or Value Transfer Services (MVTS) pose a potential threat in Bahrain due to their possible exploitation by terrorist financiers. Given that MVTS are widely used by residents to remit funds to their home countries, these channels could be leveraged to facilitate cross-border transfers for illicit purposes. 222. However, the sector’s risk is assessed as medium , as robust countermeasures—including customer due diligence (CDD), enhanced due diligence (EDD), suspicious transaction reporting (STR) and TFS implementation—significantly reduce the attractiveness of MVTS for terrorism financing activities. Banking