Case Explained: Decree-law proposes tougher penalties for financial crime – Legal Perspective

A decree-law that introduces tougher penalties – including possible jail terms and fines of up to BD1 million – for violations of regulations governing financial activities, supervised by the Central Bank of Bahrain (CBB), is set to be debated by MPs.

The proposed amendment targets Article 161 of the Central Bank of Bahrain and Financial Institutions Law and aims to strengthen enforcement against unlicensed financial services and improve compliance with international anti-money laundering standards.

The financial and economic affairs committee has recommended that MPs approve the decree-law, describing it as a necessary step to protect Bahrain’s financial system and maintain its global reputation.

Committee chairman MP Ahmed Al Salloom said the amendment comes at a critical time as Bahrain prepares for an evaluation by the Financial Action Task Force (FATF), the global body that sets standards for combating money laundering and terrorism financing.

He warned that delays in strengthening the legal framework could expose the country to serious financial risks.

“Failure to enact the necessary legal measures could potentially lead to Bahrain being placed on the FATF ‘grey list’, which would negatively affect the kingdom’s financial reputation and investment climate,” he added.

Under the amendment, violators of Articles 40 and 41 of the Central Bank law – which regulate financial activities requiring licensing – would face imprisonment and a fine of up to BD1m, or either penalty, in addition to any harsher punishment stipulated in other laws.

The committee said the tougher sanctions would particularly deter those providing financial or virtual asset services without obtaining the required licence from the CBB.

Mr Al Salloom said introducing the option of imprisonment alongside financial penalties would significantly strengthen deterrence.

“The addition of custodial penalties alongside fines ensures stronger enforcement and provides judges with the necessary discretion to impose penalties proportional to the seriousness of the violation,” he said. “This will help curb unlicensed financial activities that could harm investors, customers and the wider economy.”

During its review, the committee consulted several authorities, including the Interior Ministry, the CBB, the Bahrain Chamber and the Bahrain Association of Banks.

CBB officials told MPs the amendment would close existing legal gaps and clarify that criminal liability under Article 161 applies to natural persons as well as legal entities.

They explained that the current framework had led to differing interpretations about who could be held criminally responsible, making the amendment necessary to eliminate ambiguity.

Authorities also emphasised that the measure aligns Bahrain with international legislative practices, where imprisonment is commonly used alongside fines to deter financial crimes.

The Interior Ministry supported the decree-law, highlighting co-ordination between regulators and the National Centre for Financial Intelligence to strengthen anti-money laundering legislation ahead of the upcoming FATF evaluation.

Meanwhile, the Bahrain Chamber backed the amendment but called for clear guidance and awareness programmes to help the private sector comply with regulatory requirements.

The Bahrain Association of Banks also endorsed the measure, saying stronger enforcement would help protect the Kingdom’s financial system from illicit activities and reinforce confidence in Bahrain as a regional financial hub.

“These reforms are part of the kingdom’s broader strategy to enhance transparency, reinforce regulatory oversight and protect the stability and attractiveness of Bahrain’s financial sector,” Mr Al Salloom added.

mohammed@gdnmedia.bh