Bahrain's Sanction Status: Understanding The Country's Current Situation

Bahrain is not currently subject to any international sanctions. However, there have been calls for sanctions against specific Bahraini officials and the country has taken steps to suppress the financing of terrorism. In 2020, the crown prince and prime minister of Bahrain issued a decree aimed at combating terrorism financing by establishing the National Terrorism List and the Sanction List. This decree implements the U.N. Charter and a U.N. General Assembly Resolution for the Suppression of the Financing of Terrorism. While Bahrain itself is not sanctioned, there is debate among UK parliament members about imposing 'Magnitsky' style sanctions on individual Bahraini officials accused of human rights abuses, including torture and mistreatment of political prisoners.

Bahrain is not on the FATF list of countries with AML deficiencies

Bahrain is not on the Financial Action Task Force (FATF) list of countries with Anti-Money Laundering (AML) deficiencies. The FATF blacklist, officially known as the "Call for Action", lists countries that are judged by the FATF to be non-cooperative in the global fight against money laundering and terrorist financing. These countries are called "Non-Cooperative Countries or Territories" (NCCTs).

The FATF has been effective in shifting laws and regulations to combat illicit financial flows. It incentivizes countries to implement stricter regulations through its public non-complier list, which leads financial institutions to shift resources and services away from the countries on the blacklist. This, in turn, motivates domestic economic and political actors in the listed countries to pressure their governments to introduce regulations that comply with the FATF.

Bahrain is a leading financial center in the Gulf region with a primarily service-based economy. The financial sector contributes roughly 18% of its GDP and it hosts a diverse group of financial institutions, including 113 licensed banks, 19 money changers, and several other investment institutions, including 151 insurance organizations. While Bahrain's vast banking network and its status as a transit point along the Gulf and into Southwest Asia may attract money laundering activities, the country is not currently on the FATF list of countries with AML deficiencies.

The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Bahrain was undertaken in 2022. According to that Evaluation, Bahrain was deemed Compliant for 9 and Largely Compliant for 30 of the FATF 40 Recommendations. It remains Highly Effective for 0 and Substantially Effective for 3 of the Effectiveness & Technical Compliance ratings.

While Bahrain is not on the FATF list, it has faced other sanctions and criticism related to human rights abuses and corruption. In 2022, several dozen members of the UK parliament called for 'Magnitsky'-style sanctions on Bahrain officials accused of torture and mistreatment of political prisoners. Additionally, Bahrain presents companies operating or planning to invest in the country with a moderate corruption risk, particularly in public procurement and the extractive industries.

Bahrain's anti-money laundering and counter-terrorist financing standards

Bahrain has been deemed to have the foundation for an effective regime to combat money laundering and terrorist financing, but it needs to further develop its measures based on risk. The country has a good understanding of the risks associated with money laundering and terrorist financing, and its financial institutions are able to implement targeted financial sanctions without delay. However, designated non-financial businesses have a fragmented understanding of these risks, and most do not implement targeted financial sanctions without delay.

The Middle East and North Africa Financial Action Task Force (MENAFATF) and the Financial Action Task Force (FATF) jointly conducted an assessment of Bahrain's anti-money laundering and counter-terrorist financing (AML/CFT) system in 2018. This assessment was based on the 2012 FATF Recommendations and the 2013 Methodology and provided a comprehensive review of the effectiveness of Bahrain's AML/CFT system and its level of compliance with the FATF Recommendations.

At the time of the on-site visit, Bahrain’s national risk assessment was ongoing. The assessment found that Bahrain should use the risk assessment, incorporating information from outside the country, to further strengthen its measures. This includes amending the terrorism offence, which is currently inconsistent with the Terrorist Financing Convention, and pursuing both money laundering and terrorist financing in line with the country’s risk profile.

Bahrain has identified a subset of non-profit organisations that could potentially be abused for terrorism. However, the country currently applies restrictive obligations on all non-profit organisations operating within its borders. In line with the FATF’s requirements, the country should implement mitigation measures that are commensurate with the risks.

Bahrain has demonstrated a high level of domestic cooperation and information exchange and has shown that it cooperates well with counterparts in other countries, responding to formal requests for mutual legal assistance and informal requests for information.

UK MPs call for sanctions on Bahrain officials accused of torture

Bahrain is not currently under any international sanctions. However, in January 2022, several dozen members of the UK Parliament called on their government to impose sanctions on Bahrain officials accused of human rights abuses, specifically the torture and mistreatment of political prisoners. The debate in the House of Commons saw cross-party criticism of the Bahraini government, with the Scottish National Party (SNP)'s Brendan O'Hara highlighting specific cases of prisoners subjected to physical, mental, and sexual abuse by the Bahraini authorities. O'Hara and others called on the UK to suspend the Gulf Strategy Fund, which Bahrain has benefited from.

The Liberal Democrat Alistair Carmichael echoed these sentiments, stating that engagement with Bahrain is only worthwhile if there is visible progress in upholding human rights. He also questioned why the UK government had refused to act against Bahrain's interior minister, Rashid al-Khalifa, who has been accused of overseeing the bloody crackdown on pro-democracy protests in 2011. Carmichael drew a comparison to previous calls for Magnitsky sanctions against Chinese officials, arguing that the UK undermines its credibility on human rights by not applying equal vigour to countries like Saudi Arabia and Bahrain.

The UK government, however, has been reluctant to change its approach to Bahrain. Middle East and North Africa Minister James Cleverly defended the current strategy, stating that the UK's close relationship with the Bahraini government and civil society gives it a "privileged position to positively influence developments on human rights." He also noted that the UK has introduced "Magnitsky-style" sanctions against international human rights abusers.

Despite the UK government's stance, the debate was welcomed by Sayed Ahmed Alwadaei, director of the Bahrain Institute for Rights and Democracy (BIRD). Alwadaei supported the MPs' call for Magnitsky sanctions against top Bahraini officials, including Interior Minister Sheikh Rashid al-Khalifa.

The UK's relationship with Bahrain has come under scrutiny, with critics pointing to the ongoing human rights abuses in the country and the failure of British-funded oversight bodies to effectively address these issues. The UK's support for Bahrain, particularly in the form of funding and training for security services accused of torture, has been described as providing a ""convenient veneer of reform" for the Bahraini regime.

Bahrain's Crown Prince issues decree to suppress terrorist financing

Bahrain is not currently on the FATF List of Countries that have been identified as having strategic AML deficiencies. However, it was deemed a Jurisdiction of Concern by the US Department of State's 2016 International Narcotics Control Strategy Report (INCSR). Bahrain's vast banking network and its status as a transit point into Southwest Asia may attract money laundering activities.

Bahrain's Crown Prince and Prime Minister, Prince Salman bin Hamad Al Khalifa, issued Decree No. 12 of 2021 on the National Terrorism Lists on February 19, 2020. The decree aims to combat the financing of terrorism by establishing the National Terrorism List and the Sanction List, which will be used to control terrorist entities and individuals.

The decree consists of 22 articles. The first article defines the "National Terrorism List" as a list of names of terrorist individuals and entities. The Bahraini cabinet is the authority that decides whether to place individuals and entities on this list. The decree requires financial institutions in Bahrain to freeze funds related to persons or entities on the National Terrorism List. Any financial revenues stemming from those funds must also be confiscated. The decree prohibits financial institutions and individuals from providing monetary assistance to those on the National Terrorism List.

The Committee for Combating Extremism, Terrorism and Its Financing and Money Laundering registers the names of individuals and entities on the National Terrorism List. The decree grants the individuals and entities placed on the list the right to file a petition to request their names be removed. The committee has the right to permit entities and individuals on the list to use some of their frozen funds to meet basic or extraordinary expenses.

In addition to the National Terrorism List, the decree mentions the "Sanctions List," which is a list of terrorist individuals and entities subject to specific financial penalties by the UN Security Council. The Ministry of Foreign Affairs of the Kingdom of Bahrain is the authority designated to send the names of the persons and entities on the National Terrorism List to be added to the UN Security Council's Sanctions List.

Bahrain is not currently under any international sanctions

In 2016, Bahrain was deemed a "Jurisdiction of Concern" by the US Department of State in the International Narcotics Control Strategy Report (INCSR). Bahrain is a leading financial centre in the Gulf region with a primarily service-based economy. The country's vast banking network and its status as a transit point into Southwest Asia may attract money laundering activities.

Bahrain was removed from the EU Tax Blacklist and placed on the Grey List in March 2018. This indicates that the country was previously under sanctions but is no longer.

In 2022, several UK Members of Parliament called for 'Magnitsky' sanctions on Bahraini officials accused of human rights abuses, including torture and mistreatment of political prisoners. However, the UK government has not changed its approach to Bahrain, and there are currently no international sanctions in force against the country.

Bahrain has taken steps to suppress the financing of terrorism and comply with international standards. In February 2020, the Bahraini Crown Prince and Prime Minister, Prince Salman bin Hamad Al Khalifa, issued Decree No. 12 of 2021 on the National Terrorism Lists. This decree established the National Terrorism List and the Sanction List, which are used to control terrorist entities and individuals by freezing their funds and prohibiting financial assistance.

While Bahrain is not currently under any international sanctions, it is important to note that the country has been the subject of sanctions and related discussions in the past, particularly regarding money laundering, terrorism financing, and human rights abuses.

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