Bahrain: Who Are You Selling To?

Last Updated: 5 November 2019
Article by Reem Al Mahroos

With an increasingly competitive market, developers, sales agents and other real estate professionals in Kingdom of Bahrain (Bahrain) are under considerable pressure to attract buyers and complete transactions.

The real estate sector is, unfortunately, vulnerable to money laundering crimes. Money laundering is essentially the procedure used to conceal the origin of funds which have been generated through illegal activities. Money launderers often find real estate transactions attractive as they are able to move their illegal funds into the economy by way of a property transaction. As such, illegal funds are concealed and proceeds derived from rents or subsequent sales appear as legitimate sources of income.

Accordingly, many jurisdictions, including Bahrain, have implemented anti-money laundering (AML) laws with the goal of combatting this risk in the real estate sector.

The Real Estate Regulatory Authority in Bahrain (RERA) requires licensed real estate professionals such as developers, sales agents and others (Licensees) to comply with the relevant AML laws, including but not limited to Resolution No. 3 of 2019 Concerning the Obligations relating to the Procedures of Prohibiting and Combating Money Laundering and Terrorism Financing on the Activities of Real Estate License which was recently issued on 26 September 2019, Law No. 4 of 2001 concerning the Prohibition of Money Laundering and Ministerial Order No. 23 of 2002 with respect to Procedures of Money Laundering Prevention and Prohibition (AML Laws).

This article sets out an overview of the key requirements and responsibilities that Licensees are required to observe to comply with the AML Laws.

Know your Transactions

Licensees are prohibited from establishing any business relationships or separate processes that are intended for money laundering or financing terrorism.

Licensees are obliged to take additional precautions in monitoring all parts of transactions. They must ensure that they examine the background and purposes of transactions, particularly when a transaction gives rise to suspicion.

Specifically, the AML Laws define two types of transactions that relate to Licensees:

  • Business Relationship: the continuous arrangements between two or more parties, where one party facilitates conducting regular or frequent transactions for the benefit of the other party, or where the value of the transaction is unknown when contracting, which will require further verification.
  • Separate Process: any process beyond the scope of the Business Relationship.

Know Your Client

Licensees must verify the identity of the client as well as the ultimate beneficiary ahead of entering into any legal transactions or formal engagements. They must also ensure that reasonable procedures are in place to verify the client's source of funds.

Licensees are required obtain the following details regarding the identity of clients, representatives and beneficiaries:  

Natural / Individual Clients

Corporate Clients

Full passport details

Company's full name

Identity Card

Legal status

Occupation

Company number and place of registration

Permanent place of residence

Type of activities

Employer's details and address

Address of the main office and branches (if any)

Date, type, value, currency and details of the business relationship

Names of the directors and board members

 

Company's legal representative and authorised signatories and their contact and identity details

Information regarding the incorporation of the company must be verified, which would include the memorandum of association, the articles of association and the power of attorney

Date, type, value, currency and details of the business relationship

Licensees should not engage clients that are unknown or those who refuse to disclose evidence of their identity or that of the ultimate beneficiary.

Additional client due diligence may be required where the client is a politically exposed person, is not physically present at the time of the transaction, is a charitable organisation or falls within any of the other special categories identified in the AML Laws.

Know Your Responsibilities

First and foremost, Licensees should familiarise themselves with the AML Laws in place. If there are any money laundering suspicions that arise during a property transaction, Licensees should report these to the implementing Unit at the Financial Investigations Unit at the Ministry of Interior (the Implementing Unit) and the specialised unit at RERA that deals with AML (Specialised RERA Unit).

Licensees must also retain the records of the identification details highlighted above and the relevant transaction for a period of five years from the date the transaction is completed. Licensees should ensure that any details retained comply with the data protection laws in Bahrain or other laws such as the GDPR where applicable.

Moreover, Licensees must also take precautionary measures when accepting payments from clients. For example, licensees, apart from developers, are prohibited from accepting cash payments in excess of BHD 2,000. Any payment valued above this must go through the banking system. Developers are required to ensure that all payments are made directly to the relevant escrow account in accordance with their obligations under the laws and processes issued by RERA.

Licensees are required to provide the Specialised RERA Unit with annual reports within 3 months from the end of the financial year or calendar year (as applicable) and in accordance with the AML Laws. These include audited financial reports and reports detailing all suspicious financial transactions together with all client due diligence collected.

Licensees must also appoint a compliance officer (Compliance Officer). RERA will approve the Compliance Officer in advance and may reject or request the replacement of such appointed individual.

The Compliance Officer must ensure that they are complying with the AML Laws. If the Compliance Officer becomes aware of any suspicious or unusual transaction, it must notify the Implementing Unit and the relevant unit at RERA of this activity. This must be done in writing, electronically or in person within one working day of this knowledge.

Know Your Penalties

The AML Laws provide details in relation to who / what will be deemed as perpetrators of money laundering, partners in the money laundering crimes, and crimes associated with money laundering crimes.

It should be noted that the above categories are broad and extensive. For example, Article 2(1) of Law No. 4 of 2001 provides that a perpetrator of money laundering crime will include a person (natural or corporate) that conducts any process related to the proceeds of crime with the knowledge or belief or a cause to believe that the relevant proceeds were acquired from a criminal activity or from any act considered to be associated with a criminal activity. 

Any person who participates in, or is associated with, money laundering activities will be subject to imprisonment and / or fines. This includes those who do not comply with the relevant AML Laws and guidelines. Depending on the nature of the crime committed, the penalties can extend up to 7 years of imprisonment and / or fines up to BHD 1 million. In addition to these penalties, any proceeds of crime will be confiscated.

Know Your Processes

Licensees should therefore ensure that they have proper procedures in place to combat money laundering in accordance with the AML Laws. These may include but are not limited to the following:

  • Establishing new or updating existing AML policies to reflect the current AML Laws.
  • Adopting a system to ensure records of all details relating to all property transactions, including clients' details are collected and retained for the required period.
  • Appointing a Compliance Officer internally who will ensure that the Licensee is complying with the AML Laws and that proper procedures and controls have been implemented.
  • Reporting all suspicious transactions to the Implementing Unit and the Specialised RERA Unit (as applicable) and complying with annual reporting obligations.
  • Proceeding with caution if the client presents any suspicious behaviour and reporting any suspicious behaviour to the relevant bodies.
  • Ensuring that staff members, such as the relevant sales team, are properly and regularly trained and are familiar with the AML Laws and internal policies in place.

Given the financial and criminal implications outlined above, Licensees should consider their duties and obligations with regards to AML carefully.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions