Bahrain: Combating Money Laundering in Real Estate
In September 2019, the Real Estate Regulatory Authority (RERA) issued Resolution No. (3) of 2019 (Resolution 3) with the aim of combating money laundering within real estate activities in the Kingdom of Bahrain.
The primary aim of RERA is to ensure that the real estate industry in Bahrain is "aligned to international best practice standards in delivering a professional service in a
transparent manner eliminating the any lack of recognition, and subsequent application of the anti-money laundering (AML) regulations.
Article 5 of the Resolution 3 not only sets out the direct obligations on licensees to conduct identification procedures that verify the identity of the customer and the ultimate beneficiary but also to verify the source of money. The provisions are directly aimed at preventing the possibility for owners to conceal their identity and using layers of financial transactions to make funds appear to be from a legitimate source. The importance of licensees complying with these obligations is made clear through Article 8 of Resolution 3, which states that each licensee is required to appoint a Compliance Officer (CO) that is approved by RERA for the role. The CO is to have the responsibility for monitoring all procedures and internal controls adopted by licensees and are further required to submit reports to RERA which must contain detailed information relating to transactions and also raise any doubts they may have about the legitimacy of a transaction. The strict systematic procedure RERA has put in place aims to regulate the real estate market in a manner that significantly limits the scope for licensees to avoid fulfilling their duty of abiding by the AML policies put in place.
A significant factor in ensuring business confidence in Bahrain is demonstrating a lack of tolerance for any form of illegal activity, and proving that those found liable will be held accountable. Resolution 3 facilitates the notion that the Kingdom is increasing regulations, legal impositions and surveillance, with the aim of safeguarding the economy.
The main aims of Resolution 3 are to increase the regulation of the real estate sector to prevent money laundering and to ensure that there is national compliance with the regulations enforced and to operate as part of a holistic intention to aid Bahrain’s economic growth, as the more stability and confidence there is in the real estate sector, the more attractive it will look to future investors.