Who Are You Selling To?

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...