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Tough new penalties aimed at curbing unlicensed financial activity in Bahrain – including fines of up to BD1 million, potential jail sentences, or both – are set to be debated by the Shura Council on Sunday.
The move comes under Decree-Law No 37 of 2025, which amends Article 161 of the Central Bank of Bahrain and Financial Institutions Law, significantly tightening punishment for anyone who provides regulated financial services without a CBB licence, or misuses banking and insurance terminology to mislead the public.
The amendment stipulates that violators of Articles 40 and 41, or regulations issued under Article 42, face imprisonment, a fine not exceeding BD1m, or both.
Article 40 prohibits the provision of any regulated financial service in Bahrain without a licence from the central bank, and bars the establishment of any financial institution without its prior approval.
Article 41 bans unlicensed entities from using words such as ‘bank’, ‘insurance’, or any term suggesting they carry out banking, insurance, reinsurance, brokerage, consultancy or related financial activities.
Article 42 empowers the CBB to restrict or prohibit unlicensed parties from marketing or investing in regulated services.
In essence, any attempt to operate, market, or even present oneself as a financial or insurance entity without authorisation will now carry severe criminal consequences.
According to the Legislation and Legal Opinion Commission’s memorandum, the decree-law was driven by Bahrain’s need to rapidly align with evolving international standards on anti-money laundering and counter-terrorism financing set by the Financial Action Task Force (FATF).
The memorandum also highlighted the growing risks posed by non-compliant virtual asset service providers, which have become a key concern for global regulators.
The Shura Council’s legislative and legal affairs committee confirmed that the decree-law met the constitutional requirements under Article 38, having been issued during the parliamentary recess and presented to both chambers within the mandated time frame.
Meanwhile, Shura’s financial and economic affairs committee conducted an extensive review, examining submissions from the Interior Ministry, the CBB, the Bahrain Chamber, and the Bahrain Association of Banks.
Committee chairman Khalid Al Maskati said the amendment was not merely punitive, but protective.
“This amendment strengthens Bahrain’s financial shield,” he said. “It ensures that only properly licensed and supervised institutions can operate in the market, protecting consumers, investors and the integrity of the financial system.”
He stressed that imposing fines of up to BD1m reflected the seriousness of the offences.
“These are not minor administrative violations. Operating without a licence or misleading the public by using banking or insurance terminology opens the door to money laundering, fraud and serious financial crimes. The penalty must be proportionate to the risk posed to the national economy.”
Mr Al Maskati added that the move reinforces the Central Bank’s supervisory role.
“This demonstrates Bahrain’s full commitment to international compliance standards and to closing any loopholes that could be exploited. It enhances confidence in our regulatory environment and safeguards Bahrain’s position as a trusted financial hub.”
After deliberations with legal and financial advisers, the committee unanimously recommended approval of the decree-law, describing it as a necessary step to maintain the stability, credibility and international standing of Bahrain’s financial sector.
The final decision now rests with the Shura Council during Sunday’s session.
The committee has also recommended approval of a mutual taxation agreement with the Government of Jersey.
mohammed@gdnmedia.bh
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