A decree-law imposing fines of up to BD1 million and possible jail terms on anyone conducting unlicensed financial activity in Bahrain has been unanimously approved by the Shura Council.
The move comes under Decree-Law No 37 of 2025, which amends Article 161 of the Central Bank of Bahrain (CBB) and Financial Institutions Law, significantly tightening penalties on those who provide regulated financial services without a licence from the CBB or misuse 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 any person or entity from offering regulated financial services in Bahrain without prior authorisation from the central bank, while Article 41 bans the use of terms such as ‘bank’, ‘insurance’, ‘reinsurance’, ‘brokerage’ or ‘financial consultancy’ by unlicensed parties. Article 42 empowers the CBB to restrict or prohibit the marketing or promotion of regulated services by unauthorised entities.
In essence, anyone attempting to operate, market, or even present themselves as a financial or insurance institution without approval will now face severe criminal consequences.
The Legislation and Legal Opinion Commission memorandum explained that the decree-law was issued to ensure Bahrain’s rapid alignment with evolving international standards on anti-money laundering and counter-terrorism financing set by the Financial Action Task Force, particularly amid rising risks linked to non-compliant virtual asset service providers.
Shura financial and economic affairs 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.
“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.”
Committee rapporteur Hisham Al Qassab stressed that introducing imprisonment alongside the fine reflected “a clear legislative direction towards deterrence and serious compliance,” noting that such violations could be a front for money laundering or illicit financing.
Shura’s second vice-chairwoman Dr Jihad Al Fadhel said the core of the amendment was the addition of jail sentences for offenders, particularly unlicensed virtual asset service providers.
“Financial crime today is complex and threatens the stability of banking systems,” she said. “Security is no longer limited to public safety; it includes financial and economic security. This decree-law protects the banking sector and reinforces trust in the national financial system.
“Violations, including impersonating financial institutions, using banking or insurance labels without authorisation, or operating without a licence, may be a cover for money laundering, illicit financing or financial fraud. Adding imprisonment restores the balance between the gravity of the crime and its consequences.”
Dr Al Fadhel also proposed the creation of a specialised unit using artificial intelligence for proactive financial analysis to detect abnormal transaction patterns and predict risks before they occur.
“The amendment is clearly seen as essential to safeguarding Bahrain’s reputation as a well-regulated and trusted financial hub,” she added.
A mutual taxation agreement with the Government of Jersey was also unanimously approved and referred to His Majesty King Hamad for ratification following Parliament’s approval.
National Bureau for Revenue (NBR) chief executive Rana Faqihi explained the importance of the agreement, highlighting that Bahrain has already 49 such agreements with numerous countries.
mohammed@gdnmedia.bh
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