Bahrain Unveils National Strategy to Combat Money Laundering and Terrorism Financing

Bahrain has long positioned itself as one of the Gulf’s most prominent financial hubs, but like other open and interconnected economies, it continues to face persistent threats from money laundering and terrorism financing. These illicit practices often exploit the complexity of modern financial systems, cross-border flows, and charitable donations. In response, the Kingdom has launched its National Strategy to Combat Money Laundering, Terrorism Financing, and Weapons Proliferation for 2025–2027, a move designed to strengthen oversight, enhance compliance, and bring the country into closer alignment with international standards.

A central element of the plan is its focus on the civil sector, which includes charities, endowments, and non-profit organizations. These institutions remain particularly vulnerable worldwide, as criminals have repeatedly misused philanthropic channels to disguise both the origin and the ultimate destination of funds. Bahrain’s strategy aims to prevent such exploitation by bolstering supervision and shielding these organizations from being used as conduits for laundering the proceeds of crime or financing illicit networks. To achieve this, the framework introduces renewed financial oversight mechanisms, updates legislative tools, and reinforces the monitoring of public funds, addressing gaps that might otherwise weaken the financial system.

This reinforced approach also reflects the lessons drawn from earlier international evaluations of Bahrain’s financial regime. The new strategy is not just a defensive measure but also an effort to reinforce the country’s reputation as a reliable partner in the global financial order. Regulators in Manama have recognized that reputation is as crucial as enforcement, especially given the ongoing competition among Gulf states to attract foreign investment and establish themselves as leading financial centers.

The plan has been designed as a renewable framework, one that evolves in step with emerging risks and legislative changes. This mirrors international best practices, especially given the cross-border nature of financial crime. It incorporates risk assessments, sector-specific monitoring, and collaboration across nineteen government bodies and forty-five private sector institutions. By drawing in such a broad array of participants, Bahrain underscores that combating money laundering is not solely the responsibility of regulators and banks but a collective duty that spans across society.

Part of the strategy also involves enhancing compliance with international treaties and standards. To do this, Bahrain has embedded its national risk matrix into supervisory methods. This matrix identifies vulnerabilities across sectors such as banking, securities, insurance, and charitable organizations. The emphasis is on risk-based supervision, meaning entities deemed higher risk will be subjected to tougher scrutiny. With this approach, Bahrain aligns itself more closely with global frameworks and demonstrates that its reforms are not only procedural but also substantive in their credibility.

The private sector, especially banks and financial institutions, plays a critical role in carrying out the plan. These institutions are expected to integrate the national strategy into their compliance frameworks by revising policies, strengthening transaction monitoring, and embedding training programs that enable staff to detect suspicious activity. For a country like Bahrain, whose banking services are tightly linked to international financial markets, a strong compliance culture reduces the risk of being cut off or de-risked by foreign partners wary of reputational and legal exposure.

Beyond compliance, the strategy carries significant economic and reputational implications. In the financial services sector, a robust anti-money laundering regime is a competitive edge. Global investors and multinational corporations increasingly prioritize jurisdictions with transparent and trustworthy systems. By putting this framework in place, Bahrain not only secures its domestic markets but also signals to the international community that it is a safe and reliable destination for investment.

The reforms aimed at the civil sector are especially important for international donors and NGOs. By ensuring greater accountability and transparency in the use of charitable funds, Bahrain minimizes the risk of resources being diverted toward illicit activities, a problem that has plagued many jurisdictions worldwide. These measures bolster public trust and strengthen international partnerships, given that many donor organizations refuse to engage with countries where oversight is weak.

On a broader level, the plan helps shield Bahrain’s economy from the destabilizing effects of financial crime. Money laundering distorts fair competition, creates volatility in legitimate sectors, and undermines the integrity of markets. Stronger controls, therefore, not only preserve economic stability but also build resilience against shocks caused by illicit flows. Additionally, by fortifying its reputation, the Kingdom enhances its ability to cooperate more deeply with other GCC members and international partners, strengthening both regional security and economic integration.

The cross-border nature of money laundering makes international cooperation indispensable, and Bahrain’s new strategy emphasizes precisely that. The plan underlines a commitment to closer coordination with regional and global partners, ensuring that the Kingdom is better equipped to share information and harmonize standards with other regulators, financial intelligence units, and law enforcement bodies. Bahraini authorities acknowledge that any gap in supervision could serve as a weak point for criminal networks to exploit, and the strategy addresses this by tightening legal obligations, improving oversight across both taxable and non-taxable sectors, and refining risk assessments to keep pace with evolving threats.

By embedding compliance across public and private institutions alike, Bahrain signals a clear determination to close the vulnerabilities that smaller financial centers have historically faced. The Kingdom’s comprehensive approach strengthens its position as a credible player in the international fight against financial crime while reinforcing domestic stability. In doing so, Bahrain not only protects its economy from illicit activity but also consolidates its status as a trusted and resilient hub in the global financial system.

By fLEXI tEAM