Government Submits Draft Law to Toughen Penalties for Unlicensed Financial Activities

The Bahraini government has referred a new draft law to the legislative authority aimed at tightening penalties for conducting financial, banking, insurance, or brokerage services without official authorization.

The proposed law introduces prison sentences for individuals who engage in financial services without a license from the Central Bank of Bahrain (CBB). Previously, the penalty was limited to fines.

The draft also prohibits unlicensed entities from using the word “bank” or any equivalent term in any language, or phrases suggesting banking activities, in trade names, descriptions, addresses, invoices, or correspondence. Similarly, those without licenses in insurance or reinsurance are barred from using titles or terms implying they provide such services. Only individuals registered in the “Register of Insurance Experts and Brokers” may claim to practice related activities.

The legislation further authorizes the CBB to issue regulations restricting or prohibiting unlicensed parties from marketing or investing in activities under its supervision.

As part of the changes, Article (161) of the CBB and Financial Institutions Law (Law No. 64 of 2006) will be amended to state: “Without prejudice to any stricter penalty prescribed under the Penal Code or any other law, offenders shall be punished by imprisonment and/or a fine not exceeding one million Bahraini dinars for violating the provisions of Articles (40) and (41) of this law, or the regulations issued pursuant to Article (42).”

The initiative reflects the government’s commitment to strengthening oversight of the financial and banking sector, protecting clients from illegal or fraudulent practices, and reinforcing Bahrain’s reputation as a trusted regional financial hub.

Over recent years, the CBB has detected multiple cases of unlicensed companies offering financial or investment services through online platforms and social media, prompting the authority to issue public warnings against dealing with such entities.

The new law is expected to boost confidence in Bahrain’s financial sector, safeguard investor rights, and support the Kingdom’s vision of consolidating its position as a leading regional financial center.