Parliament to Vote on Law Introducing Jail for Unlicensed Financial Activities

The Council of Representatives of Bahrain is set to vote during its session on Tuesday on a new government-led legislation aimed at strengthening penalties against the unauthorized practice of financial, banking, insurance, and insurance brokerage activities.

The proposed law introduces imprisonment as a new penalty for anyone found engaging in financial services without obtaining a license from the Central Bank of Bahrain. Under the current law, violations are punishable only by a financial fine.

The draft legislation also prohibits unlicensed entities from using the word “bank” or any equivalent term in any language, as well as any expression suggesting the practice of banking activities. This restriction applies to trade names, descriptions, addresses, invoices, and official correspondence.

Similarly, the new law bans any individual or entity not licensed to conduct insurance or reinsurance activities from using titles or phrases that imply they provide such services. It also prevents individuals not registered in the official record of insurance experts and brokers from claiming to practice expertise, brokerage, or representation of insurance companies.

The decree-law authorizes the Central Bank of Bahrain to issue regulations that may organize, restrict, or prohibit unlicensed parties from marketing or investing in activities under its supervision.

The amendment includes changes to Article (161) of the Central Bank of Bahrain and Financial Institutions Law No. (64) of 2006. The revised article states that, without prejudice to any harsher penalty under the Penal Code or other laws, anyone violating Articles (40) and (41) of the law, or regulations issued under Article (42), shall be punished by imprisonment and/or a fine not exceeding one million Bahraini dinars.

The Ministry of Interior of Bahrain affirmed its support for the decree-law and the urgency of its issuance, noting ongoing coordination with the Central Bank of Bahrain and the National Financial Intelligence Centre in preparation for assessments by the Financial Action Task Force. The ministry highlighted that several legislative measures related to combating money laundering and terrorist financing have been enacted recently.

The Central Bank of Bahrain stated that the new decree-law addresses gaps in existing legislation concerning unauthorized financial activities. It added that introducing imprisonment alongside fines strengthens deterrence and gives the judiciary broader discretion to determine appropriate penalties based on the nature of each violation.

The bank emphasized that the stricter penalties aim to reduce unlicensed activities, protect the integrity of the financial sector, and enhance confidence in the investment environment.