LABOR MINISTRY ISSUES FINANCIAL REGULATIONS FOR

C O N F I D E N T I A L SECTION 01 OF 03 MANAMA 000376

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DEPT FOR EB/ESC/TFS:GLASS, S/CT:TNAVRATIL, IO/PHO:PEREZ,
NSC:GPETERS, AND NEA/ARP
TREASURY FOR JZARATE, OFAC:RNEWCOMB, AND TERRORIST
FINANCING TASK FORCE
CAIRO FOR STEVE BONDY

E.O. 12958: DECL: 03/14/2014
TAGS: ETTC EFIN SOCI KISL BA
SUBJECT: LABOR MINISTRY ISSUES FINANCIAL REGULATIONS FOR
CHARITIES


Classified By: CDA Robert S. Ford for reason 1.4(d).


1. (C) SUMMARY: In early March, Bahrain's Ministry of Labor
and Social Affairs issued more stringent regulations for
charities' financial activities. The rules require charities
to maintain accounts and share them with ministry inspectors
on a quarterly basis. Charities' accounts must be audited
annually if revenues and expenditures exceed USD 26,500. The
new rules also require charities to obtain a permit from the
Labor Ministry to solicit donations and to transfer money
outside Bahrain. Charities must use a monetary institution
to conduct financial transactions greater than USD 2650.
Although lacking criminal penalties, the new regulations
appear likely to deter terrorists' use of local charities to
move money. Notably, the GOB found a way to issue these
rules without submitting them to the Islamist-dominated House
of Representatives for approval. END SUMMARY.

2.(U) On March 6 al-Wasat newspaper published a Labor
Ministry order establishing new financial reporting rules for
charity organizations. All charity organizations in Bahrain
must register with the Ministry of Labor and Social Affairs.
According to a knowledgeable MOLSA source, religious
charities like religious charities like Jamiyat al-Islaah,
Jamiyat al-Tarbiya al-Islamiya, and Jamiyat al-Tawiya
al-Islamiya are also registered with MOLSA and covered by
this order. The Embassy's unofficial translation of the text
of the ministerial order follows:

3.(U) Begin text:

Decree number 3 for the Year 16-03-2004
Oversight of Private Institutions' Financial Activities

Ministry of Labor and Social Affairs:

After reviewing Articles, the Social and Cultural Societies
and Clubs and private organizations active in the field of
youth and sports and private institutions' law issued by
Decree Number (21) for the year 1989 and amended by Decree
for Law number (44) for the year 2002.

According to Edict Number (19) for the year 1994 regarding
licensing regulations concerning social and cultural
societies and clubs and charity organizations subject to the
MOLSA oversight's regarding donations.

The Following has been decided:

Article (1)

In the implementation of this decree the following words and
phrases are defined by the words adjoined to them:

Ministry: Ministry of Labor and Social Affairs
Minister: Minister of Labor and Social Affairs
Concerned Directorate: Directorate of Local Societies'
Development at the Ministry.
Private Institutions: Institutions subject to the regulations
of the Social and Cultural Societies and Clubs and Private
Organizations Active in the Field of Youth and Sports and
Private Organizations' Law issued by Decree (21) for the year

1989.
Financial Institutions: Commercial Banks, including banks,
which adhere to the Sharia law, exchange companies licensed
by the Bahrain Monetary Agency to operate in the Kingdom.
Collection of Funds: Every activity practices by the private
institution with the intention of acquiring money in cash or
in kind, from any person either directly or by holding
events, fund-raisers, sports matches, competitions, or other
such means of collecting funds.
Person: Any ordinary or legal personality.

Article (2)

a.The private institution must maintain at its main center
the following:


1. A book in which revenues and expenditures are recorded,
including the name of every donor and beneficiary of any
monetary payment or donation.

2. A book for the bank accounts.

b. Private institution is required to register details of its
accounts every three months on the electronic information
webpage launched by the Ministry to facilitate the viewing of
these accounts and inspecting of the actuality of the
financial situation of the institution at any given time.

Article (3)

All private institutions must prepare a closing budget and
account in accordance with the criterion set by the Ministry,
which must be presented to the authorized directorate
supplemented with supporting documents and any other
information, reports, or documents the Directorate may
request.

Article (4)

All private institutions are required to appoint a certified
account auditor, one that is qualified and experienced to
review the accounts if the revenues and expenditures exceed
BD 10,000 annually.

Article (5)

Concerned directorate is required to inspect the financial
activities of private institutions to insure their compliance
with the law and statute and to thereafter forward a report
to the Minister within 15 days from the day the inspection is
conducted. Every institution chairman or board of trustees,
are required to provide any information, reports, or
documents requested by the Ministers' delegates pertaining to
the institutions' activities.

Article (6)

Collecting contributions from any person inside or outside
the country's territory in any way before obtaining
authorization from the Ministry is prohibited. Private
institutions are not permitted to collect money inside
worship homes, Matams (Shia, religious center),or any
religious institutions or other party before presenting the
people in charge of these institutions an exact copy of the
mentioned authorization.

Article (7)

Private institutions are not permitted to pay or to donate an
amount exceeding BD 1,000 (USD 2650) to any person, unless
through a monetary establishment.

Article (8)

Private institutions are prohibited from transferring any
amounts to persons outside the country without permission
from the Ministry, excluding amounts pertaining to the cost
of books, publications, scientific and technical journals.
For such authorization to be granted, the beneficiaries must
be legitimate, and if they are juristic personalities, they
must be established and licensed by their country of origin.
Institutions, which seek to transfer amounts outside the
country, must provide the monetary establishment, which will
expedite the transfer, verification that the mentioned
authorization specified with amounts and the name of the
recipient has been granted.

Article (9)

In regards to licensing for private institutions' collection
of money, the laws instituted regarding the licensing system
for social and cultural societies and clubs subject to the
supervision of the Ministry of Labor and Social Affairs are
applicable in this regard.

Article (10)

Decree to be issued in the official gazette and become
effective on the day of its publication.
Minister of Labor and Social Affairs
Dr, Majeed bin Mohsin Al Alawi

Thu al Hijja 19, 1424
February 10, 2004
End text


4. (C) COMMENT: Almost two years to the day from the Finance
Minister's announcement of this initiative to former Treasury
Secretary O'Neal, the Labor Ministry finally promulgated

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financial regulations that should constrain the ability of
terrorists to move money through Bahrain. Notably, the GOB
found a way to issue the regulations without submitting them
to the Islamist-dominated House of Representatives.
Interestingly, an earlier draft of the regulations, which we
obtained from a MOLSA source contained administrative
penalties, including revocation of license, for breaking the
regulations. The lack of a penalty clause clearly weakens
the regulations. Post will seek GOB expanation for its
deletion. END COMMENT.
FORD