Instructions No. 2 of 2022 Concerning Permitted and Prohibited Activities

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Palestine Monetary Authority PALESTINE MONETARY AUTHORITY

Instructions No. (2) of 2022 Concerning Permitted and Prohibited Activities

Pursuant to the provisions of Decision No. (41) of 2016 on the Licensing and Supervision of the Exchange Profession, particularly Articles (9, 10, 27) thereof, and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1) Objective and Scope of Application

1. The provisions of these Instructions aim to regulate the permitted and prohibited activities for exchange dealers.
2. The provisions of these Instructions apply to exchange dealers licensed by the Palestine Monetary Authority.

Article (2) General Provisions

Exchange dealers must comply with the following:

1. Provide operational procedures for all permitted activities that comply with the provisions of these Instructions, and with the due diligence, identification, and verification requirements according to the prevailing Anti-Money Laundering and Counter-Terrorist Financing Law and its amendments.
2. Retain documents and records related to financial transactions for a period of no less than (10) years from the date of transaction completion or termination of the business relationship, in a manner that facilitates retrieval at any time. In the event that the business relationship is terminated due to cases involving money laundering or terrorist financing crimes, information and documents must be retained until the investigative case is concluded.
3. Maintain the independence of exchange records and not mix exchange activities with any other activities, or use capital for purposes other than the permitted activities.
4. Adhere to publishing fixed exchange rates for major currencies, at a minimum (US Dollar, Jordanian Dinar, Shekel, Euro), and the value of commissions and fees for other services provided by the exchange dealer, in a place clearly visible to the public.
5. Record all transactions on the accounting system used and approved by the Palestine Monetary Authority.

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Article (3) Permitted Activities

Exchange dealers may engage in any of the following:

1. Purchase and sell various currencies from natural or legal persons, provided that the following minimum requirements are met: a. Obtain a copy of identification for natural persons (ID/passport) when executing transactions amounting to or exceeding (5,000) US dollars or its equivalent in other currencies. b. Obtain a copy of the registration certificate for legal persons when executing transactions amounting to or exceeding (5,000) US dollars or its equivalent in other currencies. c. The value of a single transaction must not exceed the dealer's capital and existing facilities. d. Retain invoices and documents executing purchase and sale transactions of various currencies with banks and exchange dealers operating and licensed in Palestine and abroad.
2. Deal in checks of all types, provided that the following is complied with: a. Issuing checks, provided that the value of these issued and outstanding checks does not exceed the dealer's capital and existing facilities. b. Depositing checks issued by another bank into the dealer's account at that bank, provided that the source is known in terms of the check issuer, the nature of the relationship, and the purpose of issuance. c. Purchasing future checks in accordance with relevant PMA Instructions. d. The check must not be signed in blank or without a maturity date. e. The total balance of purchased but uncollected checks must not exceed 50% of the paid-up capital of the exchange company. f. Provide a Magnetic Ink Character Recognition (MICR) reader.
3. Purchase and sell unrefined precious metals according to the following: a. They must be officially stamped/assayed in accordance with regulations. b. They must be in the form of ingots/bars. c. Obtain a copy of identification for natural persons (ID/passport), and a copy of the registration certificate for legal persons. d. An invoice must be issued for each transaction. e. Their value must not exceed 20% of the dealer's paid-up capital.
4. Open and use accounts in various currencies at licensed banks operating in Palestine or abroad, according to the following: a. Open a single main account under the trade name of the dealer as recorded in the license issued by the PMA, and do not use the personal name of the license holder, shareholders, or employees for exchange purposes. b. The responsibility for managing and executing financial transactions on the dealer's bank account rests exclusively with the authorized signatories. c. Sign agreements with dealing banks that define the responsibilities and obligations of each party. d. Obtain prior written approval from the PMA before initiating procedures to open accounts at banks operating outside Palestine.
5. Obtain credit facilities from licensed banks in Palestine, according to the following: a. Credit facilities must be in the form of a loan or guarantee for permitted exchange business purposes. b. Facilities must be obtained under the dealer's trade name. c. Facilities must be used only for permitted activities. d. Obtain prior written PMA approval for facilities exceeding (20,000) US dollars or its equivalent in other currencies, except for guarantees issued in favor of the PMA and facilities covered by 100% cash collateral. e. Credit facilities must not be obtained using shareholders' shares as collateral. f. Shareholders of the exchange company and natural persons owning exchange shops may obtain credit facilities in their personal names or under their guarantee, provided that these facilities are not used for exchange business.
6. Provide money transfer services in accordance with instructions issued by the PMA.
7. Provide electronic payment services as an agent in accordance with instructions issued by the PMA.
8. Any other financial activity permitted by the PMA pursuant to instructions issued by it.

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Article (4) Prohibited Activities

Exchange dealers are prohibited from engaging in any of the following activities:

1. Opening accounts for their clients, accepting deposits or trusts of any kind, or precious metals.
2. Providing credit facilities or direct and indirect financing.
3. Speculating on currency and precious metal prices in a manner that could harm financial or monetary stability or the public interest.
4. Obtaining credit facilities from banks operating outside Palestine.
5. Dealing in derivatives, including forward and futures contracts and options contracts for currencies, metals, indices, commodities, and other financial instruments for the account of their clients or any other party, except for hedging purposes.
6. Dealing in foreign stock exchanges.

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7. Selling goods and services of all forms, except for permitted financial services under these Instructions or any other services permitted pursuant to instructions issued by the PMA on this matter.
8. Partners in the exchange company managing other accounts at banks, where their transactions indicate use for exchange purposes.
9. Dealing with unlicensed exchange practitioners.
10. Dealing with financial institutions or branches of financial institutions geographically located in settlements, including conducting any financial transaction originating from or destined to those institutions.
11. Any activities not stipulated in the company's final license.

Article (5) Penalties

Anyone who violates the provisions of these Instructions shall be penalized in accordance with the provisions of Decision No. (41) of 2016 on the Licensing and Supervision of the Exchange Profession.

Article (6) Repeal of Conflicting Provisions

1. Instructions No. (2011/03) issued on 20/12/2011 concerning permitted and prohibited activities are hereby repealed.
2. Any provision conflicting with these Instructions is hereby repealed.

Article (7) Implementation and Enforcement

All competent authorities shall, each within their respective jurisdiction, implement the provisions of these Instructions, which shall apply from the date of their issuance. Issued in Ramallah on 18/01/2022.

Dr. Firas Malham Governor [Signature]

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