Central Bank of Libya Circular 2/2017 on Regulations for Using Foreign Currency to Open Letters of Credit

Central Bank of Libya

Postal Address: P.O. Box 1103, Tripoli - Misrata Street, Libya

Reference: 804 C.B.L. (279)

Circular No. (2017/2) Date: 5 Jumaada al-Awwal 1438 AH Corresponding to: 01 February 2017 AD.

To: General Managers of Banks To: Heads of Temporary Administrative Committees of Banks To: The General Manager - Libyan Foreign Bank

Greetings...

Subject: Regulations Governing the Use of Foreign Currency for Opening Letters of Credit

Based on the provisions of Law No. (1) of 2005 regarding Banks, and its amendments, and on the supervisory and regulatory role exercised by the Central Bank of Libya over Banks, in accordance with the provisions of the Law.

And referring to this Department's Circular No. (2015/3) issued on 30/4/2015, through which the decision of the CBL Governor No. (96) of 2015 was transmitted, regarding the establishment of regulations for using foreign currency to open Letters of Credit and collection documents, and conditions for opening LCs for imports from abroad.

And referring to Circular No. (2016/2), issued on 07/1/2016, regarding the regulations, conditions, and procedures for opening Letters of Credit.

And referring to Circular No. (2016/9), issued on 14/7/2016, regarding the amendment of certain regulations and conditions issued in Circular No. (2016/2).

And referring to Circular No. (2016/12), issued on 27/10/2016, through which the Governor's Circular No. (2) of 2016 was transmitted, regarding the implementation of the CBL Board of Directors' decision No. (36) of 2009, regarding the rules governing opening bank accounts in commercial banks, accompanied by two Know Your Customer (KYC) forms for legal entities and individuals.

And in the context of the Central Bank of Libya's commitment to supporting the stability of the general level of prices for goods and services, and emphasizing the necessity of complying with all instructions regarding opening Letters of Credit mentioned above, we inform you of the issuance of CBL instructions which stipulate certain additions and amendments to the regulations governing opening Letters of Credit (noting that these regulations will be reviewed in case the import budget is approved or any other economic policies are adopted), as follows:

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First: General Regulations for Opening Letters of Credit:

Without prejudice to the prescribed ratios for covering LCs by certain entities from foreign currency budgets allocated to banks, banks must observe the following when opening LCs:

• Ensuring that data related to the entity that previously obtained (CBL-CLIENTKEY) is updated, and there are no reasons preventing continued dealings with it.

• The value of the LC opened for the requesting entity shall not exceed 20 times its capital, provided it has continuous cash flow in its bank account, and is commensurate with the size of its operations, with the necessity of fully covering the LC value.

• The amounts executed in foreign currency for a single entity shall not exceed 3% of the annual budget allocated to cover LCs in the following banks: Al-Jumhouriya, National Commercial Bank, Al-Wahda, As-Sahara, North Africa.

• The amounts executed in foreign currency for a single entity shall not exceed 5% of the annual budget allocated to cover LCs in other banks not mentioned in the previous paragraph.

• Continuous cash deposits by the LC-opening entity between the granting of one LC and the next are taken into account, as well as electronic deposits resulting from the entity's sales via POS terminals.

Second: Conditions for Opening Letters of Credit:

1. It is required to deal with correspondents in EU countries, the UK, the Americas, Australia, and Arab countries with Libyan investments that have not previously been registered for non-compliance with international regulations/standards and anti-money laundering (AML)/counter-terrorism financing (CTF), and the LC department must request from the correspondent bank, via a separate letter from the LC, confirmation of the validity of data related to the issuing/beneficiary company abroad, specifically:

• Its financial statements.

• The extent of its engagement in the same activity and its expertise in that field.

• Its file is free from legal reservations, suspicions, money laundering, or terrorism financing.

• Verification that the LC opener or one of its board members or authorized representative has no shareholding in this company.

2. The name of the importing company, validity date, and LC number must be printed on the supplied goods (box, carton, etc.).

3. The entity must provide an insurance document for the goods to the opening bank based on the proforma invoice, issued by one of the local insurance companies.

4. Provide an inspection and survey certificate issued by one of the following international inspection companies:

• LLOYD'S REGISTER (LLOYDS)
• BUREAU VERTAS
• DNV– GL
• GQS GLOBAL QUALITY AND SERVICES
• GENERAL INSPECTION TECHNICAL OFFICE

The certificate must confirm that the company inspected the goods during shipment according to recognized inspection standards regarding quantity, type, weight composition, and handling of shipped/delivered goods, according to specifications in the proforma invoice, and that it bears legal responsibility for its inspection certificates. If imported goods are food, medicines, or chemicals, the certificate must cover the conformity of the internal composition with external specifications and require that the validity date on the goods matches the actual expiry date, provided the goods are newly manufactured.

5. The inspection certificate must state that the goods are free of defects and quantity discrepancies, have been delivered to the carrier, and shipped on board the vessel named in the bill of lading, which must be signed by the ship's master.

6. For goods supplied for human consumption, a certificate issued by the competent authorities in the country of export is required, confirming that the subject goods are free from pests, germs, and radiation, and suitable for human consumption.

7. Provide the original certificate of origin for the supplied goods, issued by the competent authority in the exporting country.

Third: Procedures for Opening Letters of Credit:

When opening an LC, separation of authorities and definition of responsibilities must be observed by clarifying all stages supporting the LC opening decision within a specified timeframe.

1. The bank must document submitted requests, one by one, for opening LCs, giving priority to companies that submit their applications according to the application date. The bank must issue a receipt for LC opening documents, specifying the day and date, and signed by the concerned employee.

2. The LC department at the bank branch is subject to receiving the file and verifying the proforma invoice according to a form prepared by the bank for this purpose, indicating reasons for acceptance or rejection. It must be approved by the department head, along with the internal audit department and branch compliance unit, and reinforced by the approval of the branch manager or management director. This stage must not exceed three working days from the day following receipt of the LC application file, observing the following:

• The proforma invoice must be issued by the exporting or manufacturing company, or one of its authorized agents.

• At a minimum, the proforma invoice must include the following information:

  (a) All data related to the type, description, weight, quantity, and price of goods or services supplied from abroad, according to the agreement concluded with the exporter. The main data in the invoice (reference number, date, invoice number, and other key data) are part of the agreement terms.

  (b) The name of the manufacturing company, brand name, and place of manufacture.

  (c) Specifications and internal composition of goods, regarding food, medicines, chemicals, and other goods susceptible to tampering or substitution.

• Proforma invoices issued by general trading companies are not accepted.

• The statistical code provided by the entity must be final and valid.

• Certification of the proforma invoice by the compliance monitoring department, confirming that the economic objectives of opening LCs are met, which include:

  • Prices match the specifications and type of supplied goods.

  • Goods are not prohibited.

3. Bank branches submit to the committee their accepted proposals for obtaining approval to open LCs, within one week from the date of file acceptance, according to a form prepared by the bank for this purpose, accompanied by a decision from the LC manager, approved by the bank's customer, and supported by the accepted proforma invoice, with all required documents listed.

4. The validity of approval for accepting an LC opening application from the committee shall not exceed two weeks from the date of submission to the bank branch, through a committee formed by the bank for this purpose. It must include: credit management, risk management and compliance, internal audit, including the department responsible for external operations, and other related departments. It exercises its authorities according to a clear mechanism, including verifying compliance with applicable conditions and regulations.

5. The entity must provide an original, recent certificate addressed to the bank, confirming the settlement of all tax liabilities.

6. The entity must provide an original, recent certificate addressed to the bank, confirming the settlement of all statutory guarantee liabilities.

7. The requesting entity must submit a written undertaking to pay all fees due on goods upon receipt.

8. The specialized committee for studying LC opening applications issues a certificate confirming that it has studied the entity's file and LC application, found it compliant with all financial, legal, and administrative aspects, and that there is no objection to opening the LC. The approval must be accompanied by committee meeting minutes, approved by the bank's General Manager.

9. Submission of the requesting entity's account statement for the six months preceding the application.

10. Confirmation that the correspondent bank, via a designated LC letter, conducts high-importance document verification and requests payment with precision. Payment is refused when any fundamental discrepancy is noted in LC terms, quantities, weights, types of goods/services, or non-compliance with inspection/survey conditions during shipment, or change in country of origin, or change in beneficiary, or arrival port by cross-referencing data from the proforma invoice with inspection certificates, health certificates, standardization certificates, and bill of lading.

11. Without prejudice to regulations governing customs clearance procedures as stated in Circular No. (2016/2), goods documents are attached to Form No. (18) approved by the periodic letter No. (2006/129) for each import operation, ensuring the form includes the serial number, transfer method, shipment number and value, and other key data related to the operation. It must be approved with a thermal stamp.

12. The process of supplying goods via land transport is limited to goods from neighboring countries, except for special nature goods (medicines, infant milk, fertilized eggs), which require approval from the Banking and Currency Supervision Department.

Peace, mercy of God, and blessings be upon you...

Dr. Mukhtar Al-Hadi Al-Tawil Director of Banking and Currency Supervision Department

To: Governor To: Deputy Minister of Audit To: Deputy Minister of Administrative Control Authority To: Deputy Minister of Finance To: Deputy Minister of Communications To: Director of Banking Information Department To: Head of Correspondent Accounts Coverage Committee - CBL To: Director of Legal Affairs Department - CBL To: Director of Accounts Department - CBL To: Director of Main Financial Information Unit - CBL To: Branch Manager of CBL (Bahe - Benghazi - Sirte) To: Heads of Compliance Units in Banks (for follow-up) To: Deputy Director of Banking and Currency Supervision Department - Compliance Follow-up To: The concerned department for supervision, library, and compliance follow-up To: Ref. THE LEGISLATOR / 6 Circular No. (2017/2)

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Form No. 2017/2

Foreign Currency Purchase Request For Citizens for Personal (Non-Commercial) Purposes (According to Circular No. 2017/3)

Currency / Branch:

I, [Name]: Registration No.: Date and Place of Birth: Gender: Passport No.: National ID No.: Mother's Full Name: Marital Status: Number of Family Members: Resident in: Phone No.: I wish to purchase an amount of foreign currency worth ... US Dollars, to be credited to my account No. ...

Attached Documents: National ID of family members.

Applicant Name Signature Date

For Bank Use:

Branch Manager Approval Name: Signature Stamp

Concerned Employee Signature Date