Palestine Monetary Authority

(2013 /06 ) Instructions No. 6
To all banks operating in Palestine
Date: Tuesday, August 06, 2013
Subject: Instructions Regarding the Foreign Account Tax Compliance Act (FATCA)

In pursuit of the Palestine Monetary Authority's goal to maintain the safety and stability of the Palestinian banking sector, ensure continued dealings with foreign correspondent banks, and avoid reputational risks to the banking sector, the instructions regarding the Foreign Account Tax Compliance Act (FATCA) are attached. These instructions cover the following key areas:

• Introduction (1/1)
• Procedures to be Taken by Banks (2/1)
• Banking Secrecy Requirements (3/1)
• Non-Compliance Risks (4/1)

And the Director of Supervision and Inspection Palestine Monetary Authority

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Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487

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Palestine Monetary Authority

Introduction (1/1)

The U.S. legislative authorities enacted the Foreign Account Tax Compliance Act (FATCA), which targets U.S. citizens, meaning those holding citizenship or legal/actual residency in the United States, and companies in which Americans hold stakes exceeding 10% of their capital, thereby subjecting them to U.S. tax legislation due to maintaining financial accounts abroad with foreign financial institutions such as banks. The law requires banks to report any clients with ties to the United States who are subject to U.S. taxes in accordance with the law's requirements. Currently, the Palestine Monetary Authority and the Banks Association are working in coordination with relevant authorities to study implementation mechanisms by evaluating the pros and cons of available application models.

Procedures to be Taken by Banks (2/1)

All banks are requested to take the necessary measures to comply with the Foreign Account Tax Compliance Act (FATCA), particularly the following:

1. Form technical committees and engage legal, financial, and subject-matter experts to develop mechanisms for addressing the requirements of the aforementioned law.
2. Prepare the necessary policies and procedures to comply with the law's requirements and obtain approval from the bank's board of directors or the competent authority, including a mechanism for handling clients who refuse to comply with the law's requirements.
3. Train and raise awareness among employees regarding the law's requirements, particularly compliance officers.
4. Inventory, submit, and classify accounts subject to the law's requirements.
5. Update client data and conduct due diligence on U.S. clients.
6. Apply mandatory professional due diligence procedures to clients.

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Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487

Palestine Monetary Authority

Regarding

Banking Secrecy Requirements (3/1)

Banks must observe Article 32 of the Banks Law concerning banking secrecy and obtain the client's written consent to provide the U.S. Internal Revenue Service (IRS) with information regarding the financial accounts of U.S. clients. Documents related to this must be drafted in consultation with the bank's legal counsel and shall be used solely for the purpose of implementing the U.S. Foreign Account Tax Compliance Act.

Non-Compliance Risks (4/1)

Failure by banks to comply with the law's requirements may expose them to the risk of severed relationships with correspondent banks, in addition to reputational risks. Compliance officers and risk managers must prepare a report identifying the risks and costs of non-compliance or breach of this law's requirements and submit it to the bank's senior management.

Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487 E-mail: info@pma.ps www.pma.ps Ramallah - Al Bireh P.O. Box 452 - Tel.: 02-2409920 - Fax: 02-2409922 Gaza - P.O. Box 4026 - Tel.: 08-2825713 - Fax: 08-2844487

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