Law No. 39 of 2015 on Combating Money Laundering and Terrorist Financing

Law No. (39) of 2015 on Combating Money Laundering and Terrorist Financing.

Chapter One - Definitions. Article No. 1 Chapter Two - The Crime of Money Laundering. Article No. 2 Article No. 3 Article No. 4 Chapter Three - The Council for Combating Money Laundering and Terrorist Financing. Article No. 5 Article No. 6 Article No. 7 Chapter Four - The Office for Combating Money Laundering and Terrorist Financing. Article No. 8 Article No. 9

Chapter Five - Obligations of Financial Institutions and Designated Non-Financial Businesses and Professions. Article No. 10 Article No. 11 Article No. 12 Article No. 13 Article No. 14 Chapter Six - The Committee for Freezing Terrorist Funds. Article No. 15 Article No. 16 Article No. 17 Article No. 18 Article No. 19 Article No. 20 Article No. 21 Article No. 22 Chapter Seven - Seizure of Funds. Article No. 23 Article No. 24 Article No. 25

Chapter Eight - Duties of Regulatory Authorities. Article No. 26 Chapter Nine - International Cooperation. Article No. 27 Article No. 28 Article No. 29 Article No. 30 Article No. 31 Article No. 32 Article No. 33 Chapter Ten - Transfer of Negotiable Instruments Across Borders. Article No. 34 Article No. 35 Chapter Eleven - Penalties. Article No. 36 Article No. 37 Article No. 38 Article No. 39

Article No. 40 Article No. 41 Article No. 42 Article No. 43 Article No. 44 Article No. 45 Article No. 46 Article No. 47 Article No. 48 Chapter Twelve - General and Final Provisions. Article No. 49 Article No. 50 Article No. 51 Article No. 52 Article No. 53 Article No. 54 Article No. 55 Article No. 56 Article No. 57

The Justifications

1 In the Name of the People Presidency of the Republic Decision No. (42)

Based on what was decided by the Council of Representatives in its honor (First) Item (61) and Item (Third) Article (73) of the Constitution The President of the Republic decided on 2015/10/27 to issue the following law: Law No. (39) for the year 2015

Chapter One Definitions

Article -1- The following terms shall have the meanings indicated below for the purposes of this Law: First - The Bank: The Central Bank of Iraq. Second - The Governor: The Governor of the Central Bank of Iraq. Third - The Council: The Council for Combating Money Laundering and Terrorist Financing. Fourth - The Office: The Office for Combating Money Laundering and Terrorist Financing.

1 Law on Combating Money Laundering and Terrorist Financing

2 Fifth - Funds: Cash or movable property that can be obtained through any means, whether domestic or foreign currency, financial and commercial documents, checks, current accounts, financial investments, bonds, securities of any form, whether electronic or digital, precious metals, gemstones, and other items of financial value, whether immovable or movable, and the rights related to them, and any fruits and interest derived from such funds, whether from domestic or foreign currency, and any other funds determined by the Council to be subject to this Law, as stated in a publication in the Official Gazette. Sixth - Proceeds of Crime: Funds resulting or derived, directly or indirectly, wholly or partially, from the commission of any criminal offense. Seventh - Predicate Offense: Any crime in Iraqi law, whether felony or misdemeanor. Eighth - Financial Institution: Any commercial or legal entity engaged in one or more of the following activities on behalf of or for customers: a - Receiving deposits and other repayable funds from the public, such as current accounts. b - Lending. c - Financial leasing. d - Money and value transfer services. e - Issuing and managing means of payment, such as credit cards, traveler's checks, checks, electronic money, etc. f - Financial guarantees and commitments. g - Trading in:

1. Foreign currency instruments such as checks, drafts, bills of exchange, and foreign currency coins.
2. Financial derivatives.
3. Foreign exchange.
4. Exchange rates, interest rates, and financial indices.
5. Transferable financial instruments.
6. Futures contracts for commodities. h - Participation in the issuance of financial instruments and the provision of services related to such issuance. i) Management of individual or collective investment portfolios. j) Safekeeping or safe custody of securities or other negotiable instruments on behalf of others or their management. k) Investment or management of funds, securities, or their operation on behalf of others. l) Issuance and administration of other forms of investment securities, including insurance and pension investment securities. m) Money or currency changing. n) Any other activity or operation determined by a decision of the Council of Ministers, based on the Council's proposal, and published in the Official Gazette.

3 Ninth - Designated Non-Financial Businesses and Professions, which include: a - Real estate agents, including those dealing with buying or selling real estate or acting as agents for customers. b - Dealers in precious metals or gemstones, including those participating in cash transactions above a value determined by a decision of the Council and published in the Official Gazette. c - Lawyers or accountants, whether practicing their profession independently or as partners or employees in professional firms, when participating in the preparation or execution of transactions for their clients concerning the following activities:

1. Buying or selling real estate.
2. Managing client money, securities, or other assets.
3. Managing bank, savings, or securities accounts.
4. Organizing contributions for the creation, operation, or management of companies.
5. Creating, operating, or managing legal persons or arrangements.
6. Buying or selling companies. d - Trust and company service providers, when participating on a commercial basis in the preparation or execution of transactions for clients, including the following services:
7. Acting as a formation agent for legal persons.
8. Acting as, or arranging, a director or partner in a partnership or similar entity in a legal person.
9. Providing a registered office, business address, correspondence, or administrative address for a company or any legal person or arrangement.
10. Acting as, or arranging, a trustee for a trust or similar arrangement, or acting as, or arranging, a partner in a partnership for a legal person.
11. Acting as, or arranging, a nominee shareholder for another person.
12. Any other activity or profession added by a decision of the Council of Ministers, based on the Council's proposal, and published in the Official Gazette.

4 Tenth - Terrorist Financing: Any act committed by any person, by any means, directly or indirectly, unlawfully and wilfully, by providing or collecting funds, with the intention that they should be used, or in the knowledge that they are to be used, in whole or in part, by a terrorist or a terrorist organization, whether the offense was committed within the territory in execution of a terrorist act, or outside it, regardless of where the terrorist or terrorist organization is located, or participating in the commission of such acts. Eleventh - Terrorist Act, which includes: a - Any act criminalized under the First Part of the Iraqi Penal Code. b - Any act constituting a crime according to the definitions contained in the International Convention for the Suppression of Unlawful Seizure of Aircraft (1970), the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation (1971), the Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents (1973), and the Convention on the Prevention and Punishment of Crimes against Protected Persons (1974), and the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation (1975), and the International Convention for the Suppression of Terrorist Bombings (1997), or any other convention or protocol to which the Republic of Iraq is a party and which relates to terrorist financing. c - Any act intended to cause death or serious bodily injury to any person, or to kidnap any person, including acts intended to intimidate a population, or to compel a government or international organization to do or abstain from doing any act, provided that the perpetrator is engaged in armed conflict in the context of the act, or is part of a group engaged in such conflict.

5 Twelfth - Terrorist: Any natural person who commits a terrorist act, including the crime, or participates in it, or incites its commission, even if no punishment results from the incitement, or conspires to commit it, or agrees to commit it, by any means, whether directly or indirectly, or aids or abets in it. Thirteenth - Terrorist Organization: An agreement between two or more persons to commit terrorist acts, by any means, directly or indirectly, whether the acts are specific or unspecified, or preparatory or facilitating acts, provided that the agreement is organized, even if in a preliminary stage, and continuous, even if for a short period, whether the crime is committed or not. Or any group of terrorists acting by any of the following acts: a - Committing or attempting to commit terrorist acts, collectively, by any means, directly or indirectly. b - Participating in the execution of terrorist acts. c - Organizing terrorist acts, or directing others to commit them. d - Contributing to the commission of terrorist acts by a group of persons acting with a common purpose, where the contribution is intentional, and with the aim of furthering the terrorist act or contributing to the group's effort in committing a terrorist act.

6 Fourteenth - Beneficial Owner: The natural person who owns or exercises ultimate effective ownership, directly or indirectly, over the customer. Or the natural person on whose behalf a transaction is being conducted. Or the natural person who exercises ultimate effective control over a legal person or arrangement. Fifteenth - Attachment: Temporary prohibition on the transfer of funds or proceeds of crime or involvement in them, based on a final decision from a competent court or authority to transfer or dispose of them, or until the decision expires. Sixteenth - Freezing: Prohibition on the transfer, conversion, disposition, or involvement in funds or other assets, or their movement, belonging to persons or entities designated or controlled by a final decision from a competent court, administrative authority, or Freezing Committee, regarding terrorist funds, based on procedures taken by the Security Council of the United Nations pursuant to resolutions, and until the decision expires. Seventeenth - Regulatory Authority: The authority competent to license or authorize financial institutions and designated non-financial businesses and professions, or to supervise them and ensure compliance with the requirements of combating money laundering and terrorist financing. This includes the Ministry of Trade, the Ministry of Justice, the Central Bank of Iraq, the Financial Monitoring Unit, the Insurance Authority, and any other authority determined by a decision of the Council of Ministers based on the Council's proposal and published in the Official Gazette.

7 Eighteenth - Suspicious Transaction: Any transaction that is believed to involve proceeds of crime. Nineteenth - Legal Arrangement: A relationship established by contract between two or more persons without the creation of a legal personality, such as a trust or similar arrangements. Twentieth - Shell Account: An account registered or opened in a name or location where the account holder has no legal presence, and which is not part of a financially regulated and effectively supervised group. Twenty-first - Financial Group: Any group consisting of a parent company or subsidiary companies or any legal person exercising control over branches and subsidiary companies.

8 Twenty-second - Customer: Any person who deals or intends to deal with any of the following from any financial institution or designated non-financial business or profession: a - Establishing or executing a transaction, business relationship, or account. b - Participating in signing a transaction, business relationship, or account. c - Transferring or converting an account, rights, or obligations under a transaction. d - Acting on behalf of a transaction and controlling a business relationship or account. Twenty-third - Dormant Customer: A customer who has no business relationship with the institution that is expected to continue. Twenty-fourth - Business Relationship: The relationship established between a financial institution or designated non-financial business or profession and its customer, which involves activities and transactions performed for the customer, within which the institution expects the relationship to last for a period of time. Twenty-fifth - Negotiable Financial Instruments: Cash instruments in the form of bearer instruments, such as bearer checks, and instruments negotiable by transfer, including bonds, notes, bills of exchange, and payment orders payable to bearer or endorsed to a specific person or in any other form that transfers ownership to the holder.

9 Chapter Two The Crime of Money Laundering

Article -2- The following acts constitute the crime of money laundering: First - Converting, transferring, or concealing funds, knowing or having reason to know that they are proceeds of crime, for the purpose of hiding or disguising their illicit origin or assisting the perpetrator or the perpetrator of the predicate offense or anyone involved in its commission to evade the legal consequences of their actions. Second - Concealing or disguising the true nature, source, location, disposition, movement, rights with respect to, or ownership of funds, knowing or having reason to know that they are proceeds of crime. Third - Acquiring, possessing, or using funds, knowing or having reason to know, at the time of receipt, that they are proceeds of crime.

Article -3- The conviction of an offender for money laundering does not depend on the prior conviction of the offender for the predicate offense from which the funds originated.

Article -4- No conviction shall be issued against the offender for any money laundering crime resulting from the predicate offense. The provisions of the Penal Code regarding the crime and its punishment shall apply.

10 Chapter Three The Council for Combating Money Laundering and Terrorist Financing

Article -5- A council shall be established within the Bank, called the (Council for Combating Money Laundering and Terrorist Financing), consisting of: First - The Governor, as Chairman. Second - The following members, not below the rank of Director General:

1. The Central Bank of Iraq.
2. The Office for Combating Money Laundering, as a member.
3. A representative from each of the following ministries:
4. Ministry of Interior.
5. Ministry of Finance.
6. Ministry of Justice.
7. Ministry of Trade.
8. Ministry of Foreign Affairs.
9. General Secretariat of the Council of Ministers.
10. National Security Agency.
11. General Intelligence Service.
12. Financial Monitoring Authority.
13. Counter-Terrorism Service. Third - The High Judicial Council shall appoint one member. Second - The Vice-Chairman shall replace the Chairman in his absence. Third - The Chairman of the Council may invite anyone whose opinion he deems necessary to attend, provided they have no voting rights.

11 Fourth - The Governor shall convene the Council, determine the dates of its meetings, and the agenda of its work, preside over its sessions, record its minutes, notify the concerned authorities, and follow up on the implementation of the Council's decisions.

Article -6- The Chairman of the Council shall issue an internal regulation for the Council, its meetings, quorum, and other matters.

Article -7- The Council shall perform the following duties: First - Formulate policies and programs for combating money laundering and terrorist financing and the proliferation of weapons of mass destruction, and monitor their implementation. Second - Propose draft laws, regulations, and administrative instructions related to combating money laundering and terrorist financing. Third - Develop tools and standards for detecting money laundering and terrorist financing methods and follow up on them. Fourth - Issue a list including cash and negotiable instruments not subject to money laundering and terrorist financing monitoring, published in the Official Gazette. Fifth - Formulate and prepare training programs for employees concerned with combating money laundering and terrorist financing. Sixth - Identify and assess money laundering and terrorist financing risks in the Republic of Iraq and update them continuously. Seventh - Facilitate the exchange of information and coordination between authorities. Eighth - Review reports submitted by the Office regarding the establishment of the Anti-Money Laundering and Counter-Terrorist Financing Unit in the Republic of Iraq.

12 Ninth - Follow up on the global progress in combating money laundering and terrorist financing and propose necessary measures to keep pace with it. Tenth - Submit reports and advisory opinions to the Government on money laundering and terrorist financing. Eleventh - Manage the preservation of confidentiality of information held by the Office and other concerned authorities regarding money laundering and terrorist financing in the Republic of Iraq. Twelfth - Adopt appropriate, effective, and proportional measures to address deficiencies in the system that do not meet international standards for combating money laundering and terrorist financing. Thirteenth - Follow up on the implementation of policies for combating money laundering and terrorist financing by the concerned authorities. Fourteenth - Prepare an annual report for the Council of Ministers, including a presentation of the Council's activities, national, regional, and international developments in combating money laundering and terrorist financing, and its proposals for activating regulatory systems. Fifteenth - Follow up on the implementation of penalties imposed for non-compliance with decisions of the United Nations Security Council regarding terrorist financing and the proliferation of weapons of mass destruction. Sixteenth - Prepare proposals for the Council of Ministers regarding the inclusion of financial activities or designated non-financial businesses and professions subject to the obligations of this Law. Seventeenth - Propose the establishment of new regulatory authorities concerned with the implementation of the provisions of this Law.

13 Chapter Four The Office for Combating Money Laundering and Terrorist Financing

Article -8- First - An office shall be established within the Bank, called the (Office for Combating Money Laundering and Terrorist Financing), at the level of a general directorate, possessing legal personality and financial and administrative independence, represented by the Director General of the Office or his delegate. Second - The Office shall be headed by a Director General holding a university degree and at least fifteen years of experience and expertise, appointed in accordance with the law. Third - The Director General shall be assisted by a Deputy Director General.

Article -9- The Office shall perform the following duties centrally within the state: First - a - Receive reports, information, or inquiries from customers who are subject to them, containing proceeds of crime, money laundering, or terrorist financing from the reporting entity. b - Analyze reports or information, and the Office may, in the course of performing its duties, request additional information from the reporting entity that it deems necessary for the analysis, within the specified period, and shall not analyze from any other source. c - Suspend the execution of the financial transaction or operation for a period not exceeding seven (7) days in case of suspicion of smuggling proceeds or harming the course of the analysis. d - Refer reports that have a reasonable basis for suspicion of money laundering, terrorist financing, or predicate offenses to the Public Prosecutor to take legal measures, and notify the concerned authority of such referral.

14 Second - Prepare and submit an annual report to the Council on the establishment of the Office and activities related to money laundering and terrorist financing, including reports on reports, trends in combating money laundering and terrorist financing, its methods, and its status, in the language adopted by the Council. Third - Exchange information related to combating money laundering and terrorist financing with concerned authorities within the state, coordinate with them, and cooperate with them in this regard. Fourth - Participate in representing the Republic of Iraq in international organizations and conferences related to combating money laundering and terrorist financing. Fifth - Establish a database for the information available to the Office, serving as a national center for analyzing and processing such information, which may involve money laundering and terrorist financing, and provide the necessary means to facilitate the role of the judiciary and other concerned authorities in implementing the provisions of this Law. Sixth - Collect and analyze comprehensive reports on internal matters within the Office. Seventh - Prepare training programs for employees concerned with the subject of money laundering and terrorist financing crimes. Eighth - Notify the regulatory authority or other concerned authorities of any financial institution or designated non-financial business or profession violating this Law. Ninth - Provide technical advice regarding systems related to international conventions and treaties on money laundering and terrorist financing.

15 Chapter Five Obligations of Financial Institutions and Designated Non-Financial Businesses and Professions

Article 10 - Financial institutions and designated non-financial businesses and professions shall adopt the following due diligence measures towards customers: First - a - Identify and verify the identity of the customer and the beneficial owner using documents, data, or information from reliable and independent sources. b - Identify any person acting on behalf of the customer and verify their identity, and ascertain that such person is authorized to act on behalf of the customer. c - Understand the nature and purpose of the business relationship, and may request additional information in this regard. d - Identify the ownership structure and control rights over legal persons and legal arrangements. e - Conduct ongoing monitoring of the business relationship and review transactions to ensure they are consistent with the information available about the customer, their business activities, and risk profile, and source of funds. Second - Implement due diligence measures in the following cases: a - Before and during the opening of an account and establishing a business relationship with the customer. b - Conducting a transaction for a customer above the amount determined by the Council by decision and published in the Official Gazette, whether a single transaction or multiple transactions linked together. If the transaction value is unknown at the time of execution, the customer's identity must be verified as soon as possible, and the transaction amount must be determined or the transaction suspended. c - Executing electronic transfers for a customer above the amount determined by the Chairman of the Council by decision and published in the Official Gazette. d - Suspecting money laundering or terrorist financing. e - Doubting the adequacy or reliability of previously obtained identification data regarding the customer's identity.

16 Third - Financial institutions and designated non-financial businesses and professions may register the verification of the customer's identity or beneficial owner until the establishment of the business relationship, provided that such registration is subject to the regulatory authority. Fourth - The Governor shall issue instructions to financial institutions regarding due diligence measures towards customers. Fifth - If any financial institution or designated non-financial business or profession fails to comply with due diligence measures towards customers, the account shall not be opened, the business relationship shall not be maintained, the transaction shall not be executed, or any operation shall not be performed, and the business relationship must be terminated in any existing case, and the Office must be notified regarding the customer. Sixth - Financial institutions and designated non-financial businesses and professions shall adopt due diligence measures towards existing customers on the basis of materiality and risk, at appropriate times, taking into account the necessity and sufficiency of previously obtained data.

Article 11 - Financial institutions and designated non-financial businesses and professions shall keep records and documents and files for a period of five (5) years from the end of the business relationship with the customer or the end of the account closure or execution of a one-off transaction for the customer, whichever is earlier, and make them available to the concerned authorities as soon as possible. First - Copies of all records obtained through due diligence measures in verifying transactions, including documents evidencing the identity of customers and actual beneficiaries, accounting files, and business correspondence. Second - Copies of local and international transactions, whether executed or not, even if there is a legal impediment to their execution, provided that such records are separated by a code that allows the representation of each transaction individually. Third - Copies of reports sent to the Office and related documents, until the expiration of five (5) years from the submission of the reports or the expiration of the legal period in judicial proceedings related to them, whichever is later. Fourth - Records related to risk assessment or any data determined for the execution and updating of them.

17 Article 12 - Financial institutions and designated non-financial businesses and professions shall comply with the following: First - Establish and implement programs for combating money laundering and terrorist financing, including: a - Conducting a risk assessment of money laundering and terrorist financing risks to which they are exposed, including identifying, assessing, and understanding these risks, and adopting effective measures to mitigate them, and providing such assessment to the regulatory authority. b - Establishing internal policies and procedures to ensure compliance with the obligations imposed in combating money laundering and terrorist financing, including taking into account the risks assessed. c - Establishing and implementing criteria for the integrity of employees upon selection. d - Continuous training for managers and employees to ensure they are proficient in identifying money laundering and terrorist financing risks, recognizing unusual or suspicious transactions and how to deal with them, and implementing the required measures effectively. e - Independent internal audit to assess the effectiveness of policies and procedures and their implementation. Second - Prohibit the opening or maintenance of anonymous accounts or accounts in fictitious names. Third - Comply with lists of prohibited persons to deal with, whether natural or legal persons, against whom a decision has been issued by local or international concerned authorities for money laundering and terrorist financing. Fourth - Prohibit disclosure to customers, beneficiaries, or any other person not authorized by the competent authorities to implement the provisions of this Law.

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