Law Decree No. 39 of 2022 on Combating Money Laundering and Financing of Terrorism

mjr.lab.pna.ps Official Gazette Office Reference No.: 193-8-2022 No. 193, 2022/08/14 Law Decree No. (39) of 2022 on Combating Money Laundering and Financing of Terrorism

President of the State of Palestine Chairman of the Executive Committee of the Palestine Liberation Organization

Based on the Basic Law of the Palestine Liberation Organization, and the Amended Basic Law of 2003 and its amendments, After reviewing Law No. (3) of 2001 on Criminal Procedure and its amendments, And the Penal Code No. (16) of 1960 in force in the Northern Governorates and its amendments, And the Penal Code No. (74) of 1936 in force in the Southern Governorates and its amendments, And Law Decree No. (10) of 2018 on Cybercrimes and its amendments, And Law Decree No. (9) of 2010 on Banks and its amendments, And Law Decree No. (42) of 2021 on Companies, And Securities Law No. (12) of 2004, And Law No. (9) of 2004 on the Practice of Accounting Auditing Profession and its amendments, And Law No. (3) of 1999 on Regular Lawyers and its amendments, And Customs and Duties Law No. (1) of 1962 and its amendments, And Law No. (1) of 2000 on Charitable Associations and Civil Organizations and its amendments, And Anti-Corruption Law No. (1) of 2005 and its amendments, And Law Decree No. (18) of 2015 on Combating Narcotics and Psychotropic Substances and its amendments, And the Supervision System for Precious Metals and Gemstones Dealers to Combat Money Laundering and Terrorism Financing Crimes No. (5) of 2021, And the United Nations Convention against Transnational Organized Crime of 2000, And the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988, And the four Geneva Conventions and their Additional Protocols, And the Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents of 1973, And the Convention on the Physical Protection of Nuclear Material of 1980, And the International Convention for the Suppression of Acts of Nuclear Terrorism of 2005, And based on the proposal of the Council of Ministers dated 2022/07/04, And on the powers vested in us, And in the public interest, And achieving We have issued the following Law Decree:

Chapter One Definitions and General Provisions

Article (1) Definitions The words and expressions used in this Law Decree shall have the meanings specified below, unless the context indicates otherwise:

State: The State of Palestine. President: The President of the State. Monetary Authority: The Palestinian Monetary Authority. Committee: The National Committee for Combating Money Laundering and Financing of Terrorism established pursuant to the provisions of this Law Decree. Unit: The Financial Intelligence Unit established pursuant to the provisions of this Law Decree. Funds: Assets of every kind, economic resources including oil and other natural resources, property whether tangible or intangible, movable or immaterial, physical or non-physical, however acquired, virtual assets, and documents or legal instruments of any form, including electronic or digital, evidencing ownership rights or a share or interest in such funds, circulating currencies, foreign currencies, bank credits, traveler's checks, bank checks, payment orders, financial drafts, money transfers, shares, securities, bonds, promissory notes, financial drafts, letters of credit, and any benefit, revenue, share in profits, or any other income or value due from or derived from such funds, and any other assets that may be used to obtain funds, goods, or services. Virtual Assets: A digital representation of value that can be traded or transferred digitally, and can be used for payment or investment purposes. Virtual assets do not include the digital representation of official currencies, securities, and other financial assets covered by this Law Decree. Virtual Asset Service Providers: Any natural or legal person who carries out one or more of the activities or operations set forth in Article (4) of this Law Decree as a business, for or on behalf of another natural or legal person. Predicate Offense: Any offense stipulated in the prevailing Penal Codes and any other law in force in the State. Proceeds of Crime: Funds derived from or obtained, directly or indirectly, in whole or in part, from the predicate offense. Dual Criminality: Criminalization of the conduct constituting the offense subject to a request for mutual legal assistance or extradition in the laws of the requesting and requested States, regardless of whether the laws of both States classify the offense under the same category or use the same terminology to name the offense. Person: A natural or legal person. Trust: Legal relationships arising inter vivos or upon death, by a person or testator, when funds are placed under the control of a trustee, settlor, or custodian, forming independent assets not part of the trustee's, settlor's, or custodian's own property, for the benefit of a beneficiary or for a specific purpose, such that those assets constitute funds held in the name of the trustee, settlor, or custodian, or in the name of another person on their behalf, and the trustee, settlor, or custodian enjoys the authority to manage, use, and dispose of the assets in accordance with the trust's terms and the specific duties and powers granted to them. Law Direct Trust: A trust clearly established by the testator or person, usually in the form of a document, such as a written trust deed. This trust differs from trusts arising through the operation of law and not from the clear intention or decision of the testator or person to establish a trust or similar legal arrangements, such as trusts created by court order. Legal Arrangement: Direct trusts or any similar legal arrangements. Financial Institution: Any natural or legal person subject to the laws, regulations, and instructions in force in the State, which carries out any of the activities or operations set forth in Article (2) of this Law Decree, for or on behalf of a customer. Specified Non-Financial Businesses and Professions: Anyone who carries out one or more of the works stipulated in Article (3) of this Law Decree. Company and Trust Service Providers: Any person who provides any of the following services to other parties on a commercial basis:

1. Acting as an agent for the formation of legal persons.
2. Acting or arranging for another person to act as a director, secretary of a company, partner in a general partnership, or in a similar role related to other legal persons.
3. Providing a registered office, business address, accommodation address, mailing address, or administrative address for a company, general partnership, or any other legal person or legal arrangement.
4. Acting or arranging for another person to act as a trustee for a direct trust or performing a similar role for another person in other forms of legal arrangements.
5. Acting or arranging for another person to act as a nominee shareholder for the benefit of another person. Non-Profit Organization: Any legal person, legal arrangement, association, or civil organization that primarily operates to collect or distribute funds for charitable, religious, educational, cultural, social, solidarity, or other purposes. Transaction: Any action regarding funds, including any purchase, sale, loan, pledge, transfer, delivery, or any other action regarding funds, carried out by a natural or legal person, including depositing or withdrawing funds, transferring from one account to another, currency exchange, loan, extension of credit, purchase or sale of shares, bonds, or deposit certificates, or renting safe deposit boxes. Business Relationship: A relationship arising between a customer and a financial institution or any of the specified non-financial businesses and professions regarding the activities, services, or products provided to them. Beneficial Owner: The natural person who ultimately owns or controls the customer and/or the natural person on whose behalf a transaction is being conducted, including those who exercise ultimate effective control over a legal person or arrangement or its management. Bearer Negotiable Instruments: Monetary instruments in bearer form such as traveler's checks, and negotiable instruments (including checks, promissory notes, and payment orders) that are either to bearer or payable to order, without restriction, or issued to a fictitious payee, or in any other manner that allows the right to them to be transferred upon delivery, and incomplete instruments including (checks, promissory notes, and payment orders) signed with the payee's name omitted. Instruments: Any funds or any instrument used or intended to be used, in whole or in part, for money laundering or terrorism financing, or for committing one or more predicate offenses. Provisional Attachment: A temporary prohibition on transferring, converting, disposing of, moving, or using funds, based on a decision issued by the competent court or any authority authorized under the provisions of this Law Decree, including proceeds or instruments that may have been used or intended to be used to commit an offense, or funds used or intended to be used or designated for terrorism financing or terrorist acts or organizations, or laundered funds, or funds equivalent in value to the proceeds. Freezing: A prohibition on transferring, converting, disposing of, or moving funds, other assets, equipment, or other instruments when they are owned by persons or entities listed pursuant to relevant Security Council resolutions applicable to measures initiated by the Council or in accordance with decisions by the Committee, and during the duration of those measures and decisions. Confiscation: Permanent deprivation and loss of funds, proceeds of crime, or instruments based on a judicial ruling issued by the competent court. Controlled Delivery: A method that allows illegal or suspicious shipments to leave the territory of one or more states, pass through it, or enter it with the knowledge of its competent authorities and under their supervision, for the purpose of investigating a crime and identifying the persons involved in its commission. Covert Operation: An investigative method whereby a judicial police officer assumes an identity other than their true identity or performs a covert or false role to obtain evidence or information related to the crime. Politically Exposed Person (PEP): A natural person representing any of the following categories:
6. Foreign PEP: A natural person who holds or has held a prominent public position in foreign countries, including the following positions: . Heads of State or Government. . Senior politicians. . Senior government, judicial, or military officials. . Senior executives of state-owned corporations. . Senior executives of political parties. . Other persons designated by the Committee.
7. Domestic PEP: A natural person who holds or has held a prominent public position in the State, including the positions mentioned in paragraph (1) above.
8. International Organization Official: A natural person who holds or has held a prominent position in an international organization, including: . Senior management members (managers and their deputies). . Board of directors members. . Positions equivalent to those stipulated in items (a, b) of this paragraph. Correspondent Account Payable: Correspondent accounts used directly by a third party to conduct transactions on their behalf. Competent Authority: Any body or government/public authority with specific responsibilities in combating money laundering, terrorism financing, or any predicate offenses within its jurisdiction, including the Public Prosecution and judicial police officers. It also includes authorities responsible for registering legal persons, non-profit organizations, and legal arrangements according to the laws and regulations in force in the State. Supervisory Authority: The authority or body entrusted by relevant laws or regulations with supervising, regulating, or monitoring the compliance of financial institutions, specified non-financial businesses and professions, and non-profit organizations with the requirements stipulated in this Law Decree, its executive regulations, instructions, and directives. Shell Bank: A bank that has no physical presence in the country where it is established and licensed, is not part of a regulated financial group subject to effective unified supervision by competent supervisory authorities, and the existence of a local agent or employees with low-level positions does not constitute a physical presence. Terrorist Act: Any terrorist act stipulated in the prevailing Penal Code in the State. Terrorist: Any person who commits any of the following acts:
9. Committing or attempting to commit, or participating as an accomplice in any terrorist act by any means, whether directly or indirectly, and organizing terrorist acts or directing others to commit them.
10. Contributing to terrorist acts with a group of persons acting with a common purpose, where the contribution is intentional and aimed at enhancing the terrorist act or with knowledge of the group's intention to commit any terrorist acts. Terrorist Organization: A group of terrorists committing any of the following acts:
11. Committing or attempting to commit terrorist acts intentionally and unlawfully by any means directly or indirectly.
12. Participating as a partner in terrorist acts.
13. Organizing or directing others to commit terrorist acts.
14. Contributing to the commission or attempt of terrorist acts with a group of persons acting with a common purpose, where the contribution is intentional, aimed at enhancing the terrorist act, or with knowledge of the group's intention to commit the terrorist act. Relevant Security Council Resolutions: Resolutions issued by the UN Security Council under Chapter VII of the UN Charter regarding combating and preventing terrorism or financing of terrorism, or preventing, suppressing, and halting the proliferation or financing of weapons of mass destruction, including Resolutions (1267) of 1999, (1373) of 2001, (2253) of 2015, (1718) of 2006, (1874) of 2009, (2087) of 2013, (2094) of 2013, (2231) of 2015, (2270) of 2016, (2321) of 2016, (2356) of 2017, and all current, future, and subsequent related resolutions.

Article (2) Financial Institution Any natural or legal person who carries out, as a business, any of the following activities or operations for or on behalf of a customer:

1. Accepting deposits and other payable funds from the public, including private banking services.
2. Lending.
3. Financial leasing.
4. Money or value transfer services.
5. Issuing and managing means of payment.
6. Financial guarantees and commitments.
7. Dealing in: . Money market instruments such as checks, promissory notes, deposit certificates, financial derivatives, etc. . Foreign exchange. . Exchange instruments, interest rates, and indices. . Transferable securities. . Trading in futures and forward contracts for commodities.
8. Participation in issues of securities and providing financial services related to such issues.
9. Managing individual and collective portfolios.
10. Holding and managing cash or liquid securities on behalf of others.
11. Otherwise investing, managing, administering, or operating funds or money on behalf of other persons.
12. Insurance and underwriting life insurance and other types of insurance linked to investment and guaranteeing them, also including insurance commitments, agents, and brokers.
13. Exchange of cash or currencies.
14. Any other activities or operations determined by the Committee in consultation with the Supervisory Authority.

Article (3) Specified Non-Financial Businesses and Professions Specified non-financial businesses and professions refer to any of the following:

1. Real estate agents and brokers when concluding transactions on behalf of their customers regarding the sale and purchase of real estate.
2. Dealers in precious metals and gemstones.
3. Lawyers, accountants, and auditors when preparing, executing, or participating in transactions on behalf of their customers, regarding the following activities: . Buying and selling real estate. . Managing customers' funds and other assets, securities, and other assets owned by the customer. . Managing bank accounts, savings accounts, or securities accounts. . Organizing contributions for the establishment, operation, or management of companies. . Establishing, operating, or managing legal persons or arrangements, and buying or selling commercial entities.
4. Company and trust service providers.
5. Any other profession or work determined by the Committee.

Article (4) Virtual Asset Service Providers Anyone who carries out one or more of the following acts is considered a virtual asset service provider:

1. Exchange between virtual assets and official currencies.
2. Exchange between one or more forms of virtual assets.
3. Transfer of virtual assets, where transfer in this context means executing a transaction on behalf of another natural or legal person transferring a virtual asset from one address or virtual asset account to another.
4. Holding and/or managing assets or instruments that allow control over virtual assets.
5. Providing financial services related to the offering and/or sale of virtual assets, and participating in such services.

Article (5) Money Laundering Crime

1. Anyone who commits any of the following acts is guilty of money laundering: . Substituting or transferring funds by any person, knowing that these funds constitute proceeds of crime, for the purpose of concealing or disguising the illegal origin of these funds, or to assist a person involved in committing the predicate offense to evade the legal consequences of their actions. . Concealing or disguising the true nature, source, location, disposition, movement, ownership, or rights related to funds by any person who knows that these funds constitute proceeds of crime. . Acquiring, possessing, or using funds by any person who knows at the time of receipt that these funds are proceeds of crime. . Participating, assisting, instigating, conspiring, advising, counseling, facilitating, or colluding in, or attempting to commit any of the acts stipulated in this paragraph.
2. Knowledge, intent, or purpose shall be inferred from the objective and factual circumstances, and upon proving that the funds are proceeds of crime, it is not required to obtain a conviction of the person for the predicate offense.
3. Anyone is guilty of money laundering according to the provisions of this Article and resulting from any predicate offenses, whether those offenses occurred in the State or abroad, provided that the act constitutes a predicate offense under the law in force in the country where the offense occurred and constitutes a predicate offense under the laws in force in the State.
4. The money laundering crime applies to persons who commit the predicate offense; punishing the perpetrator of the predicate offense does not preclude punishing them for the money laundering crime.

Article (6) Terrorism Financing Crime

1. Anyone who intentionally provides or collects funds from a lawful or unlawful source by any means, directly or indirectly, with the unlawful intent to use them in whole or in part to commit a terrorist act, or by a terrorist or terrorist organization, is guilty of terrorism financing.
2. Anyone who intentionally, by any means directly or indirectly, provides or collects funds from a lawful or unlawful source to travel individuals to a country other than their country of residence or nationality for the purpose of committing, planning, participating, preparing, or facilitating terrorist acts, or providing or receiving training in terrorist acts, is guilty of terrorism financing.
3. Anyone is also guilty of terrorism financing if they: . Attempt to commit terrorism financing. . Participate as an accomplice in any terrorism financing crime or attempt to commit it. . Organize terrorist crimes or direct others to commit them or attempt to commit them. . Contribute to the commission or attempt of one or more terrorism financing crimes with a group of persons acting with a common purpose.
4. Knowledge or intent shall be inferred as essential elements required for the crime stipulated in this Article from the objective and factual circumstances.
5. The terrorism financing crime applies even if the terrorist act has not occurred, or the funds were not actually used to carry out or attempt to carry it out, or the funds were not linked to a specific terrorist act.
6. The terrorism financing crime applies regardless of whether the country where the alleged perpetrator is located is the same country where the terrorist or terrorist organization is located, or another country, and regardless of the country where the terrorist act occurred or will occur.

Chapter Two Transparency and Obligations of Financial Institutions, Specified Non-Financial Businesses and Professions, and Non-Profit Organizations

Article (7) Prohibition of Establishing and Dealing with Shell Banks

1. Establishing or operating a shell bank in the State is prohibited.
2. Financial institutions are prohibited from doing the following: . Entering into or continuing business relationships or transactions with shell banks. . Entering into or continuing correspondent banking business, transactions, or any business relationships with shell banks or allowing them to use their accounts.
3. Financial institutions must ensure that responding institutions do not allow their accounts to be used by shell banks.

Article (8) Transparency of Legal Persons and Legal Arrangements

1. Competent authorities responsible for registering legal persons, non-profit organizations, and legal arrangements must comply with the following: . Ensure sufficient transparency regarding the beneficial owner of legal persons, non-profit organizations, and legal arrangements that can be established in the State. . Keep, maintain, and update basic information and information related to legal ownership and beneficial ownership and control structure of legal persons established in the State, in a sufficient and accurate manner. . Enable the Unit, Public Prosecution, and judicial police officers to obtain the information referred to in this Article held by relevant parties promptly. . Take necessary measures to facilitate access by financial institutions and specified non-financial businesses and professions to beneficial ownership information and monitor it, for the purpose of implementing the provisions of Articles (10 and 11) of this Law Decree.
2. Share ownership in the State shall be direct, and indirect ownership is prohibited.
3. Bearer shares are prohibited in the State.
4. Nominee directors are prohibited in the State.
5. Trustees or direct trusts must disclose their status to financial institutions and specified non-financial businesses and professions when establishing a business relationship with them or conducting an occasional transaction, in accordance with Article (10) of this Law Decree.

Article (9) Risk-Based Approach Financial institutions and specified non-financial businesses and professions must do the following:

1. Identify, assess, understand, and monitor money laundering, terrorism financing, and proliferation financing risks, taking into account: . Results of any risk assessment conducted by the State. . All risk factors related to their customers, countries or geographic regions, products, services, operations, and delivery channels, before determining the overall risk level and before determining the level and type of risk mitigation measures to be applied.
2. The nature and extent of money laundering, terrorism financing, and proliferation financing risk assessments must be commensurate with the nature and size of operations in financial institutions and specified non-financial businesses and professions.
3. Establish policies and controls, and procedures approved by senior management based on their risk assessment and any assessment conducted by the State, to manage and mitigate risks, including resource allocation, and the implementation of these controls must be monitored and enhanced as circumstances require.
4. Identify and assess money laundering, terrorism financing, and proliferation financing risks that may arise from developing new products, professional practices, or commercial practices, including risks related to new service delivery channels, and those arising from the use of new or developing technologies related to existing or new products. For this purpose, they must assess these risks before launching these products, practices, or technologies or using them, and take appropriate measures to manage and mitigate the resulting risks.
5. Document their risk assessment, update it, and provide it automatically to supervisory authorities.

Article (10) Customer Due Diligence Measures

1. Financial institutions and specified non-financial businesses and professions must take the following customer due diligence measures for permanent or occasional customers, whether natural, legal, or legal arrangements: . Not maintain anonymous accounts or accounts in fictitious names. . Identify their customers and verify their identities through reliable and independent documents, data, or records. . Verify that the person claiming to act on behalf of the customer is authorized to do so, identify them, and verify their identity. . Identify the beneficial owner and take reasonable measures to verify their identity using documents, information, or data obtained from a reliable and independent source to the extent that the financial institution is satisfied that it knows the beneficial owner. . Understand the purpose and nature of the business relationship and collect information about it as necessary. . Understand the nature of the customer's business when they are legal persons or legal arrangements, and their ownership and control structure. . Exercise ongoing due diligence on any business relationship, including carefully studying the transactions being executed and their purpose to ensure they are consistent with the information held about their customers, their business activities, and their risk profile, including, if necessary, the source of funds, and ensuring that documents, data, or information collected are continuously updated and appropriate, through reviewing existing records, especially for high-risk customer categories.
2. Financial institutions and specified non-financial businesses and professions must apply these due diligence measures to their existing customers on the basis of materiality and risk since the date this Law Decree enters into force, and take due diligence measures regarding existing business relationships at appropriate times, taking into account whether due diligence measures were previously taken and when, and the adequacy of the data obtained.

mjr.lab.pna.ps Official Gazette Office Reference No.: 193-8-2022 No. 193, 2022/08/14