Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (2) of 2025

Concerning the Anti-Money Laundering and Counter-Terrorist Financing Function

Based on the provisions of Law Decree No. (9) of 2010 concerning Banks, particularly Articles (43, 72) thereof, and the provisions of Law Decree No. (39) of 2022 concerning the Combating of Money Laundering and Financing of Terrorism and its amendments, particularly the provisions of Articles (22, 25, 26, 27, 34),

In accordance with the powers vested in us,

And in pursuit of the public interest,

We have issued the following Instructions:

Article (1)

Definitions

The words and phrases appearing in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

The Law: Law Decree No. (39) of 2022 concerning the Combating of Money Laundering and Financing of Terrorism and its amendments.

The Function: The Anti-Money Laundering and Counter-Terrorist Financing Function.

The Function Officer: The Manager of the Anti-Money Laundering and Counter-Terrorist Financing Function.

Article (2)

Objective and Scope of Application

1. The provisions of these Instructions aim to: a. Contribute to maintaining the integrity and stability of the financial and banking system. b. Enhance the environment and system for combating money laundering and financing of terrorism. c. Reduce banks' exposure to risks related to money laundering and financing of terrorism.

2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business and their external branches.

Article (3)

Anti-Money Laundering and Counter-Terrorist Financing Function

1. The Bank's Board of Directors must commit to the following:
   1. Establish the Function at the senior management level and assign it to an independent employee at the manager level titled "Anti-Money Laundering and Counter-Terrorist Financing Officer," such that their appointment is made by the Board of Directors or the Compliance Committee established therefor, or any arrangements approved by the Palestine Monetary Authority.
   2. Supervise the Anti-Money Laundering and Counter-Terrorist Financing Function in the Bank and approve the Charter or any other official document establishing this Function.
   3. Adopt job descriptions for the Anti-Money Laundering and Counter-Terrorist Financing Function that include the tasks, responsibilities, and qualifications of the incumbent, and a clear organizational structure for the Function appropriate to the size of the Bank, its branches, its risks, the complexity of its operations, and its customer base.
   4. Adopt a risk-based approach (RBA) procedure manual, which must be based on the recommendations of the Financial Action Task Force (FATF), international best practices, and the basic principles and guidelines issued by the Basel Committee on Banking Supervision. It must clearly define the priorities and responsibilities of the Function, work methods, reporting mechanisms, and presentation of work results, and must include a mechanism for taking corrective actions in case any violations are discovered.
   5. Ensure the independence of the Function and protect it from influence, and adopt a system for its employees regarding bonuses, barriers, salaries, and accountability in case of negligence or breach of job duties.
   6. Provide sufficient financial resources for the Function's structure to ensure its operation and achieve the purpose of its establishment, and to enhance employees' ability to manage and mitigate money laundering and financing of terrorism risks, particularly resources for training, providing qualified human resources, programs, and automated systems for combating money laundering and financing of terrorism and implementing targeted financial sanctions.

Article (4)

Bank's Responsibilities

1. The Bank must commit to the following: a. Provide sufficient controls, systems, and programs to identify and prevent any potential misuse of financial and banking services, products, and technologies, and to report potential violations. These must include:

   • Electronic systems and programs specifically for combating money laundering and financing of terrorism, capable of classifying customer risks, monitoring and alerting on financial transactions and movements according to certain scenarios and indicators, and tracking unusual transactions and suspicious activities. b. Electronic systems and programs to query the customer base against international and national watchlists. These lists must be reviewed periodically, and when conducting any transaction or entering into a business relationship with any person or entity, the Bank must subscribe to the services of the website of the Security Council Sanctions Committee, and configure its electronic systems to enable reference to the United Nations list and the national watchlist. c. Ensure that the Bank's subsidiaries comply with anti-money laundering and counter-terrorist financing requirements and standards.
   3. Monitor and audit the accounts of the Bank's employees to ensure they are not misused for the benefit of others or for purposes other than their nature and intended use, or for criminal activities. The Bank must follow up on abnormal employee financial activity, examine the proportionality of such transactions to the nature of the accounts and monthly income, and verify the integrity of transactions and the effectiveness of due diligence procedures regarding them.
   4. Enhance the adoption of administrative and disciplinary measures against employees found to have committed incidents harming the integrity and reputation of the Bank due to misuse of their accounts or committing financial crimes such as fraud, embezzlement, and credit abuse. This includes reporting to the Palestine Monetary Authority and competent authorities any breaches and violations of laws, regulations, instructions, and operational policies and procedures in force, in compliance with the provisions of Article (25) of the Law.

2. Prepare a risk-based policy and operational procedures to implement anti-money laundering and counter-terrorist financing requirements and measures, covering at a minimum the following: a. Opening, updating, and managing customer accounts, including identifying the data and documents required to be collected and updated to identify and verify customer identities, understand their risks, identify the beneficial owner, the purpose of establishing the business relationship, and the sources of funding and usage of accounts. b. Establishing business relationships and mechanisms for accepting or rejecting customers. c. Mechanisms and authorities for approving the establishment, creation, and continuation of business relationships with Politically Exposed Persons (PEPs) representing risks. This includes obtaining senior management approval before establishing a business relationship with the customer or continuing it for existing customers, and all procedures related to PEPs representing risks according to Article (12) of the Law. d. Applying standard due diligence and enhanced due diligence. e. Identifying and classifying customer risks (high, medium, low) and taking measures to mitigate them in accordance with prevailing legislation. f. Ongoing due diligence regarding business relationships, including monitoring financial transactions and unusual financial operations. g. Reporting suspicions according to the mechanism approved by the Unit while maintaining the confidentiality of the report. h. Retaining information, documents, and transactions for the period specified by the Law and Instructions. i. Communicating with the supervisory authority, competent authorities, and the Financial Intelligence Unit. j. Evaluating compliance with regulatory and supervisory requirements and reporting information in a timely manner. k. Dealing with correspondent banks and relying on other parties, including collecting sufficient information about those banks and parties to understand the nature of their work and customer base and supervise them. Verify that the Bank does not deal with banks lacking adequate controls to combat criminal activities or shell banks. l. Informing the Function Officer of any suspected cases or misuse of financial services.

3. Enhance access controls to the Bank, including querying the names of persons authorized for employment with the Bank or contracting with them, or attracting new strategic shareholders, and verifying the sources of funds authorized for use in purchasing Bank shares. This is to prevent criminals or their partners from entering the banking sector.

Article (5)

Independence of the Function

The Bank must ensure the independence of the Function to guarantee that it performs its duties efficiently and effectively without overlapping authorities with any other departments in the Bank. The Function Officer must have the following:

1. Easy access to communicate with any employee in the Bank and to review files, documents, records, and the internal investigation committee. The Bank must provide necessary tools to enable the Officer to perform their duties seriously and impartially, including providing systems, programs, and authorities that assist in executing the Function's tasks.
2. Complete freedom to execute their responsibilities independently across all departments and sections of the Bank to ensure no conflict of interest.
3. Complete freedom and independence in preparing and submitting suspicious transaction reports to the Financial Intelligence Unit, and any other reports related to the Unit's work as stipulated in prevailing legislation.
4. Freedom to write reports regarding any violations of laws, regulations, instructions, and internal institutional breaches.

Article (6)

Tasks and Responsibilities of the Function Officer

The Function Officer must perform the following tasks and responsibilities:

1. Ensure the Bank's compliance with the requirements and duties of combating money laundering and financing of terrorism stipulated in the Law, Monetary Authority Instructions, the National Committee for Combating Money Laundering and Financing of Terrorism, and related legislation, as well as the Bank's approved policies and operational procedures. This includes: a. Sampling executed accounts and financial transactions and conducting compliance tests on anti-money laundering and counter-terrorist financing procedures. b. Reporting on the environment and effectiveness of combating money laundering and financing of terrorism in the Bank, cases of failure to apply anti-money laundering and counter-terrorist financing procedures, cases of non-compliance by Bank employees with customer identification and verification procedures and standard and enhanced due diligence, and necessary recommendations for remediation and correction. c. Following up on the immediate implementation of decisions to stop financial transactions issued by competent authorities and the immediate implementation of relevant Security Council decisions without delay, in accordance with prevailing legislation in the State of Palestine and according to approved mechanisms. d. Retaining documents and internal reports received and submitted to the Palestine Monetary Authority and the Financial Intelligence Unit. e. Applying the Risk-Based Approach (RBA) and classifying the Bank's customers according to their exposure to money laundering and financing of terrorism risks (high, medium, low). The assessment targeted by the institution, customers, products, distribution channels, and geographic dimension, as well as the results of the national risk assessment, must be taken into consideration. f. Working to periodically review the classification of the Bank's customers' exposure to money laundering and financing of terrorism risks in light of unusual transactions and the information and data available to the Bank. g. Periodically checking the Bank's customer base against international and local freezing and blocking lists in accordance with prevailing legislation and documenting the results. h. Participating in and/or supervising the preparation of the Bank's self-assessment of money laundering and financing of terrorism risks, including identifying those risks according to the four main axes of assessment (Customers, Products and Services, Distribution Channels, Geographic Dimension). i. Participating in assessing money laundering and financing of terrorism risks in new financial and banking products, services, and technologies before their launch, and when developing and modifying previous products, services, and technologies. Participate in establishing and enhancing necessary controls and measures to mitigate those risks and document this. j. Participating in any assessments of money laundering and financing of terrorism risks at the country level.

2. Submit recommendations regarding the financial needs and budgets required to develop and update anti-money laundering and counter-terrorist financing systems and programs.

3. Respond to requests and inquiries related to combating money laundering and financing of terrorism from the Financial Intelligence Unit and competent authorities, and provide those authorities with the necessary data, records, and documents promptly without delay or protraction, in a manner that does not conflict with prevailing legislation.

4. Monitor and supervise ongoing financial transactions using automated programs and systems specifically for combating money laundering and financing of terrorism. Monitor and review unusual and suspicious financial transactions and movements, and retain records, studies, analyses, and information regarding all data related to all suspicious and unusual transactions.

5. Receive and study reports submitted by any Bank employee if the employee suspects that the transaction to be executed is suspected of being related to money laundering, financing of terrorism, or any of the predicate crimes, and document the results.

6. Report to the Financial Intelligence Unit transactions suspected of involving money laundering, financing of terrorism, or any of the predicate crimes, whether these crimes were committed or not. Suspicious transaction reports must be submitted according to the approved reporting mechanisms.

7. Contribute to developing and coordinating training programs specific to combating money laundering and financing of terrorism, and training Bank employees and informing them of the requirements and updates related to combating money laundering and financing of terrorism. This contributes to enhancing their ability to detect money laundering and financing of terrorism operations.

8. Maintain continuous communication with Bank departments and administrations to address issues resulting from the national assessment of money laundering and financing of terrorism risks, and ensure the provision of requirements to enhance the environment for combating money laundering and financing of terrorism.

9. Provide statistics related to the following: a. The number of cases of receiving and responding to information requests. b. The number of suspected cases referred to the Unit according to the type of suspected crimes. c. The number of unusual transactions that were studied and retained due to the lack of suspicion indicators. d. Results of checking customer base names against international and local freezing and blocking lists, including the number of cases where Bank customer names were similar to names of persons and entities listed on international and local freezing and blocking lists, and the number of cases where it was verified that customer names did not match the names of persons and entities. e. Training courses and programs provided to Bank employees regarding the risks, updates, and requirements of combating money laundering and financing of terrorism. f. The number of cases of seizing suspected forged/falsified currencies, checks, and documents. g. The number of cases of failure to complete due diligence measures to a satisfactory degree.

h. The number of cases of rejecting or suspending telegraphic transfers due to the lack of required information about the originator or beneficiary, in accordance with prevailing legislation.

Article (7)

Appointment and Termination of the Function Officer

The Bank must commit to the following:

1. Appoint or terminate the Function and its deputy by the Board of Directors.
2. Obtain prior approval from the Palestine Monetary Authority for the appointment of the Function Officer and their deputy by submitting a request including the candidate's curriculum vitae, accompanied by a copy of the passport, personal ID, and necessary documents and certificates according to the requirements of the prevailing Instructions regarding appointment, transfer, disciplinary procedures, and resignation. The candidate must have at a minimum the following academic and practical qualifications: a. A bachelor's degree in accounting, financial and banking sciences, business administration, economics, law, or any related field. b. Practical experience of no less than (5) years in the banking field, including at least (3) years in the field of compliance supervision or combating money laundering and financing of terrorism. c. Meeting the job requirements according to the approved job description in the Bank. d. Appropriate training in banking work, for example (methods of monitoring compliance risks, methods of combating money laundering and financing of terrorism, and financials). e. Familiarity with laws, legislation, instructions, regulations, and best practices in the field of combating money laundering and financing of terrorism, and familiarity with the requirements of the FATF customer base operations, recommendations, and assessment methodology in particular. f. Some necessary requirements for the position, for example (leadership skills and planning ability, proficiency in Arabic and English languages, high ability to communicate with others, ability to enhance employee awareness and train them in aspects related to combating money laundering, and organizing seminars and workshops). g. Professional specialized certifications in the field of combating money laundering and financing of terrorism such as (PAMLA) or any related international certifications (CAMS).