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

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Decree-Law No. (39) of the Year 2022

Regarding Combating Money Laundering and Financing of Terrorism

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

Based on the Basic Statute of the Palestine Liberation Organization, and the Basic Law amended in 2003 and its amendments, and after reviewing the Criminal Procedure Law No. (3) of the Year 2001 and its amendments, and the Penal Code No. (16) of the Year 1960 in force in the Northern Governorates and its amendments, and the Penal Code No. (74) of the Year 1936 in force in the Southern Governorates and its amendments, and Decree-Law No. (10) of the Year 2018 regarding Cybercrimes and its amendments, and Decree-Law No. (9) of the Year 2010 regarding Banks and its amendments, and Decree-Law No. (42) of the Year 2021 regarding Companies, and the Securities Law No. (12) of the Year 2004, and the Law on Practicing the Profession of Auditing No. (9) of the Year 2004 and its amendments, and the Law on Regular Lawyers No. (3) of the Year 1999 and its amendments, and the Customs and Taxes Law No. (1) of the Year 1962 and its amendments, and Law No. (1) of the Year 2000 regarding Charitable Associations and Civil Organizations and its amendments, and the Anti-Corruption Law No. (1) of the Year 2005 and its amendments, and Decree-Law No. (18) of the Year 2015 regarding Combating Narcotics and Psychotropic Substances and its amendments, and the Supervision System for Dealers and Goldsmiths of Precious Metals and Gemstones to Combat Money Laundering and Financing of Terrorism No. (5) of the Year 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 Decree-Law:

Chapter One Definitions and General Provisions

Article (1) Definitions

The words and phrases appearing in this Decree-Law shall have the meanings assigned to them 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 by the provisions of this Decree-Law. Unit: The Financial Intelligence Unit established by the provisions of this Decree-Law. Funds: Assets of every kind, economic resources including oil and other natural resources, and property, regardless of their type, whether tangible or intangible, movable or immovable, physical or non-physical, regardless of the method of acquisition, and virtual assets, and documents or legal instruments of any form, including electronic or digital, indicating ownership rights to these funds or a share in them or a benefit derived from them, and circulating currencies, foreign currencies, bank credits, traveler's checks, bank checks, payment orders, financial drafts, cash transfers, shares, securities, bonds, promissory notes, financial drafts, letters of credit, and any benefit or revenue or share in profits or any other income or value due from these funds or resulting from them, 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, and does not include virtual assets representing official currencies and securities and other financial assets covered by this Decree-Law. Providers of Virtual Asset Services: Any natural or legal person who performs one or more of the activities or transactions set forth in Article (4) of this Decree-Law as a business, for the benefit of another natural or legal person or on their behalf. Predicate Offense: Any crime stipulated in the prevailing Penal Codes and any other law in force in the State. Proceeds of Crime: Funds resulting from or obtained, directly or indirectly, in part or in whole, from the Predicate Offense. Dual Criminality: Criminalization of the conduct constituting the crime subject to the request for mutual legal assistance or extradition in the laws of the Requesting State and the State requested for assistance or extradition, regardless of whether the laws of both countries classify the crime in the same category or use the same term to name the crime. Person: Natural or legal person. Trust: Legal relationships arising inter vivos or upon death, by the person or settlor when funds have been placed under the control of the trustee or custodian of the endowment or the guardian independently and are not part of the trustee's, custodian's, or guardian's assets, and remain for the benefit of a beneficiary or for a specific purpose, such that those assets constitute funds in the name of the trustee, custodian of the endowment, or guardian, and the right to the trust assets remains in the name of the trustee, custodian of the endowment, or guardian, or in the name of another person on their behalf, and they possess the authority to manage and use and dispose of the assets in accordance with the trust's conditions and the specific duties imposed on them and the powers granted to them. Law

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Direct Trust: A trust created clearly by the settlor or person, which is usually in the form of a document, such as a written trust deed. This trust differs from trusts that arise through the execution of the law and do not result from the clear intention of the settlor or person to create a trust or similar legal arrangements such as trusts established 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, who engages in any of the activities or transactions set forth in Article (2) of this Decree-Law, whether for the benefit of a client or on their behalf.

Designated Non-Financial Businesses and Professions: Anyone who engages in one or more of the prescribed works in Article (3) of this Decree-Law.

Company and Trust Service Providers: Any person who provides any of the following services to other parties on a commercial basis:

1. Acting as a third-party agent for the establishment of legal persons.
2. Acting or arranging for another person to act as a director, secretary of a company, or partner in a general partnership or in a similar position related to other legal persons.
3. Providing a registered office or business address, place of residence, mailing address, or administrative address for a company or general partnership or any other legal person or other legal arrangement.
4. Acting or arranging for another person to act as a trustee of a direct trust or performing a similar function for the benefit of 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 or institution that operates primarily to collect or distribute funds for charitable, religious, educational, cultural or social, solidarity, or other purposes.

Transaction: Any action regarding funds, including any purchase or sale, loan, mortgage, transfer, or delivery or any other action regarding funds, performed by a natural or legal person, including depositing funds or withdrawing them or transferring them from one account to another or currency exchange or loan or extending credit or purchasing or selling shares, bonds, or certificates of deposit or renting safes.

Business Relationship: A relationship arising between the client and the financial institution or any of the designated 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 client and/or the natural person on whose behalf a transaction is being conducted, including the person who exercises ultimate effective control over a legal arrangement or legal person or manages it.

Bearer Negotiable Instruments: Monetary instruments in the form of bearer documents such as traveler's checks, and negotiable instruments (including checks, promissory notes, and payment orders) that are either bearer or payable to order, without restrictions, or issued to a fictitious payee, or in another manner that allows the transfer of rights upon delivery, and incomplete instruments, including (checks, promissory notes, and payment orders) signed with the payee's name omitted.

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Instrument: Any funds or any tool used or intended to be used in any way, wholly or partially, for money laundering or financing of terrorism or committing one or more predicate offenses.

Precautionary Attachment: Temporary prohibition on transferring, converting, altering, disposing of, or moving funds or using them, based on a decision issued by the competent court or any authority authorized by the provisions of this Decree-Law, including proceeds or instruments that may have been used or were intended to be used to commit a crime, or funds used or intended to be used or designated for financing terrorism or terrorist acts or organizations or laundered funds and funds equivalent in value to the proceeds.

Freezing: Prohibition on transferring, converting, altering, disposing of, or moving funds or other assets or equipment or other instruments when they are owned by persons or entities listed pursuant to relevant Security Council resolutions applicable to measures taken 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.

Supervised Release: The method that allows illegal or suspicious shipments to leave the territory of one or more states and pass through 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 hidden or false role to obtain evidence or information related to the crime.

Politically Exposed Person (PEP): A natural person who represents any of the following categories:

1. Foreign Politically Exposed Person: 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 officials of state-owned companies. . Senior officials of political parties. . Other persons designated by the Committee.
2. Domestic Politically Exposed Person: A natural person who holds or has held a prominent public position in the State, including the positions mentioned in paragraph (1) above.
3. International Organization Official: A natural person who holds or has held a prominent position by 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: Correspondent accounts used by a third party directly to conduct transactions on their behalf.

Competent Authority: Any body or government or public authority with specific responsibilities in combating money laundering or financing of terrorism or any of the predicate offenses within its jurisdiction, including the Public Prosecution and judicial police officers. It also includes authorities responsible for the registration of legal persons and non-profit organizations and legal arrangements in accordance with the laws and regulations in force in the State.

Supervisory Authority: The authority or body entrusted by relevant laws or regulations with supervision, regulation, or oversight of compliance by financial institutions and designated non-financial businesses and professions and non-profit organizations with the requirements stipulated in this Decree-Law, its executive regulations, instructions, and directives.

Shell Bank: A bank that has no physical presence in the country where it was established and licensed, and is not part of a regulated financial group subject to unified and effective supervision by competent supervisory authorities, and the presence of a local agent or employees with low job levels 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:

1. Committing or attempting to commit or participating as an accomplice in any of the terrorist acts by any means, whether directly or indirectly, and organizing terrorist acts or directing others to commit them.
2. Contributing to terrorist acts with a group of persons acting for a common purpose, where the contribution is intentional and aimed at enhancing the terrorist act or with knowledge of the group's intent to commit any of the terrorist acts.

Terrorist Organization: A group of terrorists who commit any of the following acts:

1. Committing or attempting to commit terrorist acts intentionally and illegally by any means directly or indirectly.
2. Participating as a partner in terrorist acts.
3. Organizing or directing others to commit terrorist acts.
4. Contributing to the commission or attempted commission of terrorist acts with a group of persons acting for a common purpose, where the contribution is intentional, aimed at enhancing the terrorist act, or with knowledge of the group's intent 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, and (1373) of 2001, and (2253) of 2015, and (1718) of 2006, and (1874) of 2009, and (2087) of 2013, and (2094) of 2013, and (2231) of 2015, and (2270) of 2016, and (2321) of 2016, and (2356) of 2017, and all current, future, and subsequent resolutions related to them.

Article (2) Financial Institution

Any natural or legal person who engages, as a business, in any of the following activities or transactions, whether for the benefit of a client or on their behalf:

1. Accepting deposits and other payable funds from the public, including private banking services.

mjr.lab.pna.ps Official Gazette Office 12 Reference No.: 193-8-2022 Issue No. 193 2022/08/14 2. Lending. 3. Financial leasing. 4. Money or value transfer services. 5. Issuing and managing payment instruments and means. 6. Financial guarantees and financial commitments. 7. Dealing in the following: . Money market instruments such as checks, promissory notes, certificates of deposit, and financial derivatives, etc. . Foreign exchange. . Currency exchange instruments, interest rates, and indices. . Transferable securities. . Trading in futures and forward contracts for commodities. 8. Participating in securities issuances and providing financial services related to these issuances. 9. Managing individual and collective portfolios. 10. Holding and managing cash or liquid securities on behalf of others. 11. Other investment, management, administration, and operation of funds or money on behalf of others. 12. Insurance and underwriting of life insurance and other types of insurance related to investment and guaranteeing them, which also includes insurance commitments, agents, and brokers. 13. Exchange and conversion of cash or currencies. 14. Any other activities or transactions determined by the Committee in consultation with the Supervisory Authority.

Article (3) Designated Non-Financial Businesses and Professions

Designated Non-Financial Businesses and Professions refer to any of the following activities:

1. Real estate agents and brokers when concluding transactions on behalf of their clients regarding the sale and purchase of real estate.
2. Dealers in precious metals and gemstones.
3. Lawyers, accountants, and auditors when preparing, executing, and participating in transactions for the benefit of their clients, regarding the following activities: . Purchasing and selling real estate. . Managing clients' funds and other assets, their securities, and other assets owned by the client. . 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 legal arrangements, and purchasing and selling commercial entities.
4. Company and trust service providers.
5. Any other profession or activity determined by the Committee.

Article (4) Providers of Virtual Asset Services

Any person who performs one or more of the following activities is considered a provider of virtual asset services:

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 conducting a transaction on behalf of another natural or legal person to transfer a virtual asset from one address or virtual asset account to another.
4. Holding and/or managing virtual 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 those services.

Article (5) Money Laundering Offense

Any person who commits any of the following acts is guilty of money laundering:

1. Replacing, converting, or transferring funds by any person, knowing that these funds constitute proceeds of crime for the purpose of hiding 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. . Hiding or disguising the true nature or source, location, disposition, movement, ownership, or rights related to funds by any person knowing that these funds constitute proceeds of crime. . Acquiring, possessing, or using funds by any person knowing at the time of receipt that these funds are proceeds of crime. . Participating, assisting, instigating, conspiring, providing advice or counseling, facilitating, or colluding or attempting to commit any of the acts stipulated in this paragraph.
2. Knowledge, intent, or purpose shall be inferred as essential elements of the crime from the factual and objective 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. A person is guilty of money laundering under the provisions of this Article and resulting from any of the predicate offenses, whether those crimes occurred in the State or outside it, provided that the act constitutes a predicate offense under the law in force in the country where the crime occurred and constitutes a predicate offense under the laws in force in the State.
4. The money laundering offense applies to persons who commit the predicate offense; the punishment of the perpetrator of the predicate offense does not preclude punishing them for the money laundering offense.

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Article (6) Terrorist Financing Offense

1. Any person who intentionally provides or collects funds from a source legal or illegal by any means, directly or indirectly, with the unlawful intent to use them to commit a terrorist act or by a terrorist or partially or organization.
2. Any person who intentionally, by any means, directly or indirectly provides or collects funds from a legal or illegal source for the purpose of traveling 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.
3. Any person is also guilty of the terrorist financing offense if they: . Attempt to commit the terrorist financing offense. . Participate as an accomplice in any of the terrorist financing offenses or attempted commission thereof. . Organize terrorist crimes or direct others to commit them or attempt to commit them. . Contribute to the commission or attempted commission of one or more terrorist financing offenses with a group of persons acting for a common purpose.
4. Knowledge or intent shall be inferred as essential elements required for the crime stipulated in this Article from the factual and objective circumstances.
5. The terrorist financing offense applies even if the terrorist act has not occurred, or the funds have not been actually used to implement or attempt to implement it, or the funds are not linked to a specific terrorist act.
6. The terrorist financing offense 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 in another country, and regardless of whether the country where the terrorist act occurred or will occur is the same.

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

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

1. It is prohibited to establish or operate a shell bank in the State.
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, or 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. . Maintain basic information and information related to legal ownership and beneficial owner and the control structure of legal persons established in the State, in a sufficient and accurate manner, and keep it updated. . Enable the Unit, Public Prosecution, and judicial police officers to obtain the information referred to in this Article and held by the relevant parties promptly. . Take necessary measures to facilitate access by financial institutions and designated non-financial businesses and professions to beneficial owner information and monitoring information, for the purpose of implementing the provisions of Articles (10 and 11) of this Decree-Law.
2. Share ownership in the State shall be direct ownership, 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 designated non-financial businesses and professions when establishing a business relationship with them or conducting an occasional transaction, in accordance with Article (10) of this Decree-Law.

Article (9) Risk-Based Approach

Financial institutions and designated 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 clients, 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 the business in financial institutions and designated 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 strengthened as appropriate.

mjr.lab.pna.ps Official Gazette Office 14 Reference No.: 193-8-2022 Issue No. 193 2022/08/14 4. Identify and assess money laundering, terrorism financing, and proliferation financing risks that may arise from developing new products and professional or commercial practices, including risks related to new means of service delivery, and those arising from the use of new or developing technologies related to existing or new products, and for this purpose, they must conduct an assessment of these risks before launching these products or practices or using these technologies, 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 designated non-financial businesses and professions must take the following customer due diligence measures for permanent or occasional clients, whether natural, legal, or legal arrangements: . Not maintaining anonymous accounts or accounts under fictitious names. . Identifying their clients and verifying their identities through reliable and independent documents, data, or records. . Verifying that the person claiming to act on behalf of the client is authorized to do so, and identifying them and verifying their identity. . Identifying the beneficial owner and taking reasonable measures to verify their identity using documents or information or data obtained from a reliable and independent source to the satisfaction of the financial institution that it knows the beneficial owner. . Understanding the purpose and nature of the business relationship and collecting information about it as necessary. . Understanding the nature of the client's business when they are legal persons or legal arrangements, and their ownership and control structure. . Exercising ongoing due diligence on any business relationship, including reviewing transactions executed in detail and their purpose to ensure they are consistent with the information held by the institution about their clients, their business activities, and their risk profile, including, if necessary, the source of funds, and ensuring that documents or data or information collected are continuously updated and appropriate, through reviewing existing records, especially for high-risk client categories.
2. Financial institutions and designated non-financial businesses and professions must apply these due diligence measures to their existing clients on the basis of materiality and risk since the date of entry into force of this Decree-Law, 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.

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