Law No. (39) of 2022 on Combating Money Laundering and Terrorist Financing

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

President of the State of Palestine, Chairman of the Executive Committee of the PLO: Based on the Basic Law of the Palestine Liberation Organization, and the Amended Basic Law of 2003 and its amendments; After reviewing the Criminal Procedure Law No. (3) of 2001 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 Electronic Crimes and its amendments; And Law Decree No. (9) of 2018 on Banks and its amendments; And Law Decree No. (42) of 2021 on Companies; And the Securities Law No. (12) of 2004; And the Auditing Profession Law No. (9) of 2004 and its amendments; And the Statutory Lawyers Law No. (3) of 1999 and its amendments; And the Customs and Duties Law No. (1) of 1962 and its amendments; And Law No. (1) of 2000 on Charities and Non-Governmental Organizations and its amendments; And the Anti-Corruption Law No. (1) of 2005 and its amendments; And Law Decree No. (18) of 2015 on Combating Drugs and Psychotropic Substances and its amendments; And the Supervision System for Dealers and Jewelers of Precious Metals and Gemstones to Combat Money Laundering and Terrorist Financing 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 for the Suppression of Unlawful Acts against Persons Enjoying International Protection, 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 upon the proposal of the Council of Ministers dated 2022/07/04; And within the powers vested in us; In the public interest and to achieve it, 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 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 Terrorist Financing established under the provisions of this Law Decree. Unit: The Financial Intelligence Unit (FIU) established under the provisions of this Law Decree. Funds: Assets of all kinds, economic resources including oil and other natural resources, property whether movable or immovable, tangible or intangible, however acquired, virtual assets, and documents or legal instruments of any form, including electronic or digital, evidencing ownership rights, shares, or benefits in such funds, as well as circulating currencies, foreign currencies, bank credits, traveler's checks, bank checks, payment orders, financial instruments, cash transfers, shares, securities, bonds, bills of exchange, promissory notes, letters of credit, and any benefit, income, share in profits, or other revenue 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 used for payment or investment purposes. Virtual assets do not include digital representations of official currencies, securities, and other financial assets covered by this Law Decree. Virtual Asset Service Providers (VASPs): Any natural or legal person who conducts one or more of the activities or operations specified 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 resulting from or obtained, directly or indirectly, in whole or in part, from the predicate offense. Dual Criminality: The criminalization of conduct constituting the offense subject to a request for mutual legal assistance or extradition in both the requesting and requested States, regardless of whether the laws of both countries classify the offense under the same category or use the same terminology. Person: A natural or legal person. Trust: Legal relations arising inter vivos or upon death, by a person or testator, when funds are placed under the control of a trustee, settlor, or protector for the benefit of a beneficiary or for a specific purpose, such that those assets constitute funds independent of and not part of the trustee's/settlor's/protector's own property, with ownership remaining in the name of the trustee, settlor, or protector (or another person on their behalf), who possesses the authority to manage, use, and dispose of the assets in accordance with the trust's conditions and imposed duties. Direct Trust: A trust clearly established by a testator or person, usually in the form of a document (e.g., a written trust deed). It differs from trusts arising by operation of law, which do not result from the clear intention or decision of the testator/person to create a trust or similar legal arrangements (e.g., 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 directives in force in the State, which conducts any of the activities or operations specified in Article (2) of this Law Decree, for or on behalf of a client. Specified Non-Financial Businesses and Professions (SNFBPs): Any person who conducts one or more of the works specified in Article (3) of this Law Decree. Corporate and Trust Service Providers: Any person who provides any of the following services to other parties on a commercial basis:

1. Acting as a company formation agent.
2. Acting or arranging for another person to act as a director, secretary, or partner in a partnership company or similar role related to other legal persons.
3. Providing a registered office, business address, place of residence, mailing address, or administrative address for a company, partnership company, 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 on behalf of another party.
5. Acting or arranging for another person to act as a nominee shareholder on behalf of another party. Non-Profit Organization: Any legal person, legal arrangement, association, or NGO that primarily operates to collect or distribute funds for charitable, religious, educational, cultural, social, mutual, or other purposes. Transaction: Any act concerning funds, including any purchase, sale, loan, pledge, transfer, delivery, or other act performed by a natural or legal person, including depositing or withdrawing funds, transferring between accounts, currency exchange, lending, extending credit, purchasing or selling shares and bonds, certificates of deposit, or renting safe deposit boxes. Business Relationship: A relationship arising between a client and a financial institution or any of the specified non-financial businesses/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 conducted, including the person who exercises ultimate effective control over a legal arrangement or legal person. Bearer Instruments: Monetary instruments in the form of bearer documents, such as traveler's checks. Negotiable instruments (including checks, promissory notes, and payment orders) that are either to bearer or order, without restrictions, or issued to a fictitious payee, or in another manner allowing transfer upon delivery. Incomplete instruments include (checks, promissory notes, and payment orders) signed with the payee's name omitted. Instrumentalities: Any funds or any instrument used or intended to be used, wholly or partially, for money laundering, terrorist financing, or the commission of one or more predicate offenses. Interim Attachment: A temporary prohibition on transferring, converting, exchanging, disposing of, or moving funds, based on a decision issued by the competent court or any authority authorized under this Law Decree, including proceeds or instrumentalities that may have been used or were intended to be used in committing an offense, or funds used/intended/allocated for terrorist financing, acts, organizations, laundered funds, and funds equivalent in value to the proceeds. Freezing: A prohibition on transferring, converting, disposing of, or moving funds, other assets, equipment, or instrumentalities when they are owned or controlled by listed persons or entities pursuant to applicable UN Security Council resolutions, either initiated by the Committee or in accordance with its decisions, and during the duration of such measures and resolutions. Confiscation: The permanent deprivation and loss of funds, proceeds of crime, or instrumentalities based on a judicial decision issued by the competent court. Supervised Release: The method allowing illegal or suspicious shipments to exit, pass through, or enter the territory of one or more States with the knowledge and under the supervision of their competent authorities, for the purpose of investigating an offense and identifying involved persons. Undercover Operation: An investigative method where a judicial police officer assumes a false identity or performs a covert or undercover role to obtain evidence or information related to the offense. 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 office abroad, including the following positions: a. Heads of State or Government. b. Senior politicians. c. Senior government, judicial, or military officials. d. Senior executives of state-owned corporations. e. Senior executives of political parties. f. Other persons designated by the Committee.
7. Domestic PEP: A natural person who holds or has held a prominent public office 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 office in an international organization, including: a. Senior management members (directors and deputies). b. Board of directors members. c. Positions equivalent to those stipulated in items (a, b) of this paragraph. Account Payable to Remitter: Correspondent accounts used directly by a third party to conduct transactions on their behalf. Competent Authority: Any government or public body with specific responsibilities in combating money laundering, terrorist 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 under the laws and regulations in force in the State. Supervisory Authority: The authority or body entrusted by relevant laws, regulations, or directives to supervise, regulate, or monitor the compliance of financial institutions, specified non-financial businesses/professions, and non-profit organizations with the requirements stipulated in this Law Decree, its executive regulations, directives, and guidelines. Shell Bank: A bank that has no physical presence in the State where it was established and licensed, is not part of a regulated financial group subject to unified and effective supervision by competent supervisory authorities, and does not have local agents or employees with functional levels constituting a physical presence. Terrorist Act: Any terrorist act stipulated in the prevailing Penal Code in force 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, directly or indirectly, and organizing or directing others to commit them.
10. Participating in terrorist acts with a group acting for a common purpose, where the participation is deliberate 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 that commits any of the following acts:
11. Committing or attempting to commit terrorist acts deliberately 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. Participating in committing or attempting to commit one or more terrorist acts with a group acting for a common purpose, where participation is deliberate and aimed at enhancing the terrorist act or with knowledge of the group's intention to commit the terrorist act. Relevant UN Security Council Resolutions: Resolutions issued by the UN Security Council under Chapter VII of the UN Charter regarding combating and preventing terrorism or terrorist financing, 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 resolutions related thereto.

Article (2): Financial Institution Any natural or legal person who conducts, as a business, any of the following activities or operations for or on behalf of one or more clients:

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 payment instruments.
6. Financial guarantees and financial commitments.
7. Dealing in the following: a. Money market instruments such as checks, promissory notes, certificates of deposit, financial derivatives, etc. b. Foreign exchange. c. Exchange instruments, interest rate instruments, and indices. d. Transferable securities. e. Trading in futures and forward contracts for goods.
8. Participating in securities issuances and providing financial services related to such issuances.
9. Managing individual and collective portfolios.
10. Safeguarding and managing negotiable cash or securities on behalf of others.
11. Otherwise investing, administering, managing, and operating funds or money on behalf of other persons.
12. Insurance and underwriting life insurance and other types of investment-linked insurance, including insurance commitments, agents, and brokers.
13. Currency or foreign exchange swapping.
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/brokers when concluding transactions on behalf of their clients concerning the purchase or sale 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 clients, concerning the following activities: a. Purchasing or selling real estate. b. Managing clients' funds and other assets, including the client's securities and other assets. c. Managing bank accounts, savings accounts, or securities accounts. d. Organizing subscriptions for the formation, operation, or management of companies. e. Forming, operating, or managing legal persons or legal arrangements, and purchasing or selling commercial entities.
4. Corporate and trust service providers.
5. Any other profession or work determined by the Committee.

Article (4): Virtual Asset Service Providers Any person who performs one or more of the following activities 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, meaning in this context a transaction on behalf of another natural or legal person transferring a virtual asset from one address or account to another.
4. Safeguarding and/or managing virtual assets or instruments allowing control over virtual assets.
5. Providing financial services related to the offering for sale and/or sale of virtual assets, and participating in such services.

Article (5): Money Laundering Offense

1. Any person who commits any of the following acts is considered a money laundering offender: a. Substituting, converting, transferring, or moving funds by any person who knows that such funds constitute proceeds of crime for the purpose of concealing or disguising their illicit origin, or to assist any person involved in committing the predicate offense to evade legal consequences of their acts. b. Concealing or disguising the true nature, source, location, disposition, movement, ownership, or rights related to funds by any person who knows that such funds constitute proceeds of crime. c. Acquiring, possessing, or using funds by any person who knows at the time of receipt that such funds are proceeds of crime. d. Participating, assisting, instigating, conspiring, advising, facilitating, conniving at, or attempting to commit any of the acts stipulated in this paragraph.
2. Knowledge, intent, or purpose are extracted as essential elements of the offense from 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 in the predicate offense.
3. Any person who commits money laundering according to the provisions of this Article and resulting from any predicate offenses, whether those offenses occurred in the State or abroad, is considered a money laundering offender, provided that the act constitutes a predicate offense under the law in force in the country where it occurred and also 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; thus, punishing the perpetrator of the predicate offense does not preclude punishing them for money laundering.

Article (6): Terrorist Financing Offense

1. Any person who deliberately provides or collects funds from a lawful or unlawful source by any means, directly or indirectly, with an unlawful purpose for their use in committing a terrorist act or by a terrorist, partially or wholly, is considered a terrorist financing offender.
2. Any person who deliberately provides or collects funds from a lawful or unlawful source by any means, directly or indirectly, for the purpose of facilitating travel to a country other than their residence or nationality by individuals with the aim of committing, planning, participating in, preparing, or facilitating terrorist acts, or providing or receiving training in terrorist acts, is considered a terrorist financing offender.
3. Any person who: attempts to commit a terrorist financing offense; participates as an accomplice in any terrorist financing offense or its attempt; organizes or directs others to commit or attempt it; or participates in committing or attempting one or more terrorist financing offenses with a group acting for a common purpose, is also considered a terrorist financing offender.
4. Knowledge or intent are extracted as essential elements required for the offense stipulated in this Article from factual and objective circumstances.
5. The terrorist financing offense applies even if the terrorist act has not occurred, or the funds have not actually been used to execute or attempt its execution, or if the funds are not linked to a specific terrorist act.
6. The terrorist financing offense applies regardless of whether the country where the alleged offender is located is the same as the country where the terrorist or organization is, or in another country, and regardless of whether the country where the terrorist act occurred or will occur is elsewhere.

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. The establishment or operation of a shell bank in the State is prohibited.
2. Financial institutions are prohibited from: a. Entering into or continuing business relationships or operations with shell banks. b. Entering into or continuing correspondent banking activities, operations, 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 shell banks to use their accounts.

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: a. Ensuring sufficient transparency regarding the beneficial owner of legal persons, non-profit organizations, and legal arrangements that can be established in the State. b. Maintaining basic information, legal ownership information, and beneficial owner information of legal persons established in the State, accurately and sufficiently, and keeping them updated. c. Enabling the Unit, Public Prosecution, and judicial police officers to obtain the information mentioned in this Article held by relevant parties promptly. d. Taking necessary measures to facilitate access for financial institutions and specified non-financial businesses/professions to beneficial owner information and monitoring it, for the purpose of implementing Articles (10) and (11) of this Law Decree.
2. Share ownership in the State is direct, and indirect share 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/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/professions must:

1. Identify, assess, understand, and monitor money laundering, terrorist financing, and proliferation financing risks, taking into account: a. Results of any risk assessment conducted by the State. b. 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 type and extent of risk mitigation measures to be applied.
2. Ensure that the nature and extent of money laundering, terrorist financing, and proliferation financing risk assessments are proportional to the nature and size of operations in financial institutions and specified non-financial businesses/professions.
3. Establish policies, controls, and procedures approved by senior management based on their risk assessment and any state-conducted assessment, to manage and mitigate risks, including resource allocation. The implementation of these controls must be monitored and enhanced as appropriate.
4. Identify and assess money laundering, terrorist 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 using new or developing technologies associated with existing or new products. For this purpose, they must assess these risks before launching these products, practices, or technologies, and take appropriate measures to manage and mitigate emerging risks.
5. Document their risk assessment, update it, and automatically provide it to the supervisory authorities.

Article (10): Customer Due Diligence Measures

1. Financial institutions and specified non-financial businesses/professions must apply the following customer due diligence measures to permanent or occasional customers, whether natural, legal persons, or legal arrangements: a. Not maintaining anonymous accounts or accounts under fictitious names. b. Identifying their clients and verifying their identities through reliable, independent documents, data, or records. c. Verifying that the person acting on behalf of the client is authorized, identifying them, and verifying their identity. d. Identifying the beneficial owner and taking reasonable measures to verify their identity using documents, information, or data obtained from a reliable and independent source, sufficient to satisfy the financial institution that it knows the beneficial owner. e. Understanding the purpose and nature of the business relationship and collecting information as necessary. f. Understanding the client's nature of work when they are legal persons or legal arrangements, and their ownership and control structure. g. Exercising ongoing due diligence on any business relationship, including carefully studying the transactions executed and their purpose to ensure they align with information held about clients, their business activities, and risk profile. This includes, 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/professions must apply these due diligence measures to existing customers based on materiality and risk since the effective date of this Law Decree, taking due diligence measures for existing business relationships at appropriate times, considering whether due diligence has been previously taken and when, and the adequacy of obtained data.