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

In accordance with 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 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 the Law Decree No. (10) of 2018 on Cybercrimes and its amendments, and the Law Decree No. (9) of 2010 on Banks and its amendments, and the Law Decree No. (42) of 2021 on Companies, and the Securities Law No. (12) of 2004, and the Law on Practicing the Auditing Profession No. (9) of 2004 and its amendments, and the Regular Lawyers Law No. (3) of 1999 and its amendments, and the Customs and Taxes Law No. (1) of 1962 and its amendments, and the Law No. (1) of 2000 on Charities and Civil Organizations and its amendments, and the Anti-Corruption Law No. (1) of 2005 and its amendments, and the Law Decree No. (18) of 2015 on Combating Drugs 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 Law Decree 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 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 to achieve

We hereby issue 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 under the provisions of this Law Decree. Unit: The Financial Intelligence Unit established under the provisions of this Law Decree. Funds: Assets of every kind, whether tangible or intangible, movable or immovable, and legal documents or instruments in any form, including electronic or digital, evidencing title to or an interest in such assets, regardless of how they were acquired. This includes virtual assets, circulating currencies, foreign currencies, bank credits, traveler's checks, bank checks, payment orders, financial drafts, cash transfers, shares, securities, bonds, bills of exchange, promissory notes, letters of credit, and any benefit, revenue, share in profits, or other income or value due from or derived from such funds, as well as any other assets that may be used to obtain funds, goods, or services. Virtual Assets: A digital representation of value that can be digitally traded or transferred 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 transactions set forth in Article (4) of this Law Decree as a business, on behalf of or for 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, generated, or obtained, directly or indirectly, in part or in full, from the predicate offense. Dual Criminality: The criminalization of the conduct constituting the offense subject to a request for mutual legal assistance or extradition in the laws of both 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, created by a person or testator, where funds are placed under the control of a trustee, settlor, or protector, forming independent assets that are not part of the trustee's, settlor's, or protector's own property, for the benefit of a beneficiary or a specific purpose. The right to the trust assets remains in the name of the trustee, settlor, or protector, or another person acting on their behalf, who is empowered to manage, use, and dispose of the assets in accordance with the trust's conditions and imposed duties and powers. 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 differs from trusts arising through the operation of law, which do not result from the clear intention or decision of the testator or person to create 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 transactions set forth in Article (2) of this Law Decree, whether for the benefit of a client or on their behalf. Specified Non-Financial Businesses and Professions: Anyone who carries out one or more of the activities 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 establishment of legal persons.
2. Acting or arranging for another person to act as a director, secretary, 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 proxy 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 involving funds, including any purchase, sale, loan, pledge, transfer, delivery, or any other action involving funds, carried out by a natural or legal person, including depositing or withdrawing funds, transferring funds from one account to another, currency exchange, granting or extending credit, purchasing or selling shares and bonds, deposit certificates, or renting safe deposit boxes. Business Relationship: A relationship established between a client 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 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 payable to bearer or 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. Mediators: Any funds or any instrument used or intended to be used, in whole or in part, for money laundering, terrorist financing, or the commission of one or more predicate offenses. Seizure: 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 this Law Decree, including proceeds or mediators 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 terrorist 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 mediators when they are owned or controlled by persons or entities listed pursuant to relevant UN Security Council resolutions applicable to measures initiated by the Committee, and during the duration of those measures and resolutions. Confiscation: The permanent deprivation and loss of funds, proceeds of crime, or mediators based on a judicial ruling issued by the competent court. Controlled Delivery: A technique that allows illegal or suspicious shipments to leave the territory of one or more states, pass through, or enter them with the knowledge of the competent authorities and under their supervision, for the purpose of investigating an offense and identifying the persons involved in its commission. Covert Investigation: An investigative method whereby a judicial police officer assumes a false identity or performs a covert or undercover role to obtain evidence or information related to an 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 position in a foreign country, 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 (directors and deputies).
   • Board members.
   • Positions equivalent to those stipulated in items (a, b) of this paragraph. Account Payable to Originator: Correspondent accounts used directly by a third party to conduct transactions on their behalf. Competent Authority: Any governmental 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 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 presence 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, 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 such acts.
10. Participating in terrorist acts with a group of persons acting for a common purpose, where the participation is intentional and aimed at enhancing the terrorist act or with knowledge of the group's intention to commit any terrorist act. Terrorist Organization: A group of terrorists that commits 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 or attempts thereof.
14. Participating in the commission or attempt of terrorist acts with a group of persons acting for a common purpose, where the participation is intentional, 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 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 resolutions related thereto.

Article (2) Financial Institution Any natural or legal person who carries out, as a business, 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.
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, bills of exchange, deposit certificates, and financial derivatives.
   • Foreign exchange.
   • Exchange instruments, interest rate instruments, and indices.
   • Transferable securities.
   • Trading in commodity futures and forward contracts.
8. Participation in securities issues and provision of financial services related to such issues.
9. Management of individual and collective portfolios.
10. Safekeeping and administration of cash or liquid securities on behalf of others.
11. Other investment, management, administration, or 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 their guarantee, including insurance commitments, agents, and brokers.
13. Exchange of money or currencies.
14. Any other activities or transactions designated 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 activities:

1. Real estate agents and brokers when concluding transactions on behalf of their clients concerning the buying and selling 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, regarding the following activities:
   • Buying and selling real estate.
   • Managing clients' funds, securities, and other assets owned by the client.
   • Managing bank accounts, savings accounts, or securities accounts.
   • Organizing subscriptions for the establishment, operation, or management of companies.
   • Creating, operating, or managing legal persons or legal arrangements, and buying and selling commercial entities.
4. Company and trust service providers.
5. Any other profession or activity designated by the Committee.

Article (4) Virtual Asset Service Providers Any person who carries out 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, where transfer in this context means executing 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. Custody and/or management of assets or tools that allow control over virtual assets.
5. Provision of financial services related to the offering and/or sale of virtual assets, and participation in such services.

Article (5) Money Laundering Offense

1. Any person who commits any of the following acts is guilty of money laundering:
   • Substitution, conversion, or transfer of funds by any person who knows that these funds constitute proceeds of crime, for the purpose of concealing or disguising the illicit origin of these funds, or assisting 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.
   • Acquisition, possession, or use of funds by any person who knows at the time of receipt that these funds are proceeds of crime.
   • Participation, assistance, incitement, conspiracy, provision of advice or counseling, facilitation, complicity, or attempt 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. Any person is guilty of money laundering under the provisions of this Article and resulting from any predicate offenses, whether committed in the State or abroad, provided that the act constitutes a predicate offense under the law in force in the country where the offense was committed 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.

Article (6) Terrorist Financing Offense

1. Any person who intentionally provides or collects funds, from a legitimate or illegitimate 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 terrorist financing.
2. Any person who intentionally, by any means, directly or indirectly, provides or collects funds from a legitimate or illegitimate source, with the aim of facilitating the travel of individuals to a country other than their country of residence or nationality, for the purpose of committing, planning, participating in, preparing, or facilitating terrorist acts, or providing or receiving training in terrorist acts, is guilty of terrorist financing.
3. Any person is also guilty of terrorist financing if they:
   • Attempt to commit a terrorist financing offense.
   • Participate as an accomplice in any terrorist financing offense or attempt to commit one.
   • Organize terrorist acts or direct others to commit them or attempt to commit them.
   • Contribute to the commission or attempt 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 offense stipulated in this Article from the objective and factual circumstances.
5. The terrorist financing offense 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 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 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. The establishment or operation of a shell bank in the State is prohibited.
2. Financial institutions are prohibited from:
   • 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.
   • Maintain, update, and keep adequate and accurate basic information, legal ownership information, and beneficial ownership and control structure information for legal persons established in the State.
   • Enable the Unit, Public Prosecution, and judicial police officers to promptly obtain the information referred to in this Article held by relevant parties.
   • Take necessary measures to facilitate access by financial institutions and specified non-financial businesses and professions to beneficial ownership information and monitoring information, 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:

1. Identify, assess, understand, and monitor money laundering, terrorist 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, transactions, and delivery channels, before determining the overall risk level and before determining the level and type 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 commensurate with the nature and size of the business of financial institutions and specified non-financial businesses and professions.
3. Establish policies, 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 monitor and enhance the implementation of these controls as circumstances dictate.
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 methods, 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, 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 clients, whether natural, legal, or legal arrangements:
   • Not maintain anonymous accounts or accounts under fictitious names.
   • Identify their clients and verify their identities through reliable, independent documents, data, or information.
   • Verify that the person claiming to act on behalf of the client 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 as necessary.
   • Understand the nature of the client's business when they are a legal person or legal arrangement, and their ownership and control structure.
   • Exercise ongoing due diligence on any business relationship, including a detailed examination of transactions carried out to ensure they are consistent with the information held by the institution regarding its clients, their business activities, and their risk profile, including, if necessary, the source of funds, and ensure that documents, data, or information collected are continuously updated and appropriate through review of existing records, especially for high-risk client categories.
2. Financial institutions and specified 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 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