Circular 2/2017: Regulations Governing the Use of Foreign Currency for Opening Documentary Credits

Central Bank of Libya Telegram Address: CBL - Tripoli - Libya 1103

Reference: R M S 804 (279) Circular R M N No. (2)/2017 Date: 5 Jumaada al-Awwal 1438 AH Corresponding Date: 01 February 2017 AD

To: General Managers of Banks To: Heads of Temporary Administrative Committees of Banks To: General Manager - Libyan Foreign Bank

Greetings...

Subject: Regulations Governing the Use of Foreign Currency for Opening Documentary Credits

Based on the provisions of Law No. (1) of 2005 concerning Banks and its amendments, and on the supervisory and regulatory role exercised by the Central Bank of Libya over banks in accordance with the provisions of the Law.

In addition to Circular R M N No. (2015/3) issued on 30/4/2015, which conveyed the decision of Mr. Governor of the Central Bank of Libya No. (96) of 2015, regarding the establishment of regulations to govern the use of foreign currency for opening documentary credits and collection documents, and the conditions for opening documentary credits for imports from abroad.

And to Circular R M N No. (2016/2), issued on 07/1/2016, regarding the regulations, conditions, and procedures governing the opening of documentary credits.

And to Circular R M N No. (2016/9), issued on 14/7/2016, regarding the amendment of some regulations and conditions issued in Circular R M N No. (2016/2).

And to Circular R M N No. (2016/12), issued on 27/10/2016, which conveyed Circular of Mr. Governor No. (2) of 2016, regarding the implementation of the decision of the Board of Directors of the Central Bank of Libya No. (36) of 2009, regarding the rules governing the opening of accounts in Egyptian banks in commercial banks, and the Know Your Customer (KYC) model for legal entities and individuals.

And within the framework of the Central Bank of Libya's commitment to supporting the stability of the general level of prices of goods and services, and emphasizing the necessity of complying with all instructions governing the opening of documentary credits mentioned above, we inform you of the issuance of instructions of the Central Bank of Libya which are accompanied by making some additions and amendments to the regulations governing the opening of documentary credits (noting that these regulations will be reconsidered in the event of the adoption of the import budget or the adoption of any other economic policies), as follows:

First: General Regulations for Opening Documentary Credits:

• Without prejudice to the prescribed ratios for covering documentary credits for some entities from the foreign currency budgets allocated to banks, banks must observe the following when opening documentary credits:

  • Ensure the update of data related to the entity that previously obtained (CBL-CLIENTKEY), and that there are no reasons preventing continuing to deal with it.

  • The value of the credit opened for the applicant entity shall not exceed (20) twenty times its capital, provided that it has a continuous flow of cash in its account at the bank, commensurate with the size of its work, with the necessity of covering the value of the credit in full.

  • The amounts executed in foreign currency for a single entity shall not exceed 3% of the annual budget allocated to cover documentary credits in the following banks: National Commercial Bank, Al-Wahda Bank, Al-Sahari Bank, North Africa Bank.

  • The amounts executed in foreign currency for a single entity shall not exceed 5% of the annual budget allocated to cover documentary credits in the other banks not mentioned in the previous paragraph.

  • The continuous cash deposits of the entity opening the credit, which take place between the period of granting the credit and the next credit, as well as electronic deposits resulting from the entity's sales proceeds via point-of-sale terminals, shall be taken into consideration.

Second: Conditions for Opening Documentary Credits:

1. It is required to deal with correspondents in European Union countries, Britain, the Americas, Australia, and Arab countries with Libyan contributions, which have not previously had notes recorded on them regarding their violations of regulations and international standards and terrorism financing. The Credits Department must request the correspondent bank, via a separate letter from the letter of credit, to verify the validity of the data related to the exporting company (beneficiary) abroad, specifically as follows:

   • Its financial soundness. • The extent to which it practices the same activity and its expertise in the field. • The absence of any legal reservations or suspicions of corruption, money laundering, or terrorism financing in its file. • Verification that the applicant for the credit or any of its board members or authorized persons does not have any share in this company.

Central Bank of Libya P.O. Box 1103 Telegram Address - Misrata - Tripoli - Libya

2. The name of the importing company, the expiration date, and the documentary credit number must be printed on the supplied goods (box, carton, and similar).

3. The entity must provide an insurance document for the goods to the bank opening the credit based on the proforma invoice, issued by one of the local insurance companies.

4. Provide an inspection and survey certificate issued by one of the following international inspection companies: • LLOYD'S REGISTER (LLOYDS) • BUREAU VERITAS • DNV-GL • GQS GLOBAL QUALITY AND SERVICES • GENERAL INSPECTION TECHNICAL OFFICE

The certificate must include evidence that the company inspected the goods during shipment according to recognized inspection standards, regarding quantity, type, weight lists, and packaging of the shipped or delivered goods, according to the specifications of the goods specified in the proforma invoice, and that it bears legal responsibility for the inspection certificates issued by it. In the case where the imported goods are food, medicines, or chemical materials, the certificate must cover the conformity of the internal composition of the goods with the specifications written on the outside, and the conformity of the expiration date written on the goods with the actual expiration date, provided that the goods are newly manufactured.

5. The inspection certificate must include that the goods are free from defects and shortages in quantities, and that they have been delivered to the carrier and shipped on board the vessel named in the bill of lading, provided that the bill of lading is signed by the captain of the vessel.

6. For goods supplied for human consumption, it is required to provide a certificate issued by the competent authorities in the country of export certifying that the goods subject to the credit are free from pests, germs, and radiation, and are suitable for human consumption.

7. Provide the original certificate of origin for the supplied goods issued by the legally competent authority in the country of export.

Third: Procedures for Opening Documentary Credits:

When opening a documentary credit, the separation of competencies and the definition of responsibilities must be observed by clarifying all stages supporting the decision to open the credit within a specified time frame.

1. The bank must document the requests submitted one by one for the purpose of opening documentary credits, giving priority to companies submitting their requests according to the date of receipt of the request. The bank must issue the entity requesting the credit a receipt for the documents of the request to open the credit, specifying the day and date, and reinforced by the signature of the competent employee.

2. The Documentary Credits Department at the bank branch is subject to receiving the file and scrutinizing the proforma invoice according to a model prepared by the bank for this purpose, in which it states the reasons for acceptance or rejection, to be approved by the Head of the Department, in addition to the Internal Audit Department and the Appeals Unit at the branch, and reinforced by the approval of the Branch Manager or Management Director. This stage must not exceed three working days from the date of the day following the receipt of the credit request file, observing the following: • The proforma invoice must be issued by the exporting or manufacturing company or one of its authorized agents. At a minimum, the proforma invoice must include the following information: (a) All data related to the type, description, weight, quantity, and price of the goods or services supplied from abroad, according to the agreement concluded with the exporter. The main data included in the invoice (Reference, Date, Invoice Number, and other main data) must be part of the agreement terms. (b) The name of the manufacturing company, the brand, and the place of manufacture. (c) Specifications of the goods and their internal composition, regarding food, medicines, chemicals, and other goods that are easily tampered with, adulterated, or changed. • Proforma invoices issued by general trading companies are not accepted. • The statistical code provided by the entity must be final and valid. • The proforma invoice must be certified by economic controllers, certifying the guarantee of achieving the abbreviated economic objectives of opening credits, which are as follows:

• That the prices are consistent with the specifications and type of goods supplied.
• That the goods are not prohibited.

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Central Bank of Libya P.O. Box 1103 Telegram Address - Misrata - Tripoli - Libya

3. Egyptian branches refer the accepted requests to the competent committee at the bank for presentation to obtain approval to open documentary credits, within a week from the date of accepting the file, according to a model prepared by the bank for this purpose attached to the request form to open the credit, which must be approved by the bank's customer, and filed with the accepted proforma invoice, and include all required documents.

4. The validity of the approval to accept the request to open the credit shall not exceed two weeks from the date of submitting the request to the bank branch, through a committee formed by the bank for this purpose, which must include: Credit Management, Risk Management, Appeals, Internal Audit, including the management competent for foreign operations, and other related departments. It exercises its competencies according to a clear mechanism, including verifying the fulfillment of the conditions and regulations in force.

5. The entity must provide an original and recent certificate addressed to the bank, certifying the settlement of all tax dues.

6. The entity must provide an original and recent certificate addressed to the bank, certifying the settlement of all statutory guarantee dues.

7. The entity requesting the credit must organize a written undertaking to commit to paying all fees due on the goods upon receipt.

8. The competent committee studying requests to open documentary credits issues a certificate certifying that it has studied the file of the applying entity and the request to open the credit, and that it was found to meet all financial, legal, and administrative aspects, and there is no prohibition on opening the credit. The minutes of the committee meetings must be approved by the General Manager of the bank.

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Central Bank of Libya Telegram Wing, CBL - Tripoli - Libya

9. The bank statement of the entity requesting the opening of the documentary credit for the previous six months must be referred to the Coverage Committee at the Central Bank of Libya, attached to the proforma invoice.

10. Confirm to the correspondent bank designated by the letter of credit to scrutinize the submitted documents with high professionalism and request comparison with precision. Reject payment when any fundamental discrepancy is noticed in what was stated in the credit conditions, represented by names, quantities, weights, types of goods and services, or violation of inspection and survey conditions during shipment, or change of country of origin, or change of beneficiary, or port of arrival by comparing the data in the proforma invoice with the inspection certificate, health certificate, standard certificate, bill of lading, and others.

11. Without prejudice to the regulations governing customs clearance procedures as stated in Circular R M N No. (2/2016), the documents of the goods must be attached to Form No. (18) approved in Circular Letter R M N No. (129/2006) for each import operation. The form must include the receiver, the method of transfer, the shipment number and its value, and other main data related to the operation, and it must be approved with an official seal.

12. The process of supplying goods via land transport is restricted to goods of origin from neighboring countries, except for goods of a special nature (medicines, infant milk, fertilized eggs), which require the approval of the Banking and Currency Supervision Department.

And peace, mercy, and blessings of God be upon you...

Dr. Mukhtar Al-Hadi Al-Tawil Director of Banking and Currency Supervision Department

Certified by: Mr. Deputy of the Accountant General Mr. Deputy of the Administrative Control Authority Mr. Deputy of the Ministry of Finance Mr. Deputy of the Ministry of Economy Mr. Director of Foreign Operations Department Mr. Head of the Coverage Committee for Accounts of Residents Abroad - Central Bank of Libya Mr. Director of Legal Affairs Department - Central Bank of Libya Mr. Director of Accounts Department - Central Bank of Libya Mr. Director of the Main Financial Information Unit - Central Bank of Libya Mr. Director of the Technical Center for Automated Information - Central Bank of Libya Mr. Managers of Central Bank of Libya branches (Benghazi - Benghazi - Sirte) Mr. Heads of Compliance Units at Banks - For Follow-up Mr. Deputy Director of Banking Supervision and Digital Affairs Department and Compliance Follow-up The Department Concerned with Taxes and Compliance Facilities Date: 7 Muharram 2017 AD

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Form No. 2017/2

Application for Purchase of Foreign Currency For Citizens for Personal (Non-Commercial) Purposes (According to Circular R M N No. 3/2017)

Bank: ____________________ Branch: ____________________

I: ____________________ National ID: ____________________ Registration No.: ____________________ Date and Place of Birth: ____________________ Gender: ____________________ Passport No.: ____________________ National ID Card No.: ____________________ Mother's Full Name: ____________________ Marital Status: ____________________ Number of Family Members: ____________________ Resident in: ____________________ Phone No.: ____________________ I wish to purchase an amount of foreign currency worth __________ US Dollars, provided that the value is credited to my account No. __________

Attached Documents: National IDs of family members.

Applicant Name: ____________________ Signature: ____________________ Date: ____________________

For Bank Use

Branch Manager Approval

Name of Competent Employee: ____________________ Signature: ____________________ Date: ____________________

Name: ____________________ Signature: ____________________ Stamp: ____________________