BANKING COMMISSION OF CENTRAL AFRICA

COBAC REGULATION R-2005/01 RELATING TO THE DUE DILIGENCE OF COVERED INSTITUTIONS REGARDING THE FIGHT AGAINST MONEY LAUNDERING AND TERRORIST FINANCING IN CENTRAL AFRICA

The Banking Commission of Central Africa, meeting on April 1, 2005, in Libreville;

Having regard to the organic texts of the Central African Economic and Monetary Community (CEMAC);

Having regard to the Convention of October 16, 1990, establishing the Banking Commission of Central Africa (COBAC);

Having regard to the Convention of January 17, 1992, on the Harmonization of Banking Regulations in Central African States;

Having regard to Regulation No. 01/02/CEMAC/UMAC/COBAC on the conditions for carrying out and controlling microfinance activities in CEMAC;

Having regard to COBAC Regulation R-2001/07 on internal control in credit institutions;

Having regard to Regulation No. 01/03/CEMAC-UMAC on the prevention and repression of money laundering and terrorist financing in Central Africa;

Having regard to CEMAC Regulation No. 02/00/CEMAC/UMAC/CM on the Harmonization of Exchange Regulations in CEMAC Member States;

Having regard to Regulation No. 02/03/CEMAC/UMAC/CM on payment systems, methods, and incidents;

Considering that Regulation No. 01/03-CEMAC-UMAC on the prevention and repression of money laundering and terrorist financing is part of the international framework for combating money laundering;

Considering that this community text, signed on April 4, 2003, by the President of the Ministerial Committee of the Central African Monetary Union (UMAC), essentially provides for specific due diligence obligations incumbent in particular on financial institutions in the context of combating money laundering and terrorist financing;

Considering that the forty (40) recommendations of the Financial Action Task Force on Money Laundering (FATF) as well as the eight (8) special recommendations on terrorist financing have been reproduced in more detail for banks in the document published by the Basel Committee on Banking Supervision in October 2001;

Considering that this document contains a detailed body of principles to be observed by banks to ensure satisfactory knowledge of the client for the purpose of combating money laundering and terrorist financing; that in this regard, the essential elements presented in the said document constitute recommendations of minimum applicable standards for all banks;

Considering that, as such, they may be supplemented as needed and/or strengthened by complementary measures adapted to the risks incurred by the CEMAC banking system;

Considering that money laundering constitutes a serious threat to the integrity of the financial system and risks compromising public management and the fight against corruption;

Considering that in order to face this threat of systemic risk, COBAC must contribute to the implementation of the standards set out in the report of the Basel Committee; that indeed, the prudential responsibility of the banking supervision body of CEMAC extends to promoting the adoption by all covered institutions of the principles set out and monitoring their application, as well as to developing the improvement of methods used within the framework of transparency requirements;

Considering that within the framework of its regulatory powers defined in the aforementioned banking conventions, COBAC must develop community practices within a prudential perspective, going beyond the scope of combating money laundering and enforcing Customer Due Diligence (CDD) standards fully compliant with international standards, in order to eliminate any regulatory arbitrage and preserve the integrity of banking systems;

D E C I D E S :

Chapter I - Object

Article 1 - This Regulation specifies the obligations of covered institutions regarding the fight against money laundering and terrorist financing, as defined in Articles 1 to 3 of Regulation No. 01/03/CEMAC-UMAC.

Article 2 - The provisions of this Regulation apply to covered institutions operating, in any form whatsoever, in one of the territories of the CEMAC States and subject to COBAC supervision. These include credit institutions within the meaning of Article 4 of the Annex to the Convention on the Harmonization of Banking Regulations in Central African States, banking intermediaries referred to in Article 44 of the said text, microfinance institutions as defined in Regulation No. 01/02/CEMAC/UMAC/COBAC, as well as, at the request of a State, exchange offices.

COBAC is responsible for exercising its supervision and disciplinary power over covered institutions, in order to ensure compliance with the provisions enacted in this Regulation.

Chapter II - Definitions

Article 3 - For the purposes of this text, the following terms shall have the meanings set forth below:

a) National Financial Investigation Agency (ANIF): agency established by Article 25 of Regulation No. 01/03-CEMAC-UMAC in each member State, responsible for receiving, processing, and, where applicable, transmitting to the competent judicial authorities the declarations required of covered institutions;

b) Money Laundering: one or more of the following acts committed intentionally:

1. the conversion or transfer of property derived from a crime or offense within the meaning of the applicable texts in the member State or Regulation No. 01/03-CEMAC-UMAC, with the aim of concealing or disguising the illicit origin of the said property or of assisting any person involved in the commission of such crime or offense to evade the legal consequences of their actions;

2. the concealment or disguise of the nature, source, location, disposition, movement, or ownership of property derived from a crime or offense within the meaning of the applicable texts in the member State or Regulation No. 01/03-CEMAC-UMAC;

3. the acquisition, possession, or use of property derived from a crime or offense within the meaning of the applicable texts in the member State or Regulation No. 01/03-CEMAC-UMAC;

4. participation in any of the above-mentioned acts, conspiracy to commit the said act, attempts to perpetrate it, aiding, abetting, or advising someone to do so, or facilitating its execution.

Knowledge of the origin of the property or the intent to commit the above-mentioned acts, necessary as an element of the offense, may be established from objective factual circumstances.

To serve as a basis for prosecution for money laundering under Regulation No. 01/03-CEMAC-UMAC, predicate offenses committed in another member State or in a third country must constitute a criminal offense in the country where they were committed;

c) Occasional Client: natural or legal person not having an account with the covered institution to which they apply;

d) Referred Client: client whose business relationship with a covered institution results from an invitation by a third party, which may be a credit institution or any other natural or legal person;

e) Non-resident Client: natural or legal person established in a non-member State and requesting the opening of an account or the execution of a transaction with a covered institution located in a member State;

f) Basel Committee: body established in 1975 by the governors of the central banks of the Group of Ten countries, bringing together banking supervisory authorities. It comprises senior representatives of the banking supervisory authorities and central banks of Germany, Belgium, Canada, the United States, France, Italy, Japan, Luxembourg, the Netherlands, the United Kingdom, Sweden, and Switzerland. This Committee generally meets at the Bank for International Settlements in Basel, where its permanent secretariat is located;

g) Sanctions Committee: Committee of the Security Council of the United Nations composed of all members of the said Council, created by resolution No. 1373 adopted on September 28, 2001, by the UN Security Council concerning counter-terrorism and responsible for monitoring the implementation of this same resolution;

h) UMAC Ministerial Committee: decision-making body of CEMAC responsible for examining the broad orientations of the economic policies of the member States and ensuring consistency with common policy;

i) High-Risk Account: account presenting a high degree of risk due to the status of its holder, the dubious or uncertain origin of its resources, or the nature of the transactions carried out therein, its country of origin, or that of the intermediaries;

j) Suspicious Transaction Report: declaration concerning activities deemed suspicious, made to the ANIF by designated persons;

k) Due Diligence Duty: set of measures to be implemented by covered institutions in the fight against money laundering and terrorist financing;

l) Correspondent Institution: institution maintaining an account relationship with a covered institution;

m) Member State: State party to the Treaty establishing CEMAC. These are Cameroon, Congo, Gabon, Equatorial Guinea, Central Africa, and Chad;

n) Subsidiary: company whose share capital is held in whole or in part by a covered institution or a foreign credit institution;

o) Terrorist Financing: the act by any person of providing or collecting, by any means whatsoever, directly or indirectly, unlawfully and intentionally, funds with the intention that they be used, or in the knowledge that they will be used, in whole or in part, to commit:

1. an act that constitutes a terrorist offense as defined by one of the relevant international treaties duly ratified by the member State;

2. any other act intended to kill or seriously injure a civilian, or any other person not taking a direct part in the hostilities in a situation of armed conflict, when, by its nature or context, such act is aimed at intimidating a population or at compelling a government or an international organization to perform or to abstain from performing any act;

p) Trust Fund: entity that collects sums or assets to be transferred to a third-party beneficiary or to the settlor after management;

q) FATF: Financial Action Task Force on Money Laundering, created in 1989 by the Group of Seven most industrialized countries. This intergovernmental body establishes standards, develops, and promotes policies to combat money laundering and terrorist financing. The FATF, an international forum for consultation and coordination in the fight against money laundering and terrorist financing, currently comprises thirty-three (33) members, including thirty-one (31) countries and governments and two (2) international organizations;

r) Jurisdiction Classified as Non-Cooperative in the Fight Against Money Laundering: country or territory whose plenary Assembly of the FATF has determined that its anti-money laundering framework does not allow for effective international cooperation;

s) Electronic Money: money consisting of units of value, called electronic money units. It consists of a debt instrument embedded in an electronic device and accepted as a means of payment;

t) Customer Due Diligence Standards: set of internal measures aimed at ensuring complete control over the clients of covered institutions and their activities. These standards must be consistent with those established internationally;

u) Designated Property: assets or sums subject to a special designation;

v) Listed Persons: natural or legal persons, as well as any organization appearing on a list established by the Sanctions Committee in accordance with United Nations resolutions relating to the prevention and repression of the financing of terrorist acts. These persons must be subject to restrictive measures as terrorists or linked to terrorist organizations or who finance terrorism and/or terrorist organizations;

w) Politically Exposed Person (PEP): person who exercises or has exercised important public functions, such as heads of state or government, political figures, senior public officials, magistrates, or military officers, executives of public and para-public companies, and leaders of major political parties. All natural or legal persons clearly linked or associated with them fall within the scope of this definition;

x) FATF Recommendations: measures that each system should apply in criminal justice and control systems in the fight against money laundering and terrorist financing. These preventive measures, which must be adopted by covered institutions in particular, constitute international standards in this area, the latest revision of which, adopted by more than one hundred and thirty (130) countries, dates from 1996.

The eight (8) special recommendations adopted by the FATF in 2001, to which the 9th recommendation approved in October 2004 was added to supplement the forty (40) recommendations, contain a series of measures aimed at combating the financing of terrorist acts.

y) Branch: secondary establishment without its own legal personality, but with a certain management autonomy due to the endowment made by a covered institution or a foreign credit institution;

z) Atypical Transactions: operations unrelated to the activity, financial habits, or assets of their perpetrator.

Chapter III - Customer Identification

Section I - Obligation of Customer Due Diligence

Article 4 - Every covered institution must, before establishing any business relationship, ascertain the identity of its counterparty by requiring the presentation of a valid original official document.

When the contracting parties requesting the opening of an account or the execution of a transaction appear not to be acting on their own behalf, particularly in cases of trust accounts or mandates, the covered institution is obliged to inquire about the true identity of the represented persons. It must, at the same time, request the identity and address of the representatives as well as the original documents attesting to the delegation of powers granted to them.

In all cases, representatives, regardless of their status, may not invoke professional secrecy to the institution regarding the identity of the actual operator.

For occasional clients, the covered institution must ascertain their identity and address under the same conditions for any transaction involving an amount exceeding a sum defined by the UMAC Ministerial Committee or, failing that, by the member State.

The identification of occasional clients is systematically required in one of the following cases, even if the amount of the transaction is below the threshold set:

1. when the lawful origin of the funds is uncertain;

2. in case of repetition of distinct operations, carried out within a limited period and for an individual amount below the foreseen threshold.

Article 5 - Adequate customer due diligence consists of verifying their identity and address, by requiring the presentation of a valid original official document.

A copy of this official document, including a photograph for natural persons, and the statutes as well as any document establishing the regular constitution of the legal person, must be kept by the institution under the conditions set out in Article 39 of this text.

When the client is a legal person, the covered institution must also require the presentation of the original or a certified true copy of any deed or extract from an official register establishing its name, legal form, and registered office, as well as the powers of the persons acting in its name, determine the origin of the funds and identify their beneficiaries as well as the persons who control these funds.

This obligation also applies to companies whose capital consists of bearer shares or shares held by proxies.

Article 6 - The President of the Banking Commission may, by instruction, subject to specific conditions, restrict or prohibit all or part of the operations carried out for its own account or for the account of third parties by any covered institution with natural or legal persons:

1. domiciled, registered, or having an account with a covered institution located in a State or territory not a member of the Financial Action Task Force (FATF), having insufficient customer due diligence standards or identified as non-cooperative in the fight against money laundering and terrorist financing;

2. convicted of terrorist financing or appearing on the list established by the Sanctions Committee mentioned in Article 3-11 of Regulation No. 01/03-CEMAC-UMAC, in accordance with United Nations resolutions relating to the prevention and repression of terrorist financing acts, or on the list established by the UMAC Ministerial Committee.

Section II - Acceptance of New Clients

Article 7 - Every covered institution must define clear policies and procedures for accepting new clients, including a description of the types of clients likely to represent an above-average risk.

Within this definition, factors such as client history, country of origin, links between accounts, professional activities, and the public or prospective nature of the individuals requesting the business relationship must also be taken into account.

Article 8 - Before admitting a Politically Exposed Person (PEP) to its premises, each covered institution must, in particular, inquire about the origin of the funds, whether this person is a national of one of the CEMAC States or a foreign State or territory.

With regard to this category of clients, the covered institution must implement normal vigilance measures and, in addition:

1. have adequate risk management systems to determine if clients fall into the category of Politically Exposed Persons;

2. obtain authorization from senior management before establishing a business relationship with such clients;

3. take all reasonable measures to identify the origin of assets and funds;

4. ensure enhanced and continuous monitoring of the business relationship.

Article 9 - Non-resident clients who cannot be personally present for an identification interview must, like resident clients, be subject to permanent identification and monitoring.

Each covered institution shall consider the possibility of independent verification of the situation of its non-resident clients by a third party of confirmed reputation.

This verification may be done, in particular, by the client providing a "letter of good standing" issued by their usual banker.

Furthermore, in order to limit the risks for this category of clients, the covered institution must apply specific and adequate measures to them, including authentication of documents presented, request for additional documents, independent contact with clients, intermediation by a third party, and requiring an initial payment through an account opened in the client's name with a bank subject to similar due diligence standards.

In any event, the admission of any new client must be approved by a person authorized to do so, and failing to verify the identity of non-resident clients, the covered institution must refrain from establishing the business relationship.

Article 10 - With regard to referred clients, the covered institution must not accept to open the account requested by intermediaries:

1. when they cannot or will not provide the information obtained in the exercise of their due diligence duty regarding the situation of the beneficiaries of the account or transaction, particularly because they are bound by banking secrecy;

2. if they are not subject to standards equivalent to those set out in this Regulation or in rigorous anti-money laundering legislation;

3. if their own standards are lower than the customer due diligence procedures of the covered institution concerned.

The covered institution must carefully assess the competence and integrity of these intermediaries and verify that they exercise their due diligence duty under the conditions and in accordance with the procedures provided for in this Regulation. If necessary, the covered institution must carry out periodic reviews to ensure that the intermediaries it trusts still meet the criteria for their original reliability.

Section III - Relationships with Correspondent Credit Institutions

Article 11 - Every covered institution must obtain sufficient information on the nature of the activities of correspondent credit institutions, their money laundering prevention and detection procedures, the purpose of the account for which opening is requested, and the state of banking regulation and supervision in the country where these institutions are located.

It must only establish business relationships when these correspondents are supervised by competent authorities applying standards at least equivalent to those published in this Regulation.

When correspondents are registered in a jurisdiction where they have no physical presence or are not part of a regulated financial group, or if they are established in a jurisdiction with insufficient customer due diligence standards or classified as non-cooperative in the fight against money laundering, the covered institution must refrain from dealing with such correspondents.

Every covered institution is required to verify that correspondents apply their due diligence duty in accordance with the provisions of this Regulation and to strengthen its procedures for operations transiting through the accounts of these correspondents.

Section IV - Specific Provisions Relating to the Updating of Data Concerning the Clients of Covered Institutions

Article 12 - Data relating to customer identification must be subject to a periodic review procedure, particularly on the occasion of a large transaction, a substantial change in the standards