Fighting Money Laundering and Terrorist Financing

Circular No. 631

To Financial Intermediation Institutions and Collective Investment Bodies

We enclose for your reference a copy of Central Bank Circular No. 13459 dated July 19, 2022, amending the Fundamental Decision No. 12837 dated June 26, 2018, concerning the fighting of money laundering and terrorist financing, subject of the Fundamental Circular for Financial Intermediation Institutions No. 1.

Beirut, July 19, 2022

Governor of Banque du Liban

Riad T. Salam

Central Bank Circular No. 13459

Amendment of Fundamental Decision No. 12837 dated June 26, 2018

The Governor of Banque du Liban,
Based on the provisions of Law No. 44 dated November 24, 2015, concerning the fighting of money laundering and terrorist financing, particularly Article Four; Based on the provisions of Law No. 234 dated June 10, 2000, concerning the regulation of the financial intermediation profession; Based on the provisions of Law No. 161 dated August 17, 2011, concerning financial markets; Based on the provisions of Law No. 706 dated December 9, 2005, concerning collective investment bodies in transferable securities and other financial instruments; Based on Fundamental Decision No. 7818 dated May 18, 2001, and its amendments concerning the financial and banking operations monitoring system for fighting money laundering and terrorist financing; Based on Fundamental Decision No. 12837 dated June 26, 2018, and its amendments concerning the fighting of money laundering and terrorist financing; Based on the Financial Markets Working Rules System issued on November 10, 2016, by the Capital Market Authority in Lebanon; Based on the recommendations of the Financial Action Task Force (FATF); Based on the decision of the Central Council of Banque du Liban taken in its meeting held on July 18, 2022;

Decrees as follows:

Article One: The text of Article Five of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"A financial intermediation company shall retain all records obtained through due diligence procedures regarding the 'Client' and the 'Beneficial Owner', particularly their full name, profession, place of residence address, registered office address for legal persons (and main office address if different), financial status, and account files for a minimum of five years after closing the account or terminating the business relationship. It shall retain all documents related to all operations, including commercial correspondence and results of any analysis performed, for a minimum of five years after completing the operation. The operational records must be sufficient to allow the reconstruction of individual transactions, so that these records may serve as evidence in case of any criminal activity."

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Article Two: The text of Item (5) of Article Nine of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"5- Adopting specific policies, controls, and procedures by senior management, based on the motivations stipulated in this article, to classify and mitigate risks."

Article Three: The text of Item (6) of Article Nine of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"6- Documenting risk assessment results when necessary and retaining them to provide to competent authorities upon request."

Article Four: The text of Item (4) of Article Ten of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"4- Applying due diligence procedures to existing clients based on relative risk and materiality, as well as taking due diligence measures regarding current business relationships at appropriate times, considering whether due diligence procedures have been previously taken and their timing, and the sufficiency of obtained data."

Article Five: The text of Item (7) of Article Ten of Fundamental Decision No. 12837 dated June 26, 2018 is repealed.

Article Six: The second paragraph of Article Twelve of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"In addition to the foregoing, the company shall apply the following procedures:
1- Obtaining senior management approval before establishing relationships with correspondent banks.
2- Verifying the nature of the foreign bank's activity (Respondent Bank).
3- Understanding the responsibilities of both the company and the foreign bank (Respondent Bank) with which it deals.
4- Taking steps to achieve self-satisfaction regarding payment accounts opened by correspondent banks (Accounts Through Payable), that these banks have fulfilled their due diligence obligations towards clients who have direct access to the correspondent bank's accounts, and ensuring that these banks can provide relevant due diligence information upon request."

Article Seven: The text of Item (5) of Article Fourteen of Fundamental Decision No. 12837 dated June 26, 2018 is repealed and replaced with the following text:
"5- Ensuring that branches and subsidiaries operating abroad, in which financial companies hold a majority stake, apply the money laundering and terrorist financing countermeasures mandated in Lebanon when the minimum requirements of the host country are less stringent than those applied in Lebanon, to the extent permitted by the host country's laws and regulations. In case the host country permits effective enforcement of special money laundering and terrorist financing countermeasures consistent with those in force in Lebanon, the financial group shall apply appropriate additional money laundering and terrorist financing risk management procedures and inform the 'Special Investigation Authority' thereof."

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Article Eight: Item (11) is added to Article Fourteen of Fundamental Decision No. 12837 dated June 26, 2018 with the following text:
"11- Regarding financial groups, money laundering and terrorist financing countermeasures programs shall be applied at the group level as a whole, including all branches and subsidiaries in which the group holds a majority stake. These programs shall include the following measures:

• Appointing a compliance officer at the group management level.
• Policies and procedures for exchanging information related to customer due diligence and money laundering/terrorist financing risk management.
• Providing customer, account, and transaction information from branches and subsidiaries to the group-level compliance officer when necessary for money laundering/terrorist financing countermeasures, including analytical reports and reports on unusual activities. Branches and subsidiaries shall also receive such information from the group-level compliance officer, aligned with risk management, information analysis, and reporting on unusual activities.
• Providing adequate guarantees regarding the confidentiality and use of exchanged information, including guarantees against tipping off or alerting the client."

Article Nine: This decision takes effect upon its issuance.
Article Ten: This decision shall be published in the Official Gazette.

Beirut, July 19, 2022
Governor of Banque du Liban

Riad T. Salam