Instructions No. (1) of 2018 Regarding Politically Exposed Persons - Banks

Office of Fatwa and Legislation 119 Reference No. 149-11-2018: No. 149 2018/11/28 Instructions No. (1) of 2018 Regarding Politically Exposed Persons The National Committee for Combating Money Laundering and Financing of Terrorism, Based on the provisions of Legislative Decree No. (20) of 2015 regarding the combating of money laundering and the financing of terrorism and its amendments, particularly the provisions of Articles (6) and (14/20) thereof, And based on the powers delegated to us, And in pursuit of the public interest, We have issued the following Instructions:

Article (1) Definitions

1. The words and expressions used in these Instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

• The Law: Legislative Decree No. (20) of 2015 regarding the combating of money laundering and the financing of terrorism and its amendments.
• The Committee: The National Committee for Combating Money Laundering and Financing of Terrorism, established pursuant to the provisions of Article (19) of the Law.
• The Unit: The Financial Monitoring Unit, established pursuant to the provisions of Article (23) of the Law.
• Financial Institution: Any natural or legal person subject to the laws in force in the State of Palestine, whose profession or business is related to any of the activities outlined in Table No. (1) attached to the Law, whether conducted for their own benefit or for the benefit of their clients.
• Specified Non-Financial Businesses and Professions: The businesses and professions listed in Table No. (2) attached to the Law.
• Client: The natural or legal person who has a business relationship with any of the financial institutions or any of the specified non-financial businesses and professions.
• Politically Exposed Person (PEP): A person, their family members, close associates, and partners who hold or have held, whether in Palestine or abroad, public political office or senior positions, which include, for example but not exclusively, the categories stipulated in Article (3) of these Instructions.
• Trust: A legal relationship under which the settlor places funds under the control of the trustee for the benefit of a beneficiary or for a specific purpose, and those assets form funds independent of the trustee's property, with the right to the trustee's assets remaining in the name of the settlor or in the name of another person on behalf of the settlor.
• Legal Arrangement: The legal relationship arising between several parties pursuant to an agreement, including trusts or any similar legal arrangements.

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• Beneficial Owner: The natural person who owns or exercises ultimate effective control, directly or indirectly, and includes the natural person on whose behalf a transaction is conducted, as well as the natural person who exercises ultimate effective control over a legal person or legal arrangement.

2. The definitions set forth in Legislative Decree No. (20) of 2015 regarding the combating of money laundering and the financing of terrorism and its amendments shall apply wherever they appear in these Instructions.

Article (2) Scope of Application
The provisions of these Instructions shall apply to financial institutions and specified non-financial businesses and professions, and their branches operating abroad, to the extent permitted by the laws and regulations in force in the countries where those branches operate.

Article (3) Categories of Politically Exposed Persons
The categories of politically exposed persons fall under the following classification:

1. Public political offices or senior positions, which include, for example, the following:
   a. The Head of State, their advisors, and the heads of institutions affiliated with the Presidency. b. The Prime Minister and members of the Council of Ministers, and those in a similar capacity.
   c. Deputy Ministers, and those in a similar capacity.
   d. Directors and General Managers in government and public service positions, and those in a similar capacity. e. Directors and heads of public bodies and institutions, and those in a similar capacity. f. The Speaker and members of the Legislative Council. g. The President and members of the Judicial Council. h. Judges of courts at all levels.
   i. Members of the Public Prosecution.
   j. Directors and heads of security agencies, and officials therein, and directors of their departments and sections in public administrations and governorates. k. Directors and heads of the Palestinian General Security, and officials therein, and directors of its departments and sections in public administrations and governorates.
   l. Leaders and senior ranks in political parties and Palestinian factions, and individuals holding important positions in these parties and factions.
2. Presidents, vice presidents, and directors of local and foreign charitable institutions, associations, and non-governmental organizations, and members of their boards of directors.
3. Ambassadors, consuls, and members of the diplomatic corps.

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4. Presidents and directors of international organizations, their deputies, and representatives.
5. Executive officials in state-owned companies.

Article (4) Risk-Based Approach
Financial institutions and specified non-financial businesses and professions shall be committed to identifying and understanding risks, assessing them, and applying a risk-based approach in due diligence procedures with politically exposed persons as stipulated in Article (6) of the Law, and establishing the necessary policies, strategies, and measures for this purpose.

Article (5) Enhanced Due Diligence
In addition to the due diligence procedures stipulated in Article (6) of the Law, financial institutions and specified non-financial businesses and professions shall take the following measures regarding politically exposed persons:

1. Establishing appropriate risk management regulations and policies to determine whether the client or beneficial owner is a politically exposed person, whether local or foreign, as well as their family members and close associates.
2. Obtaining senior management approval before establishing or continuing a business relationship with them.
3. Taking reasonable measures to determine the source of wealth and funds for politically exposed persons, based on legally recognized data to verify their origin.
4. Conducting ongoing monitoring of the business relationship, verifying its integrity, and its proportionality to the financial activity, exercising special care in their transactions, operations conducted with any of them, and the purpose of those operations, and recording the results in dedicated records.

Article (6) Insurance Policy Risks
Financial institutions and specified non-financial businesses and professions shall establish and take the necessary measures to determine whether a politically exposed person is the beneficial owner of a life insurance policy, and if so, they shall do the following:

1. Notifying senior management before paying out life insurance proceeds, and conducting a thorough review of the business relationship.
2. Considering reporting to the Unit using the reporting form approved by the Committee for this purpose.

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Article (7) Repeal

1. Instructions No. (1) of 2014 regarding Politically Exposed Persons are hereby repealed.
2. Any provision conflicting with the provisions of these Instructions is hereby repealed.

Article (8) Entry into Force
All competent authorities shall, each within their respective jurisdiction, implement the provisions of these Instructions, which shall take effect from the date of their publication in the Official Gazette. Issued in the city of Ramallah on: 2018/11/1 Gregorian Corresponding to: 23 Safar 1440 Hijri The National Committee for Combating Money Laundering and Financing of Terrorism