Instructions No. (2) of 2016 on Combating Money Laundering and Terrorist Financing for Banks

Reference No. 124-8-2016: 88 / No. 124, 2016/8/25

Instructions No. (2) of 2016 on Combating Money Laundering and Terrorist Financing for Banks

The National Committee for Combating Money Laundering and Terrorist Financing, pursuant to the provisions of Legislative Decree No. (20) of 2015 on Combating Money Laundering and Terrorist Financing and its amendments, particularly Articles (6/1), (20/14), and (23/3) thereof, and based on the powers delegated to us, and in pursuit of the public interest, have issued the following Instructions:

Article (1) Definitions
.1 The words and phrases contained in these Instructions shall have the meanings specified below, unless the context indicates otherwise:
The Law: Legislative Decree No. (20) of 2015 on Combating Money Laundering and Terrorist Financing.
The Unit: The Financial Monitoring Unit.
The Committee: The National Committee for Combating Money Laundering and Terrorist Financing.
The Monetary Authority: The Palestinian Monetary Authority.
Politically Exposed Person: A person, their family members, close associates, and partners who hold or have held public political offices or high-ranking positions, whether in Palestine or abroad, including leaders of political parties, judges, members of the Legislative Council, members of the Public Prosecution, officials of state-owned companies, heads of institutions, bodies, or charitable and civil associations, authorities subordinate to the State of Palestine or any other state, and heads and representatives of international organizations. Client: A natural or legal person who deals with the Bank. Occasional Client: A client who does not have an ongoing business relationship with the Bank. Beneficial Owner: The natural person who ultimately owns or controls a client or an account of a person who carried out the transaction on their behalf, or the natural person who exercises ultimate effective control over a legal person or its management. Business Relationship: The relationship arising between the client and the Bank, relating to the banking activities and services provided by the Bank to its clients. Due Diligence: Identifying the client's identity, legal status, activity, and source of funds, the purpose and nature of the business relationship and the beneficial owner (if any), verifying all of the above, and continuous monitoring of transactions conducted within the framework of an ongoing business relationship by any means specified under relevant legislation, in addition to identifying the nature and purpose of any future relationship between the Bank and the client. Committee Implementing Resolutions of the UN Security Council: The committee established by a decision of the Head of State, tasked with implementing resolutions issued by the United Nations Security Council under Chapter VII, relating to combating and financing of terrorism and the risk of financing the proliferation of weapons of mass destruction. Shell Bank: A bank that has no physical presence, does not employ any person to conduct actual business and management, does not maintain records for its transactions, and is not subject to inspection by a competent regulatory or supervisory authority in the country where it was established or elsewhere. Electronic Transfer: Any transfer process carried out by a bank using electronic means on behalf of the originator of the transfer, whereby funds are sent to another bank, where the transferee may receive them regardless of whether the originator is the same person as the transferee. .2 The definitions contained in Legislative Decree No. (20) of 2015 on Combating Money Laundering and Terrorist Financing shall apply wherever they appear in these Instructions.

Article (2) Scope of Application
The provisions of these Instructions shall apply to all banks operating in the State of Palestine and licensed to operate by the Palestinian Monetary Authority, or branches of Palestinian banks operating abroad to the extent permitted by the laws and regulations in force in those countries.

Article (3) Prohibition of Dealing
The Bank is prohibited from doing the following:
.1 Dealing with persons of unknown identity, persons using fictitious or pseudonymous names, or persons with whom dealing is prohibited under prevailing legislation or based on instructions from the Monetary Authority. .2 Opening numbered accounts. .3 Dealing with shell banks.

Article (4) Due Diligence
The Bank shall exercise due diligence in the following cases:
.1 When a business relationship is established with the client.
.2 When an occasional client wishes to conduct any financial transaction equal to or exceeding five thousand US dollars or its equivalent in other currencies, whether conducted as a single transaction or multiple transactions that appear to be linked, and if the transaction amount is unknown at the time of execution, the client's identity shall be identified as soon as the amount is known or the threshold is reached. .3 When an occasional client wishes to conduct an international or domestic electronic transfer, regardless of its value. .4 When requesting the issuance or receipt of international and domestic electronic transfers, regardless of their value. .5 When there is suspicion of money laundering or terrorist financing. .6 When the Bank has doubts regarding the accuracy or sufficiency of previously obtained data for identifying clients.

Article (5) Customer Identification and Verification Procedures
The Bank shall comply with the following:
.1 Review the client's official documents when commencing business to identify them and the nature of their activity or income sources, and verify this information by obtaining a copy of these documents, signed to certify it as a true copy. .2 Take necessary steps to verify the accuracy of information obtained from the client through neutral and reliable sources, including contacting the official authorities that issued the documents specified in paragraph (1) of this Article. .3 The following identification procedures shall be observed if the client is a natural person:
أ. The client's full name, nationality, date and place of birth, ID number, and passport number for non-Palestinians, current and permanent address of actual residence, phone number, work address, nature of work or activity, purpose of the business relationship, client's income and wealth sources, and any other information the Bank deems necessary to obtain. ب. The agent must present a certified copy of the power of attorney, along with documents proving the identity of both the agent and the principal in case of agency transactions. ج. Documents related to persons with limited or no legal capacity and their legal representatives must be obtained, in accordance with the identification and verification procedures stipulated in this Article. د. Accounts must be opened on special forms approved by the Bank and its branches, containing the client's undertaking that they are the original owner and sole beneficiary. ه. The expected use of the account in terms of funds passing through it, and the number, type, and frequency of expected transactions. .4 Request each client to provide a written declaration identifying the beneficial owner of the intended financial transaction, and identify and verify the beneficial owner according to the identification and verification procedures stipulated in these Instructions. .5 The following procedures shall be observed if the client is a legal person:
أ. Identify the legal person's name, address, headquarters, legal form, date and registration number, owners' names and ownership shares, so the Bank is aware of the ownership structure, identify the identities of its managers, the purpose and nature of the business relationship, and verify the information mentioned in this paragraph through officially certified documents, including obtaining the following documents:

1. Registration certificate issued in accordance with laws in force in Palestine, including certificates issued by the Ministry of Economy, Chambers of Commerce or Industry, municipalities, or any competent authority for registering legal persons according to prevailing procedures.
2. Memorandum of Association.
3. Articles of Association.
4. Authorized signatories and supporting documents for them.
5. Statement of identity of its legal representative.
   ب. Verify the names of shareholders whose ownership exceeds 10% of the company's capital, and attach documents proving this data, except for public joint-stock companies.
   ج. If the beneficial owner is a Politically Exposed Person, the specific identification and verification procedures for such persons stipulated in the Law and these Instructions shall be observed.
   د. When identifying the beneficial owner for a legal person, take necessary steps to ascertain the ownership and controlling management structure, including relying on data and information obtained from official documents until the Bank is certain of the beneficial owner's identity. ه. The expected use of the account in terms of funds passing through it, and the number, type, and frequency of expected transactions. و. The provisions of paragraph (5) of this Article shall apply to foreign companies, and the Bank may request any other information it deems appropriate. .6 Regarding charitable associations, civil bodies, or non-profit entities and those in their category, the name, headquarters, legal form, type of activity, date of establishment, purpose of dealing, authorized signatories, their nationalities, and phone numbers must be identified, and the information required under this paragraph must be verified by presenting official documents evidencing them, including presenting the following documents certified according to standard procedures:
   أ. Registration certificate of the charitable association, civil body, non-profit entity, or non-profit company issued by the competent authorities responsible for its registration.
   ب. The Constitution/Bylaws.
   ج. Documents indicating the authorized signatories for the account, identifying the identity of the authorized signatory according to the identification procedures stipulated in these Instructions, and periodically updating the identification of authorized signatories. د. Statement of identity of its legal representative. .7 The Bank may postpone verification procedures for the client's and beneficial owner's identity until after commencing the business relationship, subject to the following conditions being met collectively:
   أ. Completing verification procedures as soon as possible.
   ب. Necessity to complete ordinary business tasks, without resulting in any money laundering or terrorist financing risks.
   ج. Assessing money laundering and terrorist financing risks for the postponed case, and controlling those risks.
   د. The Bank having approved and clear procedures specifically for this purpose.
   .8 Information required under this Article for legal persons, including charitable associations, civil bodies, and non-profit entities, must be updated annually, and information for natural persons must be updated every two years. The duty to update must be observed in all cases if there is doubt regarding the accuracy of the obtained information.

Article (6) High Risk
The Bank shall comply with the following:
.1 Classify all clients according to the degree of risk related to money laundering and terrorist financing, and periodically review client risk classifications.
.2 Conduct enhanced due diligence procedures when there is a high risk of money laundering or terrorist financing.
.3 Apply simplified due diligence procedures only when it is determined that money laundering or terrorist financing risks are low, through appropriate risk analysis by the State or financial institution. Simplified procedures must be proportionate to low-risk factors and shall not be acceptable when there is suspicion of money laundering or terrorist financing, when high risks materialize, and/or based on instructions from the Monetary Authority. .4 Establish internal policies, procedures, and measures necessary to avoid risks related to the misuse of indirect dealing with clients that are not conducted face-to-face or using technological means. .5 The Bank shall pay special attention to Politically Exposed Persons whose categories are specified in Committee Instructions No. (2014/1) when dealing with them, considering them high-risk persons, by taking the following actions:
أ. Take the identification and verification procedures stipulated in Article (5) of these Instructions.
ب. Obtain senior management approval before commencing business with them or continuing the relationship with existing clients.
ج. Verify the sources of funds intended for deposit and the sources of their wealth.
د. Establish a risk management system for Politically Exposed clients or beneficial owners belonging to this category.
ه. Conduct close and continuous monitoring of these clients' transactions.
و. Take necessary steps to verify the circumstances surrounding any business relationships and transactions conducted with Politically Exposed Persons and their purposes if the Bank determines that any of them lack clear economic justification, and record the results of its actions in its records.

Article (7) Identification Procedures for Electronic Transfers
In addition to the due diligence procedures stipulated in Article (5) of these Instructions, the Bank shall comply with the following:
.1 Obtain detailed information about the originator of the electronic transfer, including the transferor's name, account number, ID or passport number, purpose of the transfer, relationship between the transfer source and the beneficiary, beneficiary's name, account number, and address, beneficiary bank and its address, and support the information provided to the Bank with corroborating documents. .2 If the transfer is incoming to the Bank, detailed information about the transfer beneficiary, their account number, ID or passport number, purpose of the transfer, relationship between the transfer source and the beneficiary, transferor's name (electronic transfer source), their bank, account number, and issuing country address must be obtained, and support the information provided with corroborating documents, in addition to the due diligence procedures stipulated in Article (5) of these Instructions. .3 Establish specific policies, procedures, and measures for dealing with the risks of using transfers in money laundering and terrorist financing, taking into account the volume and/or frequency of transfers, and conducting continuous due diligence to cross-reference the transferor's records with information regarding their actual activity nature and income sources. .4 If any of the information required under paragraphs (1) and (2) of this Article is not provided, the electronic transfer must not be executed. .5 The Bank is prohibited from executing any electronic transfers for any persons or entities listed on the list issued by the International Sanctions Committee based on UN Security Council Resolution No. (1267) of 1999, or any lists issued by the Committee Implementing Resolutions of the UN Security Council.

Article (8) Risk-Based Approach
The Bank shall adopt a risk-based approach, which shall include at a minimum the following:
.1 Identifying, understanding, and analyzing money laundering and terrorist financing risks.
.2 Taking into account the risk assessment results stipulated in paragraph (1) of this Article when implementing anti-money laundering procedures, and establishing policies and strategies based on those risks.
.3 Submitting the results of actions taken under this Article to the Monetary Authority upon request.

Article (9) Special Attention
The Bank shall pay special attention in the following cases:
.1 When leasing safe deposit boxes.
.2 When requesting facilities against deposits.
.3 When depositing cash amounts or traveler's checks into an existing account by persons who do not represent the account owner originally.
.4 When collecting unknown third-party checks from abroad.
.5 When requesting execution of complex or large operations or transactions, and all patterns of unusual transactions and dealings that lack clear financial purposes, and those related to offshore activity.
.6 Large or repeated foreign exchange operations (buying and selling currencies at financial centers) originating from cash amounts.
.7 Exchanging large quantities of small denomination cash for larger denominations.
.8 Depositing large amounts or repeated deposits whose total volume is disproportionate to the client's apparent activity nature and usual transaction size.
.9 Operating an account primarily to transfer large amounts to foreign countries or to receive large transfers from it, such that the bank employee executing the client's instructions finds that the client's activity does not justify such operations. .10 Cashing large foreign-issued bearer checks or named checks that do not align with the client's usual activity nature and size, or are claimed to be gambling winnings, for example. .11 Large or repeated operations related to external activity, which the Bank considers disproportionate to the size of this activity.

Article (10) Record Keeping
The Bank shall retain all records and documents for a period of no less than ten years from the date of completion of the financial transaction, termination of the business relationship, or after the date of the occasional transaction. In the event of account closure due to ongoing investigation cases related to money laundering or terrorist financing crimes, information and documents must be retained until the investigative case is concluded. Record-keeping mechanisms must comply with what is accepted by Palestinian courts and/or laws in force in Palestine. The retained documents must include:
.1 Data related to the due diligence stipulated in Article (5) of these Instructions.
.2 Data related to clarifying financial transactions and cash deals, whether domestic or foreign.
.3 Account files and commercial correspondence.
.4 Copies of personal identity documents or registration certificates.

Article (11) Internal Measures
The Bank shall comply with the following:
.1 Appoint a Compliance Officer at the senior management level, and a deputy in their absence, to perform the following:
أ. Notify the Unit in writing and electronically and immediately about transactions suspected of involving money laundering or terrorist financing or any predicate crimes, whether completed or not, using the form attached to these Instructions and prepared specifically for this purpose, and without closing the account(s) of suspected persons. ب. Receive reports from any Bank employee if the employee suspects that the intended transaction is suspected of being related to money laundering, terrorist financing, or any predicate crimes. ج. Provide the Unit with data related to transactions suspected of being related to money laundering, terrorist financing, or any predicate crimes, and any other information requested, and facilitate their access to relevant records and information to perform their duties. د. Ensure the Bank's compliance with the provisions of the Law and the Instructions issued thereunder. ه. Train employees to enhance their capabilities in detecting money laundering operations. و. Prepare anti-money laundering and terrorist financing policies, and develop an internal procedures manual for compliance with the Law, regulations, and Instructions issued thereunder. ز. Retain all internal documents and reports received and referred to the Unit. ح. Prepare periodic reports on unusual transactions or those suspected of being related to money laundering and terrorist financing. ط. Establish necessary systems to classify clients according to risk degree based on available Bank information and data, and review them periodically. ي. Establish systems and procedures that ensure internal audit bodies perform their role of examining internal control and monitoring systems to verify their effectiveness in combating money laundering and terrorist financing, with the necessity of reviewing them periodically to complete any deficiencies, update them, and develop them to increase efficiency and effectiveness. .2 Enable the Compliance Officer to work independently, ensuring the confidentiality of information received or referred by them in accordance with these Instructions, and enable them to access records and data necessary for conducting examinations and reviewing the systems and procedures established by the Bank to combat money laundering and terrorist financing. .3 Appoint sufficient, suitable, and qualified staff in the field of combating money laundering and terrorist financing, commensurate with the Bank's size, operations, and risks.

Article (12) Daily Financial Transaction Reports
.1 The Bank must provide the Unit with daily reports on financial transactions executed through or by it, including the parties to the financial transactions and their values, as follows:
أ. All incoming or outgoing external electronic transfers to or from Palestine equal to or exceeding US$ 5,000 or its equivalent in other currencies.
ب. All internal electronic transfers between banks equal to or exceeding US$ 5,000 or its equivalent in other currencies.
ج. All checks of any kind equal to or exceeding US$ 5,000 or its equivalent in other currencies.
د. Deposits or withdrawals equal to or exceeding US$ 5,000 or its equivalent in other currencies.
ه. Documentary credits and vouchers equal to or exceeding US$ 5,000 or its equivalent in other currencies, including transfers related to the execution of those credits.
.2 The financial transactions specified in this Article are considered unusual transactions for the purposes of combating money laundering and terrorist financing.
.3 Reports on the transactions specified in this Article shall be sent via electronic means approved by the Unit.
.4 Technical instructions to ensure compliance with this Article shall be issued based on instructions issued by the Unit in coordination with the Monetary Authority.

Article (13) Implementation of UN Security Council Resolutions
The Bank shall immediately implement the obligations contained in resolutions issued by the Committee Implementing Resolutions of the UN Security Council, which are circulated by the Monetary Authority, and prepare the necessary electronic systems to ensure effective implementation of the resolutions.

Article (14) Reporting Form
The Bank shall refer to the guidelines manual attached to these Instructions to help them identify patterns suspected of involving money laundering or terrorist financing, and use it as a tool to educate their employees, while updating it as new matters arise.

Article (15) Repeal
.1 The Anti-Money Laundering Instructions for Banks Operating in Palestine No. (2009/1) issued by the Committee are hereby repealed.
.2 Everything inconsistent with these Instructions is hereby repealed.

Article (16) Entry into Force
All competent authorities shall, each within their respective jurisdiction, implement the provisions of these Instructions. They shall take effect from the date of issuance and be published in the Official Gazette. Issued in Ramallah on: 2016/06/08 Gregorian / 1437/03/03 Hijri National Committee for Combating Money Laundering and Terrorist Financing

Reporting Form
Form No.: (1) For use by the Financial Monitoring Unit Receipt No.:
Date of Receipt:
Time of Receipt:
Bank Reporting Form for a Transaction Suspected of Involving Money Laundering or Terrorist Financing or Any Predicate Crime First: Bank Data:
.1 Bank Name:
.2 Supervisory Authority:
.3 Branch Name where the Transaction Occurred:
.4 Branch Address:
.5 Branch Phone and Fax Numbers: Tel: / Fax:
.6 Manager Name: Tel: Fax:
Second: Client Data:
(A) If the Client is a Natural Person
.7 Name:
.8 Gender: □ Male □ Female
.9 Nationality:
.10 Occupation:
.11 Workplace: .12 Address:
.13 Date of Birth: Day Month Year .14 Place of Birth:
.15 Address according to ID Document:
............................................................................................
District: ................. City: ................ Governorate: ..............
.16 Permanent Residence:
.17 Permanent Residence Abroad (if any):
.18 Phone Numbers and Email: Home Work Mobile Email .19 Type of ID Document:
.20 ID Document Details: Number: Place of Issue: Issue Date: Day: ............ Month: ............ Year: .............. Expiry Date: Day: ............ Month: ............ Year: ..............
(B) If the Client is a Legal Person
(B - 1) Legal Person Data:
.21 Name:
.22 Legal Form:
.23 Headquarters Address: ............................................................................
District: ................. City: ................ Governorate: ..............
.24 Date of Establishment: Day Month Year .25 Paid-up Capital:
.26 Activity Description according to Commercial Register:
.27 Commercial Register Number:
.28 Registration Date:
.29 Licensed Operator Number: .30 Type: □ Exempt □ Small □ Regular (B - 2) Natural Person Authorized Signatory for the Legal Person Data:
.31 Full Name: First Name Father's Name Grandfather's Name Family Name .32 Gender: □ Male □ Female .33 Nationality:
.34 Occupation:
.35 Workplace: .36 Address:
.37 Nature of Relationship with the Legal Person:
.38 Date of Birth: Day Month Year .39 Place of Birth:
.40 Address according to ID Document:
............................................................................................
District: ................. City: ................ Governorate: ..............
.41 Permanent Residence:
.42 Permanent Residence Abroad (if any):
.43 Phone Numbers and Email: Home Work Mobile Email .44 Type of ID Document:
.45 ID Document Details: Number: Place of Issue: Issue Date: Day: ............ Month: ............ Year: .............. Expiry Date: Day: ............ Month: ............ Year: ..............
Third: Beneficiary Data (if any):
.46 Beneficiary Name:
.47 Address:
.48 Nationality:
.49 Beneficiary Bank Name:
.50 Beneficiary Account Number:
Fourth: Suspected Transaction Data:
.51 Transaction Date: Day: Month: Year:
.52 Date of Suspicion: Day: Month: Year:
.53 Transaction Type:
.54 Transaction Value:
.55 Currency Type:
.56 Account Type on which the Transaction was Conducted:
.57 Account Number:
.58 Account Opening Date: Day: Month: Year:
.59 Transaction Description:
..................................................................................................................................
.60 Reasons and Grounds for Suspicion:
..................................................................................................................................