Law Decree No. (39) of 2022 Concerning the Prevention of Money Laundering and the Financing of Terrorism

mjr.lab.pna.ps
Official Gazette Office 9 Reference No: 193-8-2022 No. 193 2022/08/14

Law Decree No. (39) of 2022
Concerning the Prevention of Money Laundering and the Financing of Terrorism

President of the State of Palestine
President of the Executive Committee of the Palestine Liberation Organization

Based on the Basic Law of the Palestine Liberation Organization, and the Basic Law amended in 2003 and its amendments, and after reviewing Law No. (3) of 2001 on Criminal Procedure and its amendments, and Law No. (16) of 1960 on Penalties applicable in the Northern Governorates and its amendments, and Law No. (74) of 1936 on Penalties applicable in the Southern Governorates and its amendments, and Law Decree No. (10) of 2018 on Cybercrimes and its amendments, and Law Decree No. (9) of 2010 on Banks and its amendments, and Law Decree No. (42) of 2021 on Companies, and Law No. (12) of 2004 on Securities, and Law No. (9) of 2004 on the Practice of the Accounting Profession and its amendments, and Law No. (3) of 1999 on Regular Lawyers and its amendments, and Law No. (1) of 1962 on Customs and Taxes and its amendments, and Law No. (1) of 2000 on Charitable Associations and Civil Organizations and its amendments, and Law No. (1) of 2005 on Combating Corruption and its amendments, and Law Decree No. (18) of 2015 on Combating Narcotics and Psychotropic Substances and its amendments, and the system for supervising traders and goldsmiths of precious metals and gemstones to combat money laundering and the financing of terrorism No. (5) of 2021, and the United Nations Convention against Transnational Organized Crime of 2000, and the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988, and the four Geneva Conventions and their Additional Protocols, and the Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons, including Diplomatic Agents of 1973, and the Convention on the Physical Protection of Nuclear Material of 1980, and the International Convention for the Suppression of Acts of Nuclear Terrorism of 2005, and based on the proposal of the Council of Ministers dated 2022/07/04, and on the powers vested in us, and in the public interest, and to achieve we have issued the following Law Decree:

Chapter One
Definitions and General Provisions

Article (1)
Definitions

The words and phrases appearing in this Law Decree shall have the meanings assigned to them below, unless the context indicates otherwise:

State: The State of Palestine.
President: The President of the State.
Palestine Monetary Authority: The Palestine Monetary Authority.
Committee: The National Committee for the Prevention of Money Laundering and the Financing of Terrorism established by the provisions of this Law Decree.
Unit: The Financial Intelligence Unit established by the provisions of this Law Decree.
Funds: Assets of every kind, economic resources including oil and other natural resources, property of every kind, whether tangible or intangible, movable or immaterial, whether physical or non-physical, however acquired, virtual assets, and documents or legal instruments of any form, including electronic or digital, indicating ownership rights to these funds or a share or benefit therein, and circulating currencies, foreign currencies, bank credits, traveler's checks, bank checks, payment orders, financial transfers, and cash transfers, shares, securities, bonds, bills of exchange, financial instruments, letters of credit, and any benefit, revenue, share in profits, or any other income or value due from or derived from these funds, and any other assets that may be used to obtain funds, goods, or services. Virtual Assets: A digital representation of value that can be traded or transferred digitally, and can be used for payment or investment purposes. Virtual assets do not include the digital representation of official currencies, securities, and other financial assets covered by this Law Decree. Providers of Virtual Asset Services: Any natural or legal person who carries out one or more of the activities or transactions set forth in Article (4) of this Law Decree as a business, for the benefit of another natural or legal person or on their behalf. Predicate Offense: Any offense stipulated in the applicable Penal Laws and any other law in force in the State. Proceeds of Crime: Funds derived from or obtained, directly or indirectly, partially or fully, from the Predicate Offense. Dual Criminality: Criminalizing the conduct constituting the offense subject to the request for mutual legal assistance or extradition in the laws of the Requesting State and the Requested State, regardless of whether the laws of both countries classify the offense in the same category or use the same term to name the offense. Person: A natural or legal person. Trust: Legal relationships arising inter vivos or upon death, by a person or testator, when funds have been placed under the control of a trustee, settlor, or protector, independently and not part of the trustee's, settlor's, or protector's assets, for the benefit of a beneficiary or for a specific purpose, such that those assets constitute funds of the trustee, settlor, or protector, and the right to the trust assets remains in the name of the trustee, settlor, or protector, or in the name of another person on their behalf, and they enjoy the authority to manage, use, and dispose of the assets in accordance with the trust's conditions and the duties imposed on them and the powers granted to them. Direct Trust: A trust created clearly by the testator or person, usually in the form of a document, such as a written trust deed. This trust differs from trusts created through the operation of law and not resulting from the clear intention or decision of the testator or person to create a trust or similar legal
arrangements such as trusts created by court order. Legal Arrangement: Direct trusts or any similar legal arrangements. Financial Institution: Any natural or legal person subject to the laws, regulations, and instructions in force in the State, which carries out any of the activities or transactions set forth in Article (2) of this Law Decree, whether for the benefit of a client or on their behalf. Designated Non-Financial Businesses and Professions: Anyone who carries out one or more of the works stipulated in Article (3) of this Law Decree. Company and Trust Service Providers: Any person who provides any of the following services to other parties on a commercial basis:

1. Acting as a agent for the formation of legal persons.
2. Acting or arranging for another person to act as a director, secretary of a company, partner in a general partnership, or in a similar position related to other legal persons.
3. Providing a registered office, business address, residential address, mailing address, or administrative address for a company, general partnership, or any other legal person or other legal arrangement.
4. Acting or arranging for another person to act as a trustee of a direct trust or perform a similar function on behalf of another person in the form of legal arrangements.
5. Acting or arranging for another person to act as a nominee shareholder for the benefit of another person.
   Non-Profit Organization: Any legal person, legal arrangement, association, or civil organization that operates primarily in collecting or distributing funds for charitable, religious, educational, cultural, social, solidarity, or other purposes. Transaction: Any action regarding funds, including any purchase, sale, loan, pledge, transfer, delivery, or any other action regarding funds, carried out by a natural or legal person, including depositing or withdrawing funds, transferring from one account to another, currency exchange, loan, extension of credit, purchase or sale of shares and bonds, deposit certificates, or renting safes. Business Relationship: A relationship arising between the client and the financial institution or any of the Designated Non-Financial Businesses and Professions regarding the activities, services, or products provided to them. Beneficial Owner: The natural person who ultimately owns or controls the client and/or the natural person on whose behalf a transaction is being conducted, including the person who exercises ultimate effective control over a legal arrangement or legal person or manages it. Bearer Negotiable Instruments: Monetary instruments in the form of bearer documents such as traveler's checks, and negotiable instruments (including checks, promissory notes, and payment orders) that are either to bearer or payable to order, without restriction, or issued to a fictitious beneficiary, or in another manner that allows the transfer of rights upon delivery, and incomplete instruments, including (checks, promissory notes, and payment orders) signed with the payee's name omitted. Instrument: Any funds or any instrument used or intended to be used, in whole or in part, for money laundering or the financing of terrorism or the commission of one or more Predicate Offenses. Preservation Order: A temporary prohibition on transferring, converting, disposing of, moving, or using funds, based on a decision issued by the competent court or any authority authorized by the provisions of this Law Decree, including proceeds or instruments that may have been used or intended to be used to commit an offense, or funds used or intended to be used or designated for the financing of terrorism or terrorist acts or organizations, or laundered funds, or funds equivalent in value to the proceeds. Freezing: A prohibition on transferring, converting, disposing of, or moving funds, other assets, equipment, or other instruments when they are owned by persons or entities listed pursuant to relevant Security Council resolutions applicable to measures initiated by the Committee, and during the duration of those measures and decisions. Confiscation: The permanent deprivation and loss of funds, proceeds of crime, or instruments based on a judicial ruling issued by the competent court. Supervised Release: The method that allows illegal or suspicious shipments to leave, pass through, or enter the territory of one or more states with the knowledge of
   their competent authorities and under their supervision, for the purpose of investigating a crime and identifying the persons involved in its commission. Covert Operation: An investigative method whereby a judicial police officer assumes a false identity or performs a hidden or fake role to obtain evidence or information related to the crime. Politically Exposed Person (PEP): A natural person representing any of the following categories:
6. Foreign Politically Exposed Person: A natural person who holds or has held a prominent public position in foreign countries, including the following positions:
   a. Heads of State or Government. b. Senior politicians.
   c. Senior government, judicial, or military officials.
   d. Senior executives of state-owned corporations. e. Senior executives of political parties. f. Other persons designated by the Committee.
7. Domestic Politically Exposed Person: A natural person who holds or has held a prominent public position in the State, including the positions mentioned in paragraph (1) above.
8. International Organization Official: A natural person who holds or has held a prominent position in an international organization, including:
   a. Senior management members (directors and their deputies). b. Board of Directors members.
   c. Positions equivalent to those stipulated in items (a, b) of this paragraph.
   Payable Account: Correspondent accounts used by a third party directly to conduct transactions on their behalf.
   Competent Authority: Any body or government or public authority with specific responsibilities in combating money laundering or the financing of terrorism or any of the Predicate Offenses according to its jurisdiction, including the Public Prosecution and judicial police officers. It also includes authorities responsible for the registration of legal persons, non-profit organizations, and legal arrangements according to the laws and regulations in force in the State. Supervisory Authority: The authority or body entrusted by relevant laws or regulations with supervising, regulating, or monitoring the compliance of financial institutions, designated non-financial businesses and professions, and non-profit organizations with the requirements stipulated in this Law Decree, its executive regulations, instructions, and directives. Shell Bank: A bank that has no physical presence in the country where it is established and licensed, is not part of a financial group subject to unified and effective supervision by competent supervisory authorities, and the presence of a local agent or employees with low job levels does not constitute a physical presence. Terrorist Act: Any terrorist act stipulated in the applicable Penal Law in the State. Terrorist: Any person who commits any of the following acts:
9. Committing or attempting to commit or participating as an accomplice in any terrorist act by any means, whether directly or indirectly, and organizing terrorist acts or directing others to commit them.
10. Contributing to terrorist acts with a group of persons acting for a common purpose, where the contribution is intentional and aimed at enhancing the terrorist act or with knowledge of the group's intention to commit any of the terrorist acts.
    Terrorist Organization: A group of terrorists who commit any of the following acts:
11. Committing or attempting to commit terrorist acts intentionally and illegally by any means, directly or indirectly.
12. Participating as a partner in terrorist acts.
13. Organizing or directing others to commit terrorist acts.
14. Contributing to the commission or attempted commission of terrorist acts with a group of persons acting for a common purpose, where the contribution is intentional, aimed at enhancing the terrorist act, or with knowledge of the group's intention to commit the terrorist act.
    Relevant Security Council Resolutions: Resolutions issued by the United Nations Security Council under Chapter VII of the UN Charter regarding the prevention and combating of terrorism or the financing of terrorism or the prevention, suppression, and cessation of the proliferation or financing of weapons of mass destruction, including Resolutions (1267) of 1999, (1373) of 2001, (2253) of 2015, (1718) of 2006, (1874) of 2009, (2087) of 2013, (2094) of 2013, (2231) of 2015, (2270) of 2016, (2321) of 2016, (2356) of 2017, and all current, future, and subsequent related resolutions.

Article (2)
Financial Institution

A financial institution is any natural or legal person who carries out, as a business, any of the following activities or transactions, whether for the benefit of a client or on their behalf:

1. Accepting deposits and other payable funds from the public, including private banking services.
2. Lending.
3. Financial leasing.
4. Money or value transfer services.
5. Issuing and managing means of payment.
6. Financial guarantees and commitments.
7. Trading in the following:
   a. Money market instruments such as checks, bills of exchange, deposit certificates, and financial derivatives, etc. b. Foreign exchange.
   c. Currency exchange instruments, interest rates, and indices.
   d. Transferable securities. e. Trading in commodity futures and forward contracts.
8. Participation in issues of securities and providing financial services related to these issues.
9. Managing individual and collective portfolios.
10. Holding and managing cash or liquid securities on behalf of others.
11. Other investment, management, administration, or operation of funds or money on behalf of other persons.
12. Insurance and underwriting of life insurance and other types of insurance related to investment and guaranteeing them, including insurance commitments, agents, and brokers.
13. Exchange of money or currencies.
14. Any other activities or transactions determined by the Committee in consultation with the Supervisory Authority.

Article (3)
Designated Non-Financial Businesses and Professions

Designated Non-Financial Businesses and Professions refer to any of the following works:

1. Real estate agents and brokers when concluding transactions on behalf of their clients regarding the sale and purchase of real estate.
2. Dealers in precious metals and gemstones.
3. Lawyers, accountants, and auditors when preparing, executing, or participating in transactions for the benefit of their clients, regarding the following activities:
   a. Buying and selling real estate. b. Managing clients' funds and other assets, their securities, and other assets owned by the client.
   c. Managing bank accounts, savings accounts, or securities accounts.
   d. Organizing contributions for the establishment, operation, or management of companies. e. Establishing, operating, or managing legal persons or legal arrangements, and buying and selling commercial entities.
4. Company and trust service providers.
5. Any other profession or work determined by the Committee.

Article (4)
Providers of Virtual Asset Services

Any person who carries out one or more of the following works is considered a provider of virtual asset services:

1. Exchange between virtual assets and official currencies.
2. Exchange between one or more forms of virtual assets.
3. Transfer of virtual assets, where transfer in this context means carrying out a transaction on behalf of another natural or legal person transferring a virtual asset from one address or virtual asset account to another.
4. Holding and/or managing virtual assets or instruments that allow control over virtual assets.
5. Providing financial services related to the offering and/or sale of virtual assets, and participating in those services.

Article (5)
Money Laundering Offense

1. Any person who commits any of the following acts is guilty of money laundering:
   a. Replacing, converting, or transferring funds by any person, knowing that these funds constitute proceeds of crime, for the purpose of concealing or disguising the illegal origin of these funds, or to assist a person involved in committing the Predicate Offense to evade the legal consequences of their actions. b. Concealing or disguising the true nature, source, location, disposition, movement, ownership, or rights related to funds by any person knowing that these funds constitute proceeds of crime.
   c. Acquiring, possessing, or using funds by any person knowing at the time of receipt that these funds are proceeds of crime.
   d. Participating, assisting, instigating, conspiring, advising, facilitating, colluding, or attempting to commit any of the acts stipulated in this paragraph.
2. Knowledge, intent, or purpose shall be inferred from the objective and factual circumstances, and upon proving that the funds are proceeds of crime, it is not required to obtain a conviction of the person in the Predicate Offense.
3. Any person who commits money laundering according to the provisions of this Article and resulting from any of the Predicate Offenses, whether those offenses occurred in the State or outside it, is guilty, provided that the act constitutes a Predicate Offense under the law in force in the country where the offense occurred and constitutes a Predicate Offense under the laws in force in the State.
4. The money laundering offense applies to persons who commit the Predicate Offense; the punishment of the perpetrator of the Predicate Offense does not preclude punishing them for the money laundering offense.

Article (6)
Financing of Terrorism Offense

1. Any person who intentionally provides or collects funds from a legitimate or illegitimate source by any means, directly or indirectly, with the unlawful intent to use them fully or partially in committing a terrorist act or by a terrorist or terrorist organization, is guilty of the financing of terrorism offense.
2. Any person who intentionally, by any means, directly or indirectly, provides or collects funds from a legitimate or illegitimate source for the purpose of traveling to a country other than their country of residence or nationality to commit, plan, participate in, prepare, or facilitate terrorist acts, or to provide or receive training in terrorist acts, is guilty of the financing of terrorism offense.
3. Any person is also guilty of the financing of terrorism offense if they:
   a. Attempt to commit the financing of terrorism offense. b. Participate as an accomplice in any financing of terrorism offense or attempt to commit it.
   c. Organize terrorist acts or direct others to commit them or attempt to commit them.
   d. Contribute to the commission or attempted commission of one or more financing of terrorism offenses with a group of persons acting for a common purpose.
4. Knowledge or intent shall be inferred as essential elements required for the offense stipulated in this Article from the objective and factual circumstances.
5. The financing of terrorism offense applies even if the terrorist act has not occurred, or the funds were not actually used to implement or attempt to implement it, or the funds were not linked to a specific terrorist act.
6. The financing of terrorism offense applies regardless of whether the country where the alleged perpetrator is located is the same country where the terrorist or terrorist organization is located or in another country, and regardless of the country where the terrorist act occurred or will occur.

Chapter Two
Transparency and Obligations of Financial Institutions, Designated Non-Financial Businesses and Professions, and Non-Profit Organizations

Article (7)
Prohibition of Establishing and Dealing with Shell Banks

1. The establishment or operation of a shell bank in the State is prohibited.
2. Financial institutions are prohibited from doing the following:
   a. Entering into or continuing business relationships or transactions with shell banks. b. Entering into or continuing correspondent banking business, transactions, or any business relationships with shell banks or allowing them to use their accounts.
3. Financial institutions must ensure that responding institutions do not allow their accounts to be used by shell banks.

Article (8)
Transparency of Legal Persons and Legal Arrangements

1. Competent authorities responsible for registering legal persons, non-profit organizations, and legal arrangements must comply with the following:
   a. Ensuring sufficient transparency regarding the beneficial owner of legal persons, non-profit organizations, and legal arrangements that can be established in the State. b. Keeping basic information and information related to legal ownership and beneficial ownership, as well as the control structure of legal persons established in the State, in a sufficient, accurate, and up-to-date manner.
   c. Enabling the Unit, Public Prosecution, and judicial police officers to obtain the information referred to in this Article held by relevant parties promptly.
   d. Taking necessary measures to facilitate access by financial institutions and designated non-financial businesses and professions to beneficial ownership information and monitoring information, for the purpose of implementing the provisions of Articles (10) and (11) of this Law Decree.
2. Share ownership in the State shall be direct, and indirect ownership is prohibited.
3. Bearer shares are prohibited in the State.
4. Nominee directors are prohibited in the State.
5. Trustees or direct trusts must disclose their status to financial institutions and designated non-financial businesses and professions when establishing a business relationship with them or conducting an occasional transaction, in accordance with Article (10) of this Law Decree.

Article (9)
Risk-Based Approach

Financial institutions and designated non-financial businesses and professions must do the following:

1. Identify, assess, understand, and monitor money laundering, terrorism financing, and proliferation financing risks, taking into consideration:
   a. The results of any risk assessment conducted by the State. b. All risk factors related to their clients, countries or geographic regions, products, services, transactions, and delivery channels, before determining the overall risk level and before determining the level and type of risk mitigation measures to be applied.
2. The nature and extent of money laundering, terrorism financing, and proliferation financing risk assessments must be commensurate with the nature and size of the operations of financial institutions and designated non-financial businesses and professions.
3. Establish policies and controls, approved by their senior management, based on their risk assessment and any assessment conducted by the State, to manage and mitigate risks, including resource allocation, and the implementation of these controls must be monitored and enhanced as required.
4. Identify and assess money laundering, terrorism financing, and proliferation financing risks that may arise from developing new products and professional or commercial practices, including risks related to new means of service delivery, and those arising from the use of new or developing technologies related to existing or new products. For this purpose, they must assess these risks before launching these products, practices, or technologies or using them, and take appropriate measures to manage and mitigate the resulting risks.
5. Document their risk assessment, update it, and provide it automatically to the supervisory authorities.

Article (10)
Customer Due Diligence Measures

1. Financial institutions and designated non-financial businesses and professions must take the following customer due diligence measures for permanent or occasional clients, whether natural, legal, or legal arrangements:
   a. Not maintaining anonymous accounts or accounts under fictitious names. b. Identifying their clients and verifying their identities through reliable and independent documents, data, or records.
   c. Verifying that the person purporting to act on behalf of the client is authorized to do so, identifying them, and verifying their identity.
   d. Identifying the beneficial owner and taking reasonable measures to verify their identity using documents, information, or data obtained from a reliable and independent source to the extent that the financial institution is satisfied that it knows the beneficial owner. e. Understanding the purpose and nature of the business relationship and collecting information about it as necessary. f. Understanding the nature of the client's business when they are legal persons or legal arrangements, and their ownership and control structure. g. Exercising ongoing due diligence on any business relationship, including a detailed study of transactions being executed and their purpose to ensure they are consistent with the information held by the institution regarding their clients, their business activities, and their risk profile, including, if necessary, the source of funds, and ensuring that documents, data, or information collected are continuously updated and appropriate through reviewing existing records, especially for high-risk client categories.
2. Financial institutions and designated non-financial businesses and professions must apply these due diligence measures to their existing clients on the basis of materiality and risk since the date this Law Decree enters into force, and take due diligence measures regarding existing business relationships at appropriate times, taking into account whether due diligence measures were previously taken and when, and the adequacy of the data obtained.