Palestine Law No. 39 of 2022 on Combating Money Laundering and Terrorist Financing

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Official Gazette Office Reference No: 193-8-2022 No. 193 2022/08/14 Law No. (39) of 2022 Concerning the Combating of Money Laundering and Terrorist Financing

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

Based on the Basic Statute 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 Procedures and its amendments, and Law No. (16) of 1960 on Penal Code applicable in the Northern Governorates and its amendments, and Law No. (74) of 1936 on Penal Code applicable in the Southern Governorates and its amendments, and Law No. (10) of 2018 on Cybercrimes and its amendments, and Law No. (9) of 2010 on Banks and its amendments, and Law 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 No. (18) of 2015 on Combating Narcotics and Psychotropic Substances and its amendments, and the Regulation No. (5) of 2021 on Supervision of Dealers and Goldsmiths to Combat Money Laundering and Terrorist Financing, 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 upon the proposal of the Council of Ministers dated 2022/07/04, and upon the powers vested in us, and in the public interest, and to achieve we have issued the following Law:

Chapter One
Definitions and General Provisions

Article (1)
Definitions

The words and phrases appearing in this Law shall have the meanings specified 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 Combating Money Laundering and Terrorist Financing established by the provisions of this Law.
Unit: The Financial Intelligence Unit established by the provisions of this Law.
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, regardless of the method of acquisition, 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 drafts, cash transfers, shares, securities, bonds, bills of exchange, financial drafts, letters of credit, and any benefit, revenue, share in profits, or any other income or value due from or resulting 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. Virtual Asset Service Providers: Any natural or legal person who carries out one or more of the activities or transactions mentioned in Article (4) of this Law as a business, for the benefit of another natural or legal person or on their behalf. Predicate Offense: Any crime stipulated in the prevailing Penal Codes and any other law in force in the State. Proceeds of Crime: Funds resulting from or obtained, directly or indirectly, in part or in full, from the Predicate Offense. Dual Criminality: Criminalization of the conduct constituting the crime 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 crime in the same category or use the same term to name the crime. Person: 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 do not form part of the trustee's, settlor's, or protector's assets, 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, who enjoys the authority to manage, use, and dispose of the assets in accordance with the trust's conditions and duties imposed on them and the powers granted to them.

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Official Gazette Office Reference No: 193-8-2022 No. 193 2022/08/14 Law

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 execution of the 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 orders. 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 mentioned in Article (2) of this Law, whether for the benefit of a customer or on their behalf. Specified Non-Financial Businesses and Professions: Anyone who carries out one or more of the works mentioned in Article (3) of this Law. 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, place of residence, 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 performing a similar function for 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 to collect or distribute funds for charitable, religious, educational, cultural, social, solidarity, or other purposes. Transaction: Any action in funds, including any purchase, sale, loan, mortgage, transfer, delivery, or any other action in funds, carried out by a natural or legal person, including depositing or withdrawing funds, transferring from one account to another, currency exchange, loan, extending credit, buying or selling shares, bonds, certificates of deposit, or renting safes. Business Relationship: A relationship arising between the customer and the financial institution or any of the specified 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 customer 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 bearer or payable to order, without restrictions, 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.

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Official Gazette Office Reference No: 193-8-2022 No. 193 2022/08/14 Instrument: Any funds or any instrument used or intended to be used, in whole or in part, to launder money, finance terrorism, or commit one or more predicate offenses. Precautionary Attachment: 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, including proceeds or instruments that may have been used or intended to be used to commit a crime, or funds used or intended to be used or designated to finance terrorism or terrorist acts or organizations, or laundered funds, and funds equivalent in value to the proceeds. Freezing: A prohibition on transferring, converting, disposing of, moving, or using funds, other assets, equipment, or other instruments when they are owned by persons or entities listed in accordance with applicable UN Security Council resolutions 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 decision 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, in order to investigate a crime and identify the persons involved in its commission. Covert Operation: An investigative method whereby a judicial police officer assumes an identity other than their real one or performs a hidden or false role to obtain evidence or information related to the crime. Politically Exposed Person (PEP): A natural person representing any of the following categories:

1. Foreign PEP: 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 officials of state-owned companies. e. Senior officials of political parties. f. Other persons designated by the Committee.
2. Local PEP: A natural person who holds or has held a prominent public position in the State, including the positions mentioned in paragraph (1) above.
3. 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 from Source: Correspondent accounts used by a third party directly to conduct transactions on their behalf.

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Official Gazette Office Reference No: 193-8-2022 No. 193 2022/08/14 Competent Authority: Any governmental or public body with specific responsibilities in combating money laundering, terrorist financing, or any predicate offenses within its jurisdiction, including the Public Prosecution and Judicial Police Officers. It also includes authorities responsible for registering 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, specified non-financial businesses and professions, and non-profit organizations with the requirements stipulated in this Law, 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 functional levels does not constitute a physical presence. Terrorist Act: Any terrorist act stipulated in the prevailing Penal Code in the State. Terrorist: Any person who commits any of the following acts:
1. Committing, 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.
2. 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 terrorist acts.
Terrorist Organization: A group of terrorists committing any of the following acts:
1. Committing or attempting to commit terrorist acts intentionally and illegally by any means, directly or indirectly.
2. Participating as a partner in terrorist acts.
3. Organizing or directing others to commit terrorist acts.
4. Contributing to the commission or attempt 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 UN Security Council Resolutions: Resolutions issued by the UN Security Council under Chapter VII of the UN Charter concerning combating and preventing terrorism or terrorist financing, or preventing, suppressing, and stopping 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

Any natural or legal person who carries out, as a business, any of the following activities or transactions, whether for the benefit of a customer 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 payment instruments.
6. Financial guarantees and financial commitments.
7. Dealing in:
   a. Money market instruments such as checks, bills of exchange, certificates of deposit, and financial derivatives, etc. b. Foreign exchange.
   c. Currency exchange instruments, interest rates, and index instruments.
   d. Transferable securities. e. Trading in futures and forward contracts for goods.
8. Participating in securities issuances and providing financial services related to these issuances.
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 others.
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.

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Article (3)
Specified Non-Financial Businesses and Professions

The term "Specified Non-Financial Businesses and Professions" refers to any of the following activities:

1. Real estate agents and brokers when concluding transactions on behalf of their customers 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 customers, regarding the following activities:
   a. Buying and selling real estate. b. Managing customers' funds and other assets, securities, and other assets owned by the customer.
   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)
Virtual Asset Service Providers

Anyone who carries out one or more of the following activities is considered a Virtual Asset Service Provider:

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 conducting a transaction on behalf of another natural or legal person transferring a virtual asset from one virtual asset address or 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 Crime

1. Any person who commits any of the following acts is guilty of money laundering:
   a. Substituting, 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 assisting 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, counseling, facilitating, or complicity in, 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. A person is guilty of money laundering according to the provisions of this Article and resulting from any predicate offenses, whether those crimes occurred in the State or outside it, provided that the act constitutes a predicate offense under the law in force in the country where the crime occurred and constitutes a predicate offense under the laws in force in the State.
4. The crime of money laundering applies to persons who commit the predicate offense; the punishment of the perpetrator of the predicate offense does not prevent punishing them for the crime of money laundering.

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Article (6)
Terrorist Financing Crime

1. Any person who intentionally provides or collects funds from a legitimate or illegitimate source by any means, directly or indirectly, with the unlawful intention of using them to commit a terrorist act or by a terrorist or with knowledge that they will be used wholly or partially to commit a terrorist act or by a terrorist or terrorist organization, is guilty of terrorist financing.
2. Any person who intentionally, by any means, directly or indirectly, provides or collects funds from a legitimate or illegitimate source to facilitate the travel of individuals to a country other than their country of residence or nationality for the purpose of committing, planning, participating in, preparing, or facilitating terrorist acts, or providing or receiving training in terrorist acts, is guilty of terrorist financing.
3. Any person is also guilty of terrorist financing if they:
   a. Attempt to commit terrorist financing. b. Participate as an accomplice in any terrorist financing crime or attempt to commit it.
   c. Organize terrorist crimes or direct others to commit them or attempt to commit them.
   d. Contribute to the commission or attempt of one or more terrorist financing crimes with a group of persons acting for a common purpose.
4. Knowledge or intent shall be inferred as essential elements required for the crime stipulated in this Article from the objective and factual circumstances.
5. The crime of terrorist financing applies even if the terrorist act has not occurred, or the funds have not actually been used to implement or attempt to implement it, or the funds are not linked to a specific terrorist act.
6. The crime of terrorist financing 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, Specified Non-Financial Businesses and Professions, and Non-Profit Organizations

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

1. It is prohibited to establish or operate a shell bank in the State.
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.

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Article (8)
Transparency of Legal Persons and Legal Arrangements

1. Competent authorities entrusted with the power to register 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 of legal persons established in the State, as well as their control structure, 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 specified non-financial businesses and professions to beneficial owner information and monitoring information, for the purpose of implementing the provisions of Articles (10) and (11) of this Law.
2. Share ownership in the State shall be direct, and indirect ownership is prohibited.
3. Bearer shares are prohibited in the State.
4. Nominal directors are prohibited in the State.
5. Trustees or direct trusts must disclose their status to financial institutions and specified 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.

Article (9)
Risk-Based Approach

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

1. Identify, assess, understand, and monitor money laundering, terrorist financing, and proliferation financing risks, taking into account:
   a. Results of any risk assessment conducted by the State. b. All risk factors related to their customers, 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, terrorist financing, and proliferation financing risk assessments must be commensurate with the nature and size of the business in financial institutions and specified non-financial businesses and professions.
3. Establish policies and controls, approved by senior management, based on their risk assessment and any assessment conducted by the State, to manage and mitigate risks, including resource allocation, and monitor the implementation of these controls and enhance them as required.

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4. Identify and assess money laundering, terrorist financing, and proliferation financing risks that may arise from developing new products, professional practices, 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 supervisory authorities.

Article (10)
Customer Due Diligence Measures

1. Financial institutions and specified non-financial businesses and professions must take the following customer due diligence measures for permanent or occasional customers, whether natural, legal, or legal arrangements:
   a. Not maintaining anonymous accounts or accounts under fictitious names. b. Identifying their customers and verifying their identities through reliable and independent documents, data, or records.
   c. Verifying that the person claiming to act on behalf of the customer is authorized to do so, and identifying 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 customer'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 examining transactions executed in detail and their purpose to ensure they are consistent with the information held by the institution regarding their customers, 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 customer categories.
2. Financial institutions and specified non-financial businesses and professions must apply these due diligence measures to their existing customers based on materiality and risk since the date this Law 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.

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Official Gazette Office Reference No: 193-8-2022 No. 193 2022/08/14