Regulations on Financial and Banking Operations for Fighting Money Laundering and Terrorist Financing, Conditions for Establishing Banks, Electronic Banking, Financial Institutions, Money Dealers, Leasing Companies, and FATF Recommendations

Central Bank Circular No. 625
To Banks and Financial Institutions,
And all institutions specified in Article Four of Law No. 44 dated 24/11/2015 concerning the Regulation of Money Laundering and Terrorist Financing

We hereby enclose a copy of Interim Decision No. 13440 dated 27/5/2022 regarding the amendment of:

• The System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing, attached to Fundamental Decision No. 7818 dated 18/5/2001, subject of Circular No. 83.
• Fundamental Decision No. 12837 dated 26/6/2018 concerning the Combat of Money Laundering and Terrorist Financing attached to Circular No. 1 for Financial Intermediation Institutions.
• Fundamental Decision No. 7548 dated 30/3/2000 concerning Financial and Banking Operations by Electronic Means attached to Circular No. 69.
• The Implementing System for the Law Regulating the Profession of Money Dealers attached to Fundamental Decision No. 7933 dated 27/9/2001, subject of Circular No. 3 for Money Dealers Institutions.
• Fundamental Decision No. 12174 dated 21/1/2016 concerning the conditions for practicing leasing operations according to Articles 183 and 184 of the Monetary and Banking Law, attached to Circular No. 2 for "Leasing Companies".
• Fundamental Decision No. 7739 dated 21/12/2000 concerning the conditions for establishing banks in Lebanon, subject of Circular No. 79.
• Fundamental Decision No. 7136 dated 22/10/1998 concerning the conditions for establishing and operating financial institutions, subject of Circular No. 2 for Financial Institutions.
• Fundamental Decision No. 7540 dated 4/3/2000 concerning the conditions for establishing and operating "Financial Leasing" companies, subject of Circular No. 1 for Financial Leasing Companies.
• Fundamental Decision No. 12147 dated 22/12/2015 concerning the application of decisions of the Council of the Central Bank, subject of Circular No. 136.

Beirut, on 27 May 2022
Governor of the Central Bank of Lebanon
Riad T. Souki

Interim Decision No. 13440
Amendment of Anti-Money Laundering and Counter-Terrorist Financing Provisions in the Regulatory Texts Issued by the Central Bank of Lebanon

The Governor of the Central Bank of Lebanon,
Based on the provisions of the Monetary and Banking Law, particularly Articles 174, 182, and 184 thereof, And based on the provisions of Law No. 44 dated 24/11/2015 concerning the Regulation of Money Laundering and Terrorist Financing, particularly Article Four thereof, And based on the provisions of Law No. 347 dated 6/8/2001 concerning the Regulation of the Money Dealers Profession in Lebanon, And based on the provisions of Law No. 234 dated 10/6/2000 concerning the Regulation of the Financial Intermediation Profession, And based on the provisions of Law No. 160 dated 27/12/1999 concerning the Regulation of Financial Leasing Operations, And based on the provisions of Law No. 161 dated 17/8/2011 concerning Financial Markets, And based on Fundamental Decision No. 7818 dated 18/5/2001 and its amendments concerning the System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing, And based on Fundamental Decision No. 7548 dated 30/3/2000 and its amendments concerning Financial and Banking Operations by Electronic Means, And based on Fundamental Decision No. 7933 dated 27/9/2001 and its amendments concerning the Implementing System for the Law Regulating the Money Dealers Profession, And based on Fundamental Decision No. 12174 dated 21/1/2016 and its amendments concerning the conditions for practicing leasing operations according to Articles 183 and 184 of the Monetary and Banking Law, And based on Fundamental Decision No. 7739 dated 21/12/2000 and its amendments concerning the conditions for establishing banks in Lebanon, And based on Fundamental Decision No. 7136 dated 22/10/1998 and its amendments concerning the conditions for establishing and operating financial institutions, And based on Fundamental Decision No. 7540 dated 4/3/2000 and its amendments concerning the conditions for establishing and operating "Financial Leasing" companies, And based on Fundamental Decision No. 12837 dated 26/6/2018 and its amendments concerning the Combat of Money Laundering and Terrorist Financing directed at intermediation institutions, And based on Fundamental Decision No. 12836 dated 26/6/2018 concerning the Combat of Money Laundering and Terrorist Financing directed at collective investment bodies, And based on Fundamental Decision No. 12147 dated 22/12/2015 concerning the application of decisions of the Council of the Central Bank, And based on the Financial Markets Operating Rules System No. 3000 issued on 10/11/2016 by the Financial Markets Authority in Lebanon, And based on the recommendations of the "Financial Action Task Force" (FATF), And based on the decision of the Central Bank Council taken in its meeting held on 20/5/2022,

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It is decided as follows:

Article 1: The first paragraph of Article 2 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« The Bank must not enter into or continue a correspondent relationship with a shell bank, and when establishing relationships with foreign correspondent banks or similar correspondent banking relationships, it must obtain supporting documents confirming its actual existence, in addition to ensuring that it does not deal with shell banks, enjoys a good reputation, is subject to adequate supervision, and has undergone money laundering or terrorist financing investigation or supervisory measures, and adopts sufficient and effective anti-money laundering and counter-terrorist financing procedures. »

Article 2: The text of each of Item (3) at the beginning of Item (4), Paragraph (c) of Item (4), Item (5), and Item (6) of Article 3 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« 3- The employee responsible for executing the transaction must apply due diligence procedures, including verifying the customer's identity, regardless of the transaction value, if it is observed that a single or multiple related transactions occur in amounts less than the minimum threshold mentioned in Item (2) of this Article and reach or exceed 10,000 USD or its equivalent, or if suspicion arises regarding a customer's attempt to launder money or finance terrorism. » « 4- In order to verify the customer's identity and the beneficial owner, the employee responsible for executing the transaction must request from the customer or their authorized representative the following official documents or data: » « c- If the transaction is conducted through an agent or a person acting on behalf of the customer, the original or a certified copy of the power of attorney or evidence proving that this person is authorized to do so, in addition to presenting documents related to the identity of the agent and the principal or person acting on behalf of the customer, and verifying them. Due diligence procedures specified in Item (2) of Article 3 above must also be applied to non-professional agents. » « 5- The Bank must retain information about the "Customer" and the "Beneficial Owner (Owner Beneficial)", particularly their full name, profession, place of residence address, and registered business address for corporate customers (and main place of work if different), as well as their financial status, and copies of all documents relied upon for verification. Account files must be kept for at least five years after closing the account or terminating the business relationship, and all documents related to transactions (including commercial correspondence and results of any analysis) must be kept for at least five years after completing the transaction. Transaction records must be sufficient to allow reconstruction of individual transactions for prosecution and investigation, such that these records may serve as evidence in case of any criminal activity. » « 6- If due diligence procedures specified in Item (2) of Article 3 of this Law cannot be performed satisfactorily for the customer and beneficial owners, the account must not be opened or business commenced, or the transaction conducted, or the business relationship terminated. Consideration must also be given to notifying the "Special Investigation Body" established by Law No. 318 dated 20/4/2001 (which is deemed replaced by Law No. 44 concerning the Regulation of Money Laundering and Terrorist Financing dated 24/11/2015). » ../..

Article 3: The beginning of Article 5 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« The Bank must immediately notify the Governor of the Central Bank of Lebanon in his capacity as head of the "Special Investigation Body" if it has confirmations or suspicions, based on reasonable or objective grounds, that the banking transaction or its attempted execution relates to money laundering, related predicate crimes, terrorist financing, terrorist acts, or terrorist organizations, regardless of the transaction amount, particularly when: »

Article 4: The text of Article 6 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« Banks must implement due diligence procedures continuously and at appropriate times based on relative importance and risks, for all their customers including those with accounts opened prior to the issuance of Law No. 318 dated 20/4/2001, resulting from any changes that may occur in the customer's status, particularly if there is doubt about the accuracy or validity of declared information. For this purpose, each bank must prepare specific action plans with defined timelines to implement these obligations. »

Article 5: The text of each of the fifth paragraph of "Article 9", Item (5) of Article Nine, and the ninth paragraph of "Article 12 bis" of Fundamental Decision No. 12837 dated 26/6/2018, Item (5) of the fifth paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016, Item (12) of the second paragraph of "Article 15" of the Implementing System for the Law Regulating the Money Dealers Profession attached to Fundamental Decision No. 7933 dated 27/9/2001, and the ninth paragraph of Item (11) of "Article 9 bis" of Fundamental Decision No. 7548 dated 30/3/2000 is repealed and replaced with the following text:
« Adoption of a specific policy by senior management, based on the obligations specified in this Article, to classify risks and determine control procedures to be implemented by concerned parties with the aim of mitigating these risks. »

Article 6: The text of the first paragraph of Item (7) of "Article 12" of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« When relying on services of intermediaries such as (Introducers & Brokers), or when relying on any third party, it must be ensured that they are regulated and supervised, meet the Financial Action Task Force criteria for due diligence procedures and record keeping, and that information can be obtained from them without delay to identify the "Customer" and "Beneficial Owner" and understand the nature of the business. Copies of customer identification data and documents related to due diligence procedures must be retained. In all cases, the entity dealing with the third party bears ultimate responsibility for due diligence measures, whether the third party is within or outside Lebanon, taking into account risk mitigation measures particularly related to countries that do not apply FATF recommendations or apply them inadequately. »

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Article 7: The text of the second paragraph of "Article 12" of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001 is repealed and replaced with the following text:
« Each bank must ensure that foreign branches and subsidiaries in which it holds a majority stake apply the anti-money laundering and counter-terrorist financing procedures 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 laws and regulations of the host country. If this is not possible due to conflict with mandatory laws and regulations in effect at the branch or subsidiary location, the bank must apply additional appropriate measures under the "Special Investigation Body" for money laundering and terrorist financing risk management. »

Article 8: The fourth paragraph of "Article 12" is added to the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Fundamental Decision No. 7818 dated 18/5/2001, with the following text:
« Fourth: Banks must take counter-measures proportionate to the risk level, whether regarding countries that invite the Financial Action Task Force to take such measures against them, or based on concerns identified by the bank itself. These measures include, without limitation:

• Obtaining senior management approval to deal with or continue dealing with customers.
• Enhanced monitoring and prioritization.
• Not establishing branches, subsidiaries, or representative offices in these countries.
• Not relying on third parties located in these countries.
• Terminating any correspondent relationships with institutions located in these countries. »

Article 9: The beginning of Article 4 and the text of Items (a) and (c) of Article 4 of Fundamental Decision No. 12837 dated 26/6/2018 are repealed and replaced with the following text:
« In order to verify the customer's identity and beneficial owner, the employee responsible for executing the transaction must request from the customer or their authorized representative the following official documents or data:
« a- If the person is natural, presenting a passport, national ID card, individual registration statement, or residence permit. » « c- If the transaction is conducted through an agent or a person acting on behalf of the customer, presenting the original or a certified copy of the power of attorney or evidence proving that this person is authorized to do so, in addition to presenting documents related to the identity of the agent and the principal or person acting on behalf of the customer, and verifying them. Due diligence procedures must also be applied to non-professional agents. »

Article 10: The beginning of "Article 12 bis" and the text of Items (3) and (1) of the fourth paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016 are repealed and replaced with the following text:
« In order to verify the customer's identity and beneficial owner, the employee responsible for executing the transaction must request from the customer or their authorized representative the following official documents or data:
« 1- If the person is natural, presenting a passport, national ID card, individual registration statement, or residence permit. » « 3- If the transaction is conducted through an agent or a person acting on behalf of the customer, presenting the original or a certified copy of the power of attorney or evidence proving that this person is authorized to do so, in addition to presenting documents related to the identity of the agent and the principal or person acting on behalf of the customer, and verifying them. Due diligence procedures must also be applied to non-professional agents. »

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Article 11: The text of Article Five of Fundamental Decision No. 12837 dated 26/6/2018 is repealed and replaced with the following text:
« The financial intermediation company must retain information about the "Customer" and the "Beneficial Owner (Owner Beneficial)", particularly their full name, profession, place of residence address, and registered business address for corporate customers (and main place of work if different), as well as their financial status, and copies of all documents relied upon for verification. Account files must be kept for at least five years after closing the account or terminating the business relationship, and all documents related to transactions (including commercial correspondence and results of any analysis) must be kept for at least five years after completing the transaction. Transaction records must be sufficient to allow reconstruction of individual transactions for prosecution and investigation, such that these records may serve as evidence in case of any criminal activity. »

Article 12: The text of each of Item (2) of Article Eight, the eighth paragraph of "Article 12 bis" of Fundamental Decision No. 12837 dated 26/6/2018, Item (2) of the second paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016, Item (16) of the second paragraph of "Article 15" of the Implementing System for the Law Regulating the Money Dealers Profession attached to Fundamental Decision No. 7933 dated 27/9/2001, and Item (8) of the second paragraph of "Article 9 bis" of Fundamental Decision No. 7548 dated 30/3/2000 is repealed and replaced with the following text:
« Notifying the Governor of the Central Bank of Lebanon in his capacity as head of the "Special Investigation Body" immediately if it has confirmations or suspicions, based on reasonable or objective grounds, that the transaction or its attempted execution relates to money laundering, related predicate crimes, terrorist financing, terrorist acts, or terrorist organizations, regardless of the transaction amount. Furthermore, if suspicion arises regarding money laundering or terrorist financing at the company and it has reasonable grounds to believe that executing due diligence procedures will alert the customer, it may refrain from continuing these procedures provided that the "Special Investigation Body" is notified immediately. »

Article 13: The text of the last paragraph of Item (1) of Article Nine of Fundamental Decision No. 12837 dated 26/6/2018 is repealed and replaced with the following text:
« Customer risk, country risk, and service risk are taken into consideration, without limitation, when classifying customer and transaction risks:

• Customer Risk (Risk Customer): Customers primarily dealing in cash, such as money dealers, restaurants and cafes, nightclubs, car trading, non-banking institutions conducting cash transfers via electronic means.

• Politically Exposed Persons (PEPs).

• "Offshore" companies.

• Companies located in countries known as tax havens (Tax Haven).

• Customers who do not deal face-to-face with the institution (Non Face-to-Face Customers).

• Customers who deal only through intermediaries (Intermediaries).

• Customers dealing under fiduciary or trust arrangements (Fiduciary / Trust).

• Customers who are nationals of, or residents in, countries that do not apply FATF recommendations or apply them inadequately.
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• Non-profit associations, particularly those newly established without clear programs and funding sources.
  b- Country Risk (Risk Country):

• Stringency of laws concerning anti-money laundering and counter-terrorist financing, and effectiveness of supervisory and judicial authorities responsible for their implementation.

• Existence of bank secrecy.
  c- Country weakness regarding corruption and organized crime.

• Service Risk (Risk Service):

• Private portfolio management.

• Management of collective investment bodies.

• Dealing or trading in financial instruments. »

Article 14: The first paragraph of Article Eleven of Fundamental Decision No. 12837 dated 26/6/2018 is repealed and replaced with the following text:
« Financial intermediation companies must not enter into or continue a correspondent relationship with a shell bank, and when establishing relationships with foreign correspondent banks or similar correspondent banking relationships, they must obtain supporting documents confirming actual existence, in addition to ensuring that they do not deal with shell banks, enjoy a good reputation, are subject to adequate supervision, and have undergone money laundering or terrorist financing investigation or supervisory measures, and adopt sufficient and effective anti-money laundering and counter-terrorist financing procedures. »

Article 15: The text of Item (5) of Article Fourteen of Fundamental Decision No. 12837 dated 26/6/2018 is repealed and replaced with the following text:
« Ensuring that foreign branches and subsidiaries in which financial intermediation companies hold a majority stake apply the anti-money laundering and counter-terrorist financing procedures 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 laws and regulations of the host country. If this is not possible due to conflict with mandatory laws and regulations in effect at the branch or subsidiary location, the company must apply additional appropriate measures under the "Special Investigation Body" for money laundering and terrorist financing risk management. »

Article 16: Item (9) is added to the fourth paragraph of "Article 14" of Fundamental Decision No. 12837 dated 26/6/2018, with the following text:
« 9- Financial intermediation companies must take counter-measures proportionate to the risk level, whether regarding countries that invite the Financial Action Task Force to take such measures against them, or based on concerns identified by the company itself. These measures include, without limitation:

• Obtaining senior management approval to deal with or continue dealing with customers.
• Enhanced monitoring and prioritization.
• Not establishing branches, subsidiaries, or representative offices for the company in these countries.
• Not relying on third parties located in these countries.
• Terminating any correspondent relationships with institutions located in these countries. »

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Article 17: The text of the fifth paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016 is repealed and replaced with the following text:
« Leasing companies must retain information about the "Customer" and the "Beneficial Owner (Owner Beneficial)", particularly their full name, place of residence address, profession, and registered business address for corporate customers (and main place of work if different), as well as their financial status, and copies of all documents relied upon for verification. Account files must be kept for at least five years after closing the account or terminating the business relationship, and all documents related to transactions (including commercial correspondence and results of any analysis) must be kept for at least five years after completing the transaction. Transaction records must be sufficient to allow reconstruction of individual transactions for prosecution and investigation, such that these records may serve as evidence in case of any criminal activity. »

Article 18: The text of the last paragraph of Item (1) of the ninth paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016 is repealed and replaced with the following text:
« Customer risk, country risk, and service risk are taken into consideration, without limitation, when classifying customer and transaction risks:

• Customer Risk (Risk Customer): Customers primarily dealing in cash.
• Politically Exposed Persons (PEPs).
• "Offshore" companies.
• Companies located in countries known as tax havens (Tax Haven).
• Customers who do not deal face-to-face with the institution (Non Face-to-Face Customers).
• Customers who are nationals of, or residents in, countries that do not apply FATF recommendations or apply them inadequately.
• Non-profit associations, particularly those newly established without clear programs and funding sources.
  b- Country Risk (Risk Country):
• Stringency of laws concerning anti-money laundering and counter-terrorist financing, and effectiveness of supervisory and judicial authorities responsible for their implementation.
• Existence of bank secrecy.
  c- Country weakness regarding corruption and organized crime.
• Service Risk (Risk Service):
• Commercial loans.
• Loans not based on sufficient cash/physical guarantees. »

Article 19: The text of Item (4) of the third paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016 is repealed and replaced with the following text:
« Ensuring that foreign branches and subsidiaries in which leasing companies hold a majority stake apply the anti-money laundering and counter-terrorist financing procedures 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 laws and regulations of the host country. If this is not possible due to conflict with mandatory laws and regulations in effect at the branch or subsidiary location, the company must apply additional appropriate measures under the "Special Investigation Body" for money laundering and terrorist financing risk management. »

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Article 20: Item (9) is added to the third paragraph of "Article 12 bis" of Fundamental Decision No. 12174 dated 21/1/2016, Item (24) is added to the second paragraph of "Article 15" of the Implementing System for the Law Regulating the Money Dealers Profession attached to Fundamental Decision No. 7933 dated 27/9/2001, and Item (21) is added to the second paragraph of "Article 9 bis" of Fundamental Decision No. 7548 dated 30/3/2000, with the following text adopted for each of these items:
« Taking counter-measures proportionate to the risk level, whether regarding countries that invite the Financial Action Task Force to take such measures against them, or based on concerns identified by the institution itself. These measures include, without limitation:

• Obtaining senior management approval to deal with or continue dealing with customers.
• Enhanced monitoring and prioritization.
• Not establishing branches, subsidiaries, or representative offices for the institution in these countries.
• Not relying on third parties located in these countries. »

Article 21: The text of each of Paragraph (a) and Paragraph (c) of Item (3) of the second paragraph of "Article 12" of the Implementing System for the Law Regulating the Money Dealers Profession attached to Fundamental Decision No. 7933 dated 27/9/2001 is repealed and replaced with the following text:
« a- If the person is natural, presenting a passport, national ID card, individual registration statement, or residence permit. » « c- If the transaction is conducted through an agent or a person acting on behalf of the customer, presenting the original or a certified copy of the power of attorney or evidence proving that this person is authorized to do so, in addition to presenting documents related to the identity of the agent and the principal or person acting on behalf of the customer, and verifying them. Due diligence procedures specified in Item (1) of this paragraph must also be applied to non-professional agents. »

Article 22: The text of each of Item (6) of the second paragraph of "Article 15" and Item (7) of the second paragraph of "Article 9 bis" of the Implementing System for the Law Regulating the Money Dealers Profession attached to Fundamental Decision No. 7933 dated 27/9/2001, and Fundamental Decision No. 7548 dated 30/3/2000 is repealed and replaced with the following text:
« Retaining information about the "Customer" and the "Beneficial Owner (Owner Beneficial)", particularly their full name, place of residence address, profession, and registered business address for corporate customers (and main place of work if different), as well as their financial status, and copies of all documents relied upon for verification. Account files must be kept for at least five years after closing the account or terminating the business relationship, and all documents related to transactions (including commercial correspondence and results of any analysis) must be kept for at least five years after completing the transaction. Transaction records must be sufficient to allow reconstruction of individual transactions for prosecution and investigation, such that these records may serve as evidence in case of any criminal activity. »

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Article 23: The text of the last paragraph of Item (8) of the second paragraph of "Article 15" of the Implementing System for the Law Regulating the Money Dealers Profession is repealed.