Regulations on the Control of Financial and Banking Operations for Fighting Money Laundering and Terrorist Financing

Circular No. 633

To Banks, Financial Institutions, and Leasing Companies For Institutions Issuing and Promoting Payment or Credit Cards Operating in Lebanon

We enclose a copy of Interim Decision No. 13461 dated July 19, 2022, concerning the amendment of the System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing, attached to Interim Decision No. 7818 dated May 18, 2001, subject of Circular No. 83.

Beirut, July 19, 2022
Governor of the Central Bank of Lebanon
Riad T. Salam

Interim Decision No. 13461
Amending the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing"

The Governor of the Central Bank of Lebanon, pursuant to the provisions of Law No. 44 dated November 24, 2015 on Combating Money Laundering and Terrorist Financing, particularly Article 4 thereof, and Interim Decision No. 7818 dated May 18, 2001 and its amendments concerning the System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing, and Interim Decision No. 7136 dated October 22, 1998 and its amendments concerning the conditions for establishing and operating financial institutions. and Interim Decision No. 7540 dated March 4, 2000 and its amendments concerning the conditions for establishing and operating "leasing companies". and Interim Decision No. 7548 dated March 30, 2000 and its amendments concerning financial and banking operations via electronic means, and the recommendations of the "Financial Action Task Force" (FATF), and the decision of the Central Council of the Central Bank of Lebanon taken in its meeting held on July 18, 2022,

hereby decides as follows:

Article 1: The text of the second paragraph of Article 2 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following text:
"In addition to the foregoing, the bank shall apply the following procedures:

1. Obtaining the approval of senior management before establishing relationships with correspondent banks.
2. Verifying the nature of the business activity of the foreign bank with which it deals ("Bank Respondent").
3. Understanding the responsibility of both the bank and the foreign bank with which it deals ("Bank Respondent").
4. Taking what allows reaching self-assurance, regarding payment accounts opened with it by foreign banks ("Accounts Through Payable Correspondent"), that these banks have fulfilled their due diligence obligations towards customers who have direct access to the correspondent bank's accounts, and ensuring that these banks are capable of providing relevant due diligence information upon request."

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Article 2: The text of paragraph (5) of Article 3 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following text:
"5. The bank shall retain all records obtained through due diligence procedures regarding the "Customer" and the "Beneficial Owner" (Owner Beneficial), specifically his full name, profession, place of residence address and registered office address for the corporate customer, and in case of a discrepancy between the main office address and the registered office address, and his financial status, and account files for a period of 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 performed, for a period of at least five years after completing the transaction, provided that transaction records are sufficient to allow the reconstruction of individual transactions so that they may constitute these records evidence for prosecution and defense in case of any criminal activity."

Article 3: The text of Article 6 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001 is repealed and replaced by the following text:
"Banks shall apply due diligence procedures to their existing customers among those account holders opened before the issuance of Law No. 318 dated April 20, 2001 based on relative importance and risks, as well as taking due diligence measures towards existing customer relationships at appropriate times, considering whether due diligence measures have been previously taken and when they were taken, and whether there are any changes in the customer's status or in case of doubt regarding the validity or accuracy of previously declared information, especially in case of actual changes in customer identity or beneficial owner identity. For this purpose, each bank must prepare a specific timeline plan to implement these obligations."

Article 4: The text of the fifth paragraph of Article 9 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following text:
"Fifth, adopting specific policies, controls and procedures by senior management, based on the obligations stipulated in this article, for risk classification and mitigation."

Article 5: The text of paragraph (w) of paragraph (2) of Article 11 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001 is repealed and replaced by the following text:
"w. Auditing transactions throughout the duration of the relationship with customers to ensure consistency of transactions performed with what the bank knows about the customer and their activity pattern and the risks they represent, as well as, if necessary, the source of funds."

Article 6: Paragraph (v) is added to paragraph (2) of Article 11 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001, with the following text for paragraph (v):
"v. Ensuring that the documents, statements or information obtained pursuant to due diligence procedures are continuously updated and appropriate, by reviewing existing records, particularly for high-risk customer categories."

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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 Interim Decision No. 7818 dated May 18, 2001 is repealed and replaced by the following text:
"Each bank must ensure that branches and subsidiaries operating abroad, which it owns a majority in, adopt the money laundering and terrorist financing measures imposed in Lebanon when the minimum requirements in the host country are less stringent than those applied in Lebanon, to the extent permitted by the laws and regulations of the host country. And in case the host country permits the appropriate implementation of specific measures combating money laundering and terrorist financing consistent with the procedures in force in Lebanon, the financial group shall apply appropriate additional risk management procedures for money laundering and terrorist financing and appoint a "special investigation body" for that purpose."

Article 8: The fifth paragraph is added to Article 12 of the "System for Monitoring Financial and Banking Operations to Combat Money Laundering and Terrorist Financing" attached to Interim Decision No. 7818 dated May 18, 2001, with the following text:
"Fifth, regarding financial groups, money laundering and terrorist financing combating programs must be applied at the group level as a whole, including all branches and subsidiaries that the group owns a majority in, and these programs must include the following measures:

• Appointing a compliance officer at the group management level.
• Policies and procedures for exchanging information related to customer due diligence and money laundering and terrorist financing risk management.
• Providing customer, account and transaction information from branches and subsidiaries to the group-level compliance officer when necessary for combating money laundering and terrorist financing, which should include information, analytical reports, and reports on unusual activities. Furthermore, branches and subsidiaries must receive similar information from the group-level compliance officer, commensurate with risk management, data analysis, reports and unusual operations.
• Providing adequate guarantees regarding confidentiality and the use of exchanged information, including guarantees against tipping off or notifying the customer."

Article 9: This decision shall take effect upon its issuance.
Article 10: This decision shall be published in the Official Gazette.

Beirut, July 19, 2022
Governor of the Central Bank of Lebanon
Riad T. Salam