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

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Central Bank Circular No. 605
To Banks and Financial Institutions,
We enclose a copy of Interim Decision No. 13388 dated December 23, 2021, concerning the amendment of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to the Basic Decision No. 7818 dated May 18, 2001, subject of the main Circular No. 83.
Beirut, December 23, 2021
Governor of the Central Bank of Lebanon
Riad T. Salamé

Interim Decision No. 13388
Amendment to the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing"

The Governor of the Central Bank of Lebanon,
Based on the provisions of Law No. 44 dated November 24, 2015, concerning the fight against money laundering and terrorist financing, particularly Article Four thereof, Based on Basic Decision No. 7818 dated May 18, 2001, and its amendments concerning the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing", Based on the resolution of the Central Council of the Central Bank of Lebanon taken in its meeting held on December 15, 2021, Decides as follows:

Article One: The first paragraph of Article 2 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
"The Bank shall not enter into or continue a correspondence relationship with shell banks, and when establishing such relationships with external correspondent banks, it must ensure that they have an actual presence supported by documentary evidence, in addition to not dealing with shell banks and having a good reputation and being subject to adequate supervision. It must also verify whether they have been subject to money laundering or terrorist financing investigations or supervisory actions, and adopt adequate and effective measures against money laundering and terrorist financing."

Article Two: Subparagraph (2) of Article 3 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is fully repealed and replaced by the following:
"(2) Banks, each within its scope of activity, must ensure that they do not hold anonymous or nominal accounts, adopt clear procedures for closing such accounts, and apply due diligence measures that include investigating the identity of each of their permanent and transient customers, residents and non-residents, determining their place of business and tax residence, obtaining the relevant signed declaration, understanding the full ownership structure and/or control over legal entities, identifying the nature of transactions and/or account types, obtaining information related to such nature when necessary, determining the 'beneficial owner', source of funds, and continuously monitoring operations, particularly in the following cases:"

Article Three: Subparagraph (b) of paragraph (4) of Article 3 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
"(b) If the customer is a legal entity (company, foundation, or legal structure), it must provide authenticated documents regarding the assets under the basic system, a registration certificate, ownership structure, a list showing all shares or rights (directly or indirectly), the nature of associated voting rights, and a list of names of persons holding such shares or rights directly, in addition to copies of the identity documents of each legal representative, director, and natural person who directly or indirectly holds a percentage granting them effective control over the company's management, in addition to the statement of the 'beneficial owner' submitted to the Financial Intelligence Unit and the Commercial Register."

Article Four: Paragraphs (5) and (6) of Article 3 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, are repealed and replaced by the following:
"(5) The Bank must retain information on the 'customer' and the 'beneficial owner', particularly their full name, place of residence address, registered office address for legal entities (or main location if different), profession, financial status, and copies of all documents relied upon for verification, as well as account statements for a minimum period of five years after account closure or termination of the customer relationship, and all documents related to operations including commercial correspondence and results of any analysis performed, for a minimum period of five years after the operation is completed. These records may serve as evidence in litigation and audits in case of any criminal offense. (6) When performing the due diligence measures stipulated in subparagraph (2) of Article 3 herein, for satisfactory customers and beneficial owners, accounts may not be closed, transactions initiated or conducted, or customer relationships terminated. Furthermore, Law No. 318 dated April 20, 2001 (considered replaced by Law No. 44 concerning the fight against money laundering and terrorist financing dated November 24, 2015) must be considered regarding notifying the 'Special Investigation Unit'."

Article Five: Article 5 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is fully repealed and replaced by the following:
"The Bank must notify the Governor of the Central Bank of Lebanon as Chairman, and 'the Special Investigation Unit', if it has confirmations or doubts based on reasonable or objective grounds, that the banking operation or its attempt relates to money laundering or related predicate crimes, terrorist financing, terrorist acts, or terrorist organizations, particularly when:"

Article Six: Article 9 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is fully repealed and replaced by the following:
"Banks must take appropriate steps to identify money laundering and terrorist financing risks, evaluate and understand them, and apply the following measures based on this understanding:"

Article Seven: The "second" and "fifth" paragraphs of Article 9 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, are repealed and replaced by the following:
": Second - Establishing risk-based monitoring measures and procedures, adopting, as a minimum, for customers and beneficial owners (Owners Beneficial) and exposed persons politically (s’PEP), and above the general customer group, policies for risk scoring (Scoring Risk) for customers with 'high risk' according to the following enhanced measures and procedures for managing and mitigating risks:
-1 Strengthened monitoring with priority and conducting continuous enhanced follow-up of the customer relationship.
-2 Obtaining more detailed information about customers and beneficial owners (Owners Beneficial) (Levels KYC Increased), particularly determining the source of their wealth.
-3 Obtaining senior management approval for transactions or continuation of transactions with customers and mitigating operations, commensurate with the determined risk level.
-4 Conducting periodic reviews of relationships with customers (Periodic review of relationship).
-5 Conducting continuous peer comparison with accepted similar manufacturing (Peer Comparison).
-6 Establishing an appropriate system to determine if the 'customer' or 'beneficial owner' (Owner Beneficial) is politically exposed (PEP’s).
: Fifth - Adopting a specific policy by senior management, based on the premises stipulated in this Article, for risk scoring and determining control measures required to mitigate them."

Article Eight: The "sixth" paragraph is added to Article 9 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, with the following text:
": Sixth - Documenting risk assessment results and updating them as necessary, retaining them to provide to supervisory authorities when required."

Article Nine: Subparagraph (2) of Article 10 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
"(2) Establishing, within the Central Bank's administration, a Compliance Unit for implementing procedures and regulations concerning the fight against money laundering and terrorist financing (Unit Compliance CFT/AML) and naming it 'the Investigation Unit'. The person in charge of it must have sufficient experience in combating money laundering or hold specialized certifications such as CAMS-Certified Anti-money Laundering Specialist, among others. Employees must possess adequate qualifications, and sufficient resources must be available for them to perform their duties."

Article Ten: Subparagraph (a) of paragraph (2) of Article 11 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
"(a) Establishing and adopting a procedure manual for implementing the provisions of the Law on combating money laundering and terrorist financing and the provisions of this System, and presenting it to the committee referred to in paragraph (1) of Article 10 above."

Article Eleven: The "first" paragraph is added to paragraph (7) of Article 12 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, with the following text:
"Furthermore, when relying on a third party that is part of the financial group, the Bank must do the following:

• Ensure that the third party applies the group's requirements regarding customer due diligence and politically exposed persons (s’PEP), record-keeping, compliance with internal supervisory procedures, and that the group is subject to supervision.
• Mitigate any high risks associated with countries, particularly those that do not apply or inadequately apply the recommendations of the Financial Action Task Force (FATF), through a manual and internal controls related to combating money laundering and terrorist financing specific to the group."

Article Twelve: The "first" paragraph is added to Article 12 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, as paragraphs (10), (11), (12), and (13) with the following text:
"(10) Continuously reviewing any updates on the electronic website of the General Directorate for Internal Control (lb.gov.isf.www) regarding specified names listed in the relevant lists concerning natural, legal persons and entities involved in terrorist or terrorist financing activities, by applying decisions of the 'Special Investigation Unit' through available information systems and notifying them regarding freezing funds, accounts, or operations, including those being attempted or the final assets belonging to these names or under their control. The 'Special Investigation Unit' must be provided within a maximum period of 48 hours with confirmation that it has done so and the available information regarding this matter. (11) Notifying the 'Special Investigation Unit' in case of similarity between the name of one of its customers and a specified name listed in the relevant lists mentioned in paragraph (10) of the 'first' paragraph of Article 12 herein. (12) Applying Recommendation No. 7 of the Financial Action Task Force regarding conducting necessary reviews and periodic freezing of related funds, accounts, or operations, including those being attempted or the final assets. The 'Special Investigation Unit' must be provided within a maximum period of 48 hours with confirmation that it has done so and the available information regarding this matter, and notifying the 'Special Investigation Unit' in cases of similarity, as well as evaluating associated risks. (13) Applying enhanced due diligence measures, commensurate with the risk level, to customer relationships and operations involving natural and legal persons (including financial institutions) from countries that the Financial Action Task Force recommends taking such measures against. For this purpose, the website of this group must be reviewed periodically, especially after each general meeting."

Article Thirteen: The "second" paragraph of Article 12 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
": Second - Subsidiaries and companies operating in countries where Lebanese banks hold a majority stake must adopt, as a minimum, the measures stipulated in this System. In case of impossibility due to conflict with applicable laws and regulations in the country of residence of the subsidiary or company, the Bank must apply appropriate additional measures to manage money laundering and terrorist financing risks and notify the 'Special Investigation Unit' thereof."

Article Fourteen: Article 14 of the "System for Monitoring Financial and Banking Operations against Money Laundering and Terrorist Financing" attached to Basic Decision No. 7818 dated May 18, 2001, is repealed and replaced by the following:
"The provisions of this System apply to financial institutions, leasing companies, and entities that issue and distribute credit or debit cards operating in Lebanon."

Article Fifteen: This Decision takes effect immediately upon its issuance.
Article Sixteen: This Decision shall be published in the Official Gazette.
Beirut, December 23, 2021
Governor of the Central Bank of Lebanon
Riad T. Salamé