Circular to Banks and Financial Institutions No.1912

Banque du Liban

Circular to Banks and Financial Institutions No. 1912

 Attached are a copy of Decision No. 7818 of May 18, 2001, and a copy of the Regulations on the Control of Financial and Banking Operations for Fighting Money Laundering, attached to this Decision.

Beirut, May 18, 2001

The Governor of the Banque du Liban

Riad Toufic Salamé

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

The Governor of the Bank of Lebanon,

 Article 1Article 1:

The attached Regulations on the Control of Financial and Banking Operations for Fighting Money Laundering come hereby into effect.

Article 2Article 2Article 2:

The following provisions are repealed:

1. Paragraph 2 of Article 1 of Decision No. 6349 of October 24, 1996, attached to Circular to Banks and Financial Institutions No. 1475 of October 24, 1996.

2. Decision No. 7511 of January 21, 2000, attached to Circular to Banks No. 1792 of January 21, 2000.

 Article 3Article 3:

This Decision and the attached Regulations shall come into effect upon their issuance.

Article 4Article 4Article 4:

This Decision and the attached Regulations shall be published in the Official Gazette.

Beirut, May 18, 2001

The Governor of the Bank of Lebanon

Riad Toufic Salamé

These Regulations are set under the provisions of Article 5 of Law No. 318 on Fighting Money Laundering.

Section I – Control on financial operations for fighting money laundering

Article 2Article 2Article 2:

All banks and financial institutions operating in Lebanon must exercise control on their operations with clients to avoid involvement in money-laundering operations resulting from any of the offences specified in Law No. 318 of April 20, 2001. For this purpose, they must adopt, for indicative purposes but not restrictively, the compulsory rules set out in these Regulations.

Checking the Client's Identity

1. Banks and financial institutions must, as far as they are concerned, check the identity of all their permanent and transient clients, especially in the following instances:

• Opening accounts of any kind, including fiduciary accounts and numbered accounts.

• Conducting lending operations.

• Concluding contracts for leasing bank safes.

• Conducting cashier's operations when the amount exceeds US$ 10,000 or the equivalent in any other currency.

Cashier's operations include cash payments by the client at the counter (depositing funds, exchanging currencies, purchasing precious metals, purchasing financial instruments in cash, cash subscription to vouchers at the counter, purchasing traveler’s cheques in cash, orders for current transfers in cash, etc.).

 

    2.    Regardless of the operation's value, the officer in charge of the operation must also check the client’s identity: (a) if he notices that, on the same account or on multiple accounts of the same person, several cashier’s operations are being effected separately for an amount less than the minimum specified in Paragraph 1 of this Article; (b) if he suspects that a client is making a money-laundering attempt.

    3.    In order to check the client's identity, the officer in charge of the operation must:

1. Request the following documents from the client:

1. In case the client is a natural person: a passport, an identity card, an individual civil registration, or a residence permit.

2. In case the client is a legal entity: duly registered documents regarding its statutes, its registration certificate, the identity of the person empowered to sign on its behalf, and the identity of its legal representative.

3. In case the operation is effected through an authorized representative: the original power of attorney or a certified copy, in addition to documents regarding the identity of both the client and the authorized representative.

4. In case the operation is effected by correspondence: an authentication of the client's signature on the same document or separately. The signature’s authentication or the verification of the non-resident client’s identity may be obtained from a correspondent or affiliated bank, or from a branch or a representative office of the concerned bank, or from another bank whose authorized signatures can be verified.

        2.     Keep, for five years at least after carrying out the operation or closing the account, the full name and residential address of the client, in addition to copies of all documents used to check the client’s identity.

 Article 4Article 4:

The bank/financial institution shall request from each client a written statement about the identity of the economic right’s owner (the actual beneficiary) regarding the intended operation, including the full name and residential address of the said owner (the name of the institution, its head office and home country, in case the owner is a legal entity or a company). The bank/financial institution shall keep a copy of this statement if it has doubts that the client is not the economic right’s owner, or in case the client states that the said owner is a third party, especially when cashier’s operations are carried out for an amount exceeding ten thousand US dollars or its equivalent, as mentioned in Article 3, Paragraph 1 of these Regulations.

Doubts about the identity of the economic right’s owner would arise in the following instances, which are mentioned for indicative purposes but not restrictively:

1. When a power of attorney is given to a non-professional person (who, for instance, is not a lawyer, a fully authorized representative, or a financial intermediate) and when it appears that the relationship to the client does not justify the proxy operation; or when the business relationship is conducted through nominees or numbered accounts, or through umbrella institutions or companies.

2. When the financial status of the client intending to make the operation is known to the officer in charge, and when the operation's value is disproportionate to the financial status of the said client.

3. When, through the conduct of business with the client, any other indicator draws the attention of the bank/financial institution.

 Article 6Article 6:

The bank/financial institution must immediately inform the Governor of the Banque du Liban in his capacity as chairman of the Special Investigation Commission, established by virtue of Article 5 of Law No. 318 of April 20, 2001, when it holds evidence or has doubts that an operation involves money laundering, especially:

• When it has persistent doubts about the credibility of the written statement submitted by the client regarding the identity of the economic right’s owner, or when it discovers that false information has been given on the identity of the said owner.

• When it realizes that it was misled in the course of checking the client’s identity, while having serious and precise doubts about the information provided by the client.

Article 7Article 7Article 7:

The bank/financial institution shall periodically check again the identity of the client or the identity of the economic right’s owner, especially when it has doubts about the veracity of previously submitted information, or when changes have occurred in the client's identity or in the identity of the economic right’s owner.

Section III – The Obligation to Control Certain operations

Article 8:

1. The bank/financial institution must enquire from the client about the source and destination of funds, the object of the operation, and the identities of both the beneficiary and the economic right's owner, when it finds that the intended operation has the following characteristics:

1. A cashier’s operation, as described in Article 3, Paragraphs 1 and 2 of these Regulations.

2. An operation to be carried out in exceptionally complicated circumstances. In this respect, the bank/financial institution should assess the said circumstances not only in relation to the nature and type of the operation, but also in relation to its apparent goal.

3. An operation that seems to have no economic rationale or legitimate objective, especially when there is a discrepancy between the operation and the client's professional activity, or even between the operation and the client's habits and personality.

2. The bank/financial institution must immediately inform the Governor of the Banque du Liban in his capacity as chairman of the Special Investigation Commission when, in light of the answers received, it has serious doubts that the operation is an attempt to launder funds resulting from any of the offences specified by law.

 Article 9

Banks and financial institutions must, as far as they are concerned, take into consideration, for indicative purposes but not restrictively, the following indicators on money laundering:

1. Exchanging big quantities of small-denomination bills with large-denomination bills.

2. Undertaking large or recurrent cambio operations, by using cash funds.

3. Making large or recurrent deposits totaling a large amount, compared with the apparent activities of the client.

4. Operating an account for the main purpose of transferring to or receiving from foreign countries large amounts of money, while it appears to the officer in charge of such operations that the client's activities do not justify these operations.

5. Receiving or cashing bearer cheques issued abroad, or large-amount cheques alleged to be the result of gambling gains.

6. Undertaking large or recurrent operations related to offshore activities but considered by the bank or the financial institution as disproportionate to these activities.

Section IV – Final Provisions

Article 10

Within six months from the issuing date of these Regulations, each bank/financial institution must:

1. Prepare a training program on the methods of controlling financial and banking operations for fighting money laundering.

2. Appoint, at the headquarters and branch levels, the staff responsible for implementing the training program.

3. Ensure an ongoing training of the staff responsible for the program.

4. Establish a central archive of collected information on money-laundering operations, and on the ways to fight them.

5. Ensure that the officials and staff responsible for the training program attend relevant seminars, workshops and lectures, in order to keep abreast of money- laundering fighting methods.

6. Prepare a procedure guide on the implementation of the provisions of the Law on Fighting Money Laundering and the provisions of these Regulations.

Article 11

The auditor of the bank/financial institution has the obligation:

1. To review the internal auditing procedures, in order to ascertain compliance by the bank or the financial institution with the provisions of these Regulations. In this respect, the auditor shall prepare a semi-annual report to be submitted to the board of directors of the bank or financial institution, and also to the Banking Control Commission. This report shall include the results of the auditor’s review, in addition to recommendations about the ways to enhance the control of financial and banking operations for fighting money-laundering operations.

2. To report immediately to the Governor of the Banque du Liban, in his capacity as chairman of the Special Investigation Commission, any operation considered or suspected to be concealing money laundering.