Background and Rationale
Money laundering has been identified as a major threat to the International financial services community. The Lebanese Government, in common with Banque du Liban (BDL), has passed legislation designed to prevent money laundering which imposes certain requirements upon institutions registered in their jurisdiction.
As BLOM BANK sal is registered, authorized and based in Lebanon, Lebanese legislation is of primary importance to the Bank and to its overseas branches. The Bank has adopted the Lebanese requirements as a statement of the minimum standards to be adopted by all overseas branches. Some of these branches may be subject to different or more rigorous requirements of local regulation. In which case, the local requirements will be applicable, or in addition to, the Lebanese requirements. In the case of uncertainty as to which requirements apply, or how different requirements can be complied with consistently, the Anti-Money Laundering Compliance Officer at the Head Office should be contacted.
Legal and Regulatory Framework
The principle Lebanese legislation are summarized as follows:
- The Lebanese parliament has adopted and the President of the Republic promulgated the text of Law 318 – Fighting Money Laundering.
- Banque du Liban (BDL) issued circular No. 83 on May 18, 2001 concerning regulations on the control of financial and banking operations for fighting money laundering, and amended it on May 31, 2002 and September 17, 2003.
The various components of the above legislation share a common aim of preventing, deterring and combating money laundering.
The predicate offenses which would constitute money laundering under Lebanese Legislation include:
- The growing, manufacturing or trading of narcotics.
- Acts committed by associations of wrongdoers, that are specified by Articles 335 and 336 of the Penal Code, and internationally identified as organized crime.
- Terrorist acts as specified in Articles 314, 315 and 316 of the Penal Code.
- To finance or to contribute to the financing of terrorism, terrorist acts, or terrorist organizations, in accordance with the concept of terrorism as defined in the Lebanese Penal Code.
- Illegal arm trade.
- The offences of stealing or embezzling public or private funds, or their appropriation by fraudulent means, counterfeiting, or breach of trust, incumbent on banks, financial institutions, and institutions listed in Article 4 of Law 318, or falling within the scope of their activities.
- Counterfeiting money, credit cards, debit cards or charges cards, or any official document or commercial paper, including checks.
- Circular No. 83 and its amendments require the adoption of certain procedures, namely:
The appointment of a Anti-Money Laundering Compliance Officer.
Procedures in relation to the identification of customers (Know your customer policy KYC).
- Record Keeping.
- Internal reporting procedures for suspicious transactions.
- Internal controls and communications for the purposes of forestalling or preventing money laundering (Compliance officers, Compliance unit and Internal Audit functions).
- Procedures for the education and training of relevant employees.
The objectives of this Policy are:
- To prevent use of Bank’s products or services for money laundering.
- To prevent damage to the Bank’s name and reputation by association with money launderers.
- To ensure that the Bank complies with money laundering legislation / regulations wherever it does business.
- This Policy applies to all the Bank’s overseas branches.
- Where local legislation is more stringent, local requirements will apply in addition to this Policy.
- Meeting the requirements of this Policy is considered of paramount importance and takes precedence over other commercial aspects of managing our customer relationships.
All the Bank’s branches will implement policies and procedures to the standards required by the Lebanese legislation (or to any higher standard required by local legislation), which will:
- Identify and know their customers.
- Ensure that adequate records are kept and preserved.
- Provide training for relevant employees to enable them to understand and fulfill their obligations under the Lebanese legislation (or any other local requirements).
- Ensure suspicious transactions are reported to the Compliance Officer at Head Office who will determine whether a report is to be made to the authorities (where local legislation requires) and to the Special Investigation Commission (SIC)...
- Provide the Compliance Officer at the Head Office with all reasonable access to information that may be of assistance to him in carrying his duties.
- Ensure that all necessary controls and communications are in place and are operating effectively to prevent money laundering.
- This Policy should always be read and operated in conjunction with the Bank’s detailed AML and KYC procedures.
The responsibilities connected with this Policy are:
- The overall ownership of this Policy rests with the Bank’s Compliance Committee.
- The day–to-day custodian of the Policy is the Anti-Money Laundering Compliance Officer at Head Office who also controls the amendments required to this Policy as a result of changing internal and external requirements.
- No changes to, or exceptions from, this Policy are allowed without the formal agreement of the Anti-Money Laundering Compliance Officer at the Head Office in consultation with the Compliance Committee.
- The Anti-Money Laundering Compliance Officer at the Head Office is responsible for ensuring that each local or overseas branch complies with this Policy.
No deviations from this Policy are permitted except where formally agreed in advance with the Anti-Money Laundering Compliance Officer at the Head Office, acting in consultation with the Compliance Committee, in a documented special relaxation approved by the General Manager. This must only be considered in exceptional circumstances.
In summary, the Lebanese Legislation establishes the following offences in Lebanon:
- Any person who undertakes money laundering, or intervenes or participates in such operations, shall be punished by imprisonment for a period of three to seven years, and by a fine of no less than twenty million Lebanese pounds ( approximately equivalent to USD 13,300)
- Institutions subjected to the provisions of the Banking Secrecy law of September 3, 1956 must control their operations with clients, in order to avoid involvement in what may conceal money laundering operations resulting from any of the offences specified by the Law 318 – Fighting Money Laundering.
- The banks and financial institutions obligations set by the before mentioned law and BDL circular No. 83 with its amendments are:
- To ascertain the true identity of their permanent clients and that of the beneficial owner, when operations are carried out through proxies, through figureheads acting for individuals, institutions or companies, or through numbered accounts.
- To apply the same identity verification process to transient clients, when the value of the requested operation or series of operations exceeds a specified amount.
- To keep, at least for a five-year period after completing the operations or closing the accounts, photocopies of all operation-related documents, as well as photocopies of official documents about the identity of operators.
- To identify signals revealing the existence of money laundering operations, and set out the principles of due diligence that could detect suspicious operations
- To refrain from delivering incorrect statements that aim at misleading administrative or judicial authorities.
- To ensure that their auditors monitor the implementation of related regulations and that they report any violation to the Governor of BDL.
- Report to the “Special Investigation Commission” – independent legal entity with judicial status established by BDL with mandate to investigate money laundering operations, and to monitor compliance with the rules and procedures stipulated by Law318 the details of operations they suspect to be concealing money laundering.
- The reporting to the “Special Investigation Commission” is absolutely confidential. This absolute confidentiality shall apply to any reporting, natural or moral person, as well as to the documents submitted for this purpose, and to the documents and procedures related to each stage of the investigation.
Any person who violates the above provisions shall be punishable by imprisonment for a period of two months to one year and a fine not exceeding ten million Lebanese pounds (approximately equivalent to USD 6,600), or by either penalty.
The Significance of Compliance
In addition to the criminal penalties referred to above, there is an underlying and essential reputational issue to be considered in relation to compliance represented by the considerable damage that would affect the Bank’s name and reputation by involvement in a serious money laundering incident.
Services provided by different branches
Where one branch provides services to another, each branch must meet the requirements of this policy and the applicable law and regulations. In addition, the service provider must provide sufficient information to allow the client’s targeted branch to meet the necessary requirements of the Policy.
Monitoring of Transactions
- Procedures were put in place to monitor customers’ transactions. The Compliance Unit at the Head Office generates daily and quarterly reports to achieve this task.
- Any transaction which does not fit within a customer’s transaction profile should be reviewed by the Anti-Money Laundering Compliance Officer at the branch and the branch manager, to determine whether the circumstances give rise to any suspicion of money laundering.
- An employee should judge a transaction to be suspicious if, in their personal judgment, they know or suspect that the transaction might be connected to any criminal offence or activity as detailed in the predicate offences as per Law 318 of 2001.
Suspicious Activity Reporting
- Any employee who identifies any activity or transaction which he deems to be suspicious must report that suspicion to the Anti-Money Laundering Compliance Officer at the branch and to the branch manager, who in their turn and after agreeing with the employee’s finding, will report it, through a written Suspicious Transaction Report (STR), to the Anti-Money Laundering Compliance Officer at the Head Office.
- STRs should not be discussed with anyone other than the Anti-Money Laundering Compliance Officers at the branch and at the Head Office and with the branch manager – including the customer and other staff members – to avoid the risk of “tipping off”.
- The Anti-Money Laundering Compliance Officer at the Head Office will review the STRs submitted by the branches and decide whether they should be reported to the Special Investigation Commission (SIC) after discussion with the chairman of the Compliance Committee.
Maintaining and Updating Information
In accordance with Lebanese Legislation, Money Laundering information and documents will be stored securely for at least a five-year period. The information relating to customers (personal details, proof of beneficial ownership, etc…) should be kept up-to-date. The Compliance Unit at Head Office will ensure, from time to time, that detailed and concerted renewal efforts are made.
Staff Training and Communication
- The Compliance Committee has to prepare a training program on the methods of controlling financial and banking operations, in accordance with the control procedure guide, and with other legal and regulatory texts in force.
- Ensure an ongoing training of the staff and the participation of the officers responsible for operation control and for training in relevant seminars, workshops and lectures, so that they may keep abreast of money laundering-fighting methods.