Building A Financial Intelligence Unit In a Bank Secrecy Environment Lebanon’s Experience Presented by A. Mansour Secretary Special Investigation Commission

Lebanon on the NCCT List  FATF placed Lebanon in 2000 on the list of non- cooperative countries /territories (NCCT) due to the following reasons: o No AML Law o Major Banking Center in the Region o Strict Banking Secrecy Law o Due Diligence accord adopted by the banks in 1996 was insufficient o No measures for Fighting money laundry in place

Bank Secrecy law - Lebanon  Law passed in 1956 even prior to the promulgation of the law of Money & Credit in 1963  The law Provides total bank secrecy whereby secrecy cannot be lifted even by a court order  Secrecy can be lifted only in the following cases: 1. Bankruptcy 2. Death (Death of one of the holders of a joint account does not lift secrecy) 3. Client approval 4. Litigation between client & bank

AML/CFT Regime & FIU Creation  In 2000 a Team was set up at BDL to create public awareness that lead to a “High Political Commitment” on AML  In 2001 AML law 318 was passed and BDL issued Reg 83  The Special Investigation Commission (Lebanon’s FIU) was set up with additional Powers & Functions:  Exclusive powers on Lifting Bank Secrecy & Freezing Accounts  Carry out Financial investigations with the Capacity to request information from : Judicial, Law enforcement, Customs, and all Administrative agencies  Supervision : Examinations of Reporting entities on Compliance with AML law & regulations, as the banks prudential supervisor does not have access to customers’ deposit accounts  Set up 2 National committees on AML & CFT

AML/CFT Regime – Set Up  Other steps taken to put in place an AML/CFT operational regime : o Developed SIC appropriate organizational structure o Created public AML/CFT awareness in the business community : Banks, Fis, Money dealers, Insurance,.. o Tracked developments of international standards to prepare for necessary amendments to AML law & regulations o Established International Cooperation by joining Egmont Group in July 2003 o Launched Regional initiatives : lead the efforts to the creation of MENFATF in Nov 04

AML law 318 of 2001 & Reg 83  Mile stone in the Lebanese legislation on AML. It defines, criminalizes, and imposes sanctions on ML  Establishes the SIC as an “independent legal entity “ with a “Judicial Character” at the Central Bank of Lebanon  Immunity for SIC staff and Reporting entities on actions taken while discharging their duties under law 318  Reg 83 covers various AML procedures ranging from KYC/CDD requirements, filing of STR’s & other control procedures

Lifting Bank Secrecy Mechanism  SIC receives STRs or ROAs requesting information about a Bank client, a transaction, or bank account  In cases of ROA the SIC request the reasons behind the request to verify if the underlying predicate crimes are within the scope of AML/CFT laws of Lebanon  SIC writes to the bank or financial institutions asking for the provision of the required information  SIC request information on KYC, account balances or accounts statements, cards, other details on the account  Banks & financial institutions have to respond within a week  SIC analyses the received information and disseminate to the relevant parties

The SIC Handled 1573 Case Classified by Predicate Offences Secrecy Lifted: 188 cases Information Provided Involving Secrecy: 738 cases Freezing Accounts: 145 cases

Bank Secrecy & International Cooperation, Rec 40  Lifting bank secrecy is essentail to be in compliance with Rec 40  International cooperation is of key importance when assessing the effectiveness of individual jurisdictions and multi-lateral efforts to combat ML&TF  Current issues under consideration to review Rec 40 : Status of the FIU should not affect their capacity to exchange information What info the FIU should be able to access directly or indirectly ( Calls to revisit Rec 26 before Rec 40) FIU to respond to ROAs same as STRs Easing of restrictive conditions to cooperation and consistency with Rec ( Mutual legal assistance, Dual criminality, freezing of accounts, Extradition)

In Brief Lebanon’s answer to Bank Secrecy was an AML/CFT law that created a “Multifunctional” FIU, empowered with to lift Bank Secrecy Strict implementation of the law Active and enhanced inter-agency & international cooperation Results: Lebanon is in compliance with International AML/CFT requirements while preserving its own particularities in respect of the Bank Secrecy law