Cross-border operations regulated

Local banks must abide by rules of their correspondents' home countries: Central Bank

In a recently issued Basic Decision (No 10965), the Central Bank has outlined regulations governing the relationship between banks and financial institutions operating locally and their correspondents abroad.

The decision states that banks and financial institutions must fully adhere to the laws that govern the operation of their correspondents abroad. Banks must apply all regulations, procedures, sanctions, and restrictions adopted by "international legal organizations" or by "the authorities in the home countries of their correspondents".

The decision's provisions shall apply to any dealings between banks and financial institutions operating in Lebanon, and their branches, subsidiaries, or sister companies operating abroad.

According to the decision, banks and financial institutions must implement the regulations of the 'Fighting Money Laundering and Terrorist Financing Law', particularly with customers who request cross-border operations through correspondent banks and financial institutions. Banks should adopt a risk-based approach in checking the identity of both customers and economic beneficiaries of these transactions. It also said that banks and financial institutions must notify the Central Bank's Special Investigation Commission of any suspicious operation they encounter.

The decision also stipulates that external auditors check the compliance of banks and financial institutions with the previously mentioned provisions.

Reported by Hanadi Chami