Prepaid cards, bearer shares
prohibited by Central Bank

In effort to combat money laundering

The Central Bank (BDL) has issued a ruling prohibiting banks from issuing or marketing prepaid cards. The decision also applies to other institutions that issue credit and loyalty cards.

The move is part of BDL’s efforts to combat money laundering. The ruling pertains to anonymous cards, which could be easily used for money laundering purposes, the source said.

BDL gave the concerned parties till Sept. 30, 2016 as the deadline to take the necessary measures to settle the problem of existing prepaid cards. These cards are not allowed to be recharged in the meantime.

The Central Bank (BDL) has also issued a ruling prohibiting banks and other financial institutions from carrying out transactions with companies or mutual investment funds whose ownerships are partially or fully in ‘bearer shares’.

The concerned parties are also not allowed to deal with companies or mutual investment funds if the latter are owned directly or indirectly by other companies or mutual investment funds whose shares are bearer shares.

The elimination of bearer shares is a global trend, said Chahdan E. Jebeyli, Group Head of the Legal and Compliance Department at the Bank Audi Group. BDL’s resolution is part of the country’s commitment to always abide by international standards pertaining to combating money laundering and terrorism financing, he said. Lebanon is located in a high-risk area so it is under continuous scrutiny from international watchdogs that monitor compliance with these regulations like the Financial Action Task Force (FATF), Jebeyli said.

Bearer shares were instruments that escaped the control of regulators and financial institutions. It is not easy to identify the owners of bearer shares as these are transferred without any requirement for registering the names of holders. Banks have to comply with the ‘Knowing Your Customer’ (KYC) rule and they must know who the owner of the legal entity is, Jebeyli said.

The decision regarding new transactions takes immediate effect. Banks and financial institutions whose current situations are not in line with the new regulation are given a deadline of two years to conform, according to BDL’s circular. Banks and financial institutions have to set up an inventory of holders of bearer shares and ask them to adjust to the new regulation by the deadline, Jebeyli said.