Qatar
Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

This paper is focused on a detailed assessment report on Anti-Money Laundering (AML) and Combating the Financing of Terrorism for Qatar. There is no fundamental principle in Qatari law that would prohibit the courts from applying the money laundering offense to the person who has committed the predicate crime. Qatar has adopted a comprehensive confiscation, freezing, and seizing framework under the AML Law, which enables the authorities to remove all assets linked with a money laundering offense or its predicate.

Abstract

This paper is focused on a detailed assessment report on Anti-Money Laundering (AML) and Combating the Financing of Terrorism for Qatar. There is no fundamental principle in Qatari law that would prohibit the courts from applying the money laundering offense to the person who has committed the predicate crime. Qatar has adopted a comprehensive confiscation, freezing, and seizing framework under the AML Law, which enables the authorities to remove all assets linked with a money laundering offense or its predicate.

DETAILED ASSESSMENT REPORT

1 General

1.1 General Information on Qatar

48. The State of Qatar is a peninsula located halfway along the west coast of the Persian Gulf covering an area of 11,521 square kilometers. It shares a 60 km land border with the Kingdom of Saudi Arabia to the south, where the peninsula connects to the mainland. It also has maritime borders with Iran from the north and east, Bahrain from the west, and the United Arab Emirates from the south east.

49. The population was estimated at 838,000 inhabitants in mid-2007 compared to 744,000 inhabitants in 2004. More than 45 percent live in the capital, Doha City, and its suburbs. Foreign workers comprise 52 percent of the total population and make up about 89 percent of the total labor force. Most are from South Asia and the Arab countries (in particular, Egyptians, Jordanians, Syrians, Lebanese, and Palestinians). The population has a literacy rate of 89 percent and the life expectancy averages 74 years. Islam is the official religion of Qatar, and Arabic is the official language.

50. Qatar remained a British protectorate until 1971 when Britain withdrew from the Persian Gulf area. In 1970, Qatar adopted a provisional constitution declaring it an independent Arab country. The Al Thani family formally became the ruling dynasty. The provisional constitution was replaced by a new constitution (the permanent constitution) which was approved by referendum in 2003. The new constitution differs significantly from the previous document in that it grants new rights and freedoms to the citizens and increases their participation in the government of the country. Similar to the previous constitution, the new constitution declares Qatar to be an independent and sovereign state with executive powers vested in the Emir. The Emir is the head of state and the minister of defense. He appoints the prime minister and the cabinet. The Advisory Council (Al-Shoura) has been an appointed body since 1970, but the new constitution envisions elections for two-thirds of its members. The Emir selects the crown prince from among his sons. The 2003 constitution specifies that the system of government is based on the separation of powers: Executive power rests with the Emir and the council of ministers; Legislative authority belongs to the elected Advisory Council (Al-Shoura); and judicial authority is exercised independently by the courts in the name of the Emir. At the time of the assessment, the (new) Al-Shoura had not been elected. According to article 150 of the 2003 constitution, the provisions in the 1972 constitution pertaining to the Al-Shoura remain in force until the new council is elected. The current Al-Shoura is composed of 35 members appointed by Emiri decision on the basis of the former Constitution.

51. Under the permanent Constitution the Council of Ministers, “in its capacity as the highest executive organ, is empowered to propose draft laws and decrees to Al-Shoura Council, approve regulations and decisions prepared by the ministries and other government organs and supervise the implementation of laws, decrees, regulations and resolutions (Article 121 para. 1 to 3 of the Constitution). Any draft law passed by Al-Shoura Council must then be referred to the Emir for ratification (Articles 67 para. 2 and 106 para. 1 of the Constitution). To date, however and as mentioned above, the new Al-Shoura Council has not been established. Legislations are adopted by the Council of Ministers then ratified by the Emir. For the purpose of this assessment, the assessors considered that the laws issued by the Council of Ministers and enacted by the Emir constitute primary legislation and that only the regulations adopted by the Council of Ministers or its members individually in accordance with the delegation provided in the primary law could constitute secondary legislation.

52. The judiciary system in Qatar is divided into the Sharia courts and the civil system. The 1999 Law governing the organization of the judiciary provides for a three-tiered judicial system. The Courts of Justice and the Sharia Courts of First Instance occupy the base of the structure. The Courts of Justice are empowered to hear civil, criminal, and commercial matters. The Sharia courts administer Islamic laws. Their role is generally limited to the adjudication of disputes relating to personal status matters (such as marriages, divorce, inheritance, custody cases and child support) and certain criminal cases. Decisions made in these first instance courts may be appealed to the Appeal Court of Justice and the Sharia Court of Appeal. The Court of Cassation is the third tier of the judicial system. In hearing criminal cases, both the Sharia and the criminal courts employ practices and procedures similar to those employed in common and civil law courts. A public prosecutor presents the case on behalf of the State, the accused is allowed legal representation, the accused is presumed innocent until proven guilty, and, generally, trials are open to the public. Decisions of the Qatari courts are not published and there is no doctrine of binding precedent under Qatari law, although, in practice, courts of first instance usually follow decisions of the courts of appeal.

53. The State of Qatar is a member of the Gulf Cooperation Council (GCC) which also includes Bahrain, Kuwait, the United Arab Emirates, Oman, and Saudi Arabia. Qatar is also a member of the League of Arab States, the Organization of Petroleum Exporting Countries (OPEC), the United Nations (UN), the Organization of the Islamic Conference (OIC), the Non-Aligned Movement, and the World Trade Organization (WTO), among other regional and international organizations. The State of Qatar was elected a non-permanent member of the United Nations Security Council for the term 2006–2007. The country has signed defense pacts with the United States (US), the United Kingdom (UK), and France and hosts the U.S. Central Command (CENTCOM) Forward Headquarters. Qatar is home to the satellite television station, Al-Jazeera.

54. Oil and gas resources form the cornerstone of Qatar’s economy. In total, they account for 62 percent of the GDP and 65 percent of the state revenues. Qatar has the third largest proven reserves of gas in the world and exports liquefied gas to Asia, Europe and the United States. Qatar’s production of liquefied gas reached 30 million tons in 2007 and is expected to increase to 77 million tons by 2012 making Qatar the main world gas exporter. As a result of the constant development in producing and exporting gas and the increase in the gas prices worldwide, Qatar’s nominal GDP per capita was expected to reach US$70,000 in 2007, one of the highest levels in the world. In 2006, real GDP growth was over 7 percent and the current account surplus reached US$ 9.5 billion.

55. The non-oil and gas sector accounts for less than 40 percent of the GDP. The finance, insurance and real estate sector is the second largest contributor to the GDP with around 8 percent in 2006. Qatar is currently trying to attract foreign investment in the development of its non-energy projects by further liberalizing the economy. Over the next six years, over US$130 billion in investments are planned in the emirate. Qatar riyal is pegged to the U.S. dollar at QR3.64: US$1, with a consumer price inflation above 6 percent every year since 2004. In 2005, Japan, South Korea, and Singapore were the main destinations of exports, whereas France, Japan and the United States were the main sources of imports.

56. Concerning governance, Qatar ranks in the world top third according to the World Bank Worldwide Governance Indicators, covering 213 countries and territories. These indicators measure six dimensions of governance: voice and accountability, political stability, and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. Qatar only lags behind for the ‘voice and accountability’ indicator but the situation has been improving over the years. For all indicators, but regulatory quality, Qatar is above the GCC countries’ average ranking.

Table 1.

World Bank Worldwide Governance Indicators 1 - 2005

(213 jurisdictions covered)

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For more details see World Bank website: www.worldbank.org/wbi/governance.

1.2 General Situation of Money Laundering and Financing of Terrorism

Money Laundering

57. Although the offense of money laundering has now been in place for a few years, the dispositions of the AML Law remain untested by the courts. One prosecution has been conducted on the basis of the AML Law in 2006, but was subsequently abandoned when it was established that the source of the funds was legitimate.

58. The Qatari FIU classifies STRs according to their typologies. Three main typologies of STRs have been identified: the transfer of large amounts of money abroad through exchange houses, the deposit of large amounts of money in an account in a manner that is not proportional to the individual’s monthly income, and the inflow of financial remittances from abroad through a bank from an unknown source.

59. While there is currently no evidence of significant ML in the country, it should be noted that Qatar’s financial sector was, between 2002 and 2006, the fastest growing of the GCC region in terms of banking sector assets. Qatar is now, after the UAE, the most financially developed economy in the region and has the highest banking sector assets per inhabitant. The development of the financial sector is associated to a boom in the real estate sector and the precious stones and metals trade. These developments have the potential of creating a suitable environment for money launderers seeking to exploit these conditions to exercise their illegitimate activities.

Predicate Offenses

60. The level of predicate offenses appears very low in Qatar in comparison to other countries. According to statistics issued by the United Nations,2 the total crimes recorded in Qatar were 9.9 per 1,000 populations to compare to an average of 33.7 per 1,000 for the 92 countries surveyed. Sanctions appear to be tougher in Qatar as prisoners account for 1 percent of the population as compared to 1.51 percent for the average of countries surveyed. There was no specific mention of Qatar in the UN International Narcotic Control Board and UN World Drug 2006 reports. According to several reports, Qatar ranks among the less corrupted countries in the region. Qatar was listed as a ‘medium’ human trafficking destination country by the UN in the 2006 report on human trafficking.

61. More crime statistics were provided to the mission by the Public Prosecutor’s Office. They confirm the low rate of proceeds-generating crimes in the country. A total of 33 prosecutions were conducted in 2006 for bribery and embezzlement and 249 prosecutions for drug-related crimes. It should be noted that alcohol trafficking is included in the “drug-related crimes” and that two-thirds of the prosecutions are related to the possession of drugs (including alcohol). Counterfeiting of currency and trafficking of counterfeited currency accounted for 16 prosecutions during the same year. Other proceeds generating crimes mentioned by the authorities are credit card fraud, corruption, piracy of goods, insider trading, and market manipulation. The authorities are unaware of the presence of serious organized or transnational crime in the country.

Terrorist Financing

62. No prosecution has ever been led on terrorist financing and the FIU has not received any suspicious transaction report (STR) related to terrorist financing so far.

Terrorist Activities

63. No major terrorist activity has been recorded in the country. But less serious terrorist activity has been noted. Among the most relevant events, a suicide car bombing directed against UK interests and claimed by an Islamic group took place in 2005. Eight prosecutions related to terrorist activities were conducted in 2006. Four cases involved the constitution of a group intending to commit terrorist acts against the State of Qatar. Other cases included manufacturing of and training in explosives, possession of arms, and hijacking.

1.3 Overview of the Financial Sector

64. Qatar has adopted an open economy policy and attracted significant foreign investments to the different sectors of the country such as the real estate and securities sectors. In doing so, Qatar issued legislations and facilitated procedures for investors. This has had a very positive impact on the national economy. In the past few years, Qatar has become one of the developed countries in terms of attracting foreign investments. To accompany its open economy policy, Qatar has adopted a number of AML/CFT control policies.

65. The Qatari financial system is comprised of two sectors: Domestic - which includes the financial institutions under the responsibility and supervision of the QCB, the MEC and the DSM; and the QFC which was established in 2005 and includes international financial services firms.

66. Domestic Sector: The Qatari banking and financial system, excluding the QFC entities, is comprised of banks, including Islamic banks, investment companies, exchanges houses, finance companies, insurance companies, and brokerage firms.

67. There are 17 banks (9 Qatari, 8 foreign), 3 investment companies, 19 exchange houses, 1 finance company, 8 insurance companies, and 7 brokerage firms operating in Qatar. Based on QCB information in 2005, total assets of banking institutions amounted to QR 127,934 million (approximately US $35,147 million) or 83 percent of GDP. The largest three banks in Qatar accounted for approximately 68 percent of total banking assets. No other financial information for the DSM and the MEC was provided by the authorities.

68. The table below reflects the breakdown for each type of financial institution, permitted activities, and competent authority responsible for AML/CFT supervision.

Table 2.

Financial Institutions and Supervisory Authority—Domestic Sector

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69. QFC: The QFC was established in 2005 under Law No. 7 of 2005. The QFC is not an offshore center. It was created to provide both a venue for financial services firms to establish themselves within a designated zone in the State of Qatar and to undertake and provide a broad range of activities, services, and products. Companies licensed by the QFC can operate in local and other currencies. The QFC allows for 100 percent ownership by foreign companies and all profits can be remitted outside Qatar. The QFC is currently a tax free zone until April 2008. Article 17 of the QFC Law provides that after April 2008, the Regulations may provide for the imposition, administration, and collection of all kinds of taxes and duties within the QFC including without limitation taxes in relation to entities, individuals and corporate bodies as well as businesses operating in the QFC and the wages, salaries, and benefits of employees working in the QFC, and to set from time to time the level and method of calculation thereof and to provide exemptions therefrom for such periods as may be deemed appropriate.

70. The legal and regulatory system of the QFC is implemented and administered by the following QFC institutions:

  • The QFC Regulatory Authority (QFCRA) which is the unitary financial services regulator of the QFC;

  • The QFC Authority (QFCA) which is responsible for developing the commercial strategy of the QFC, is also responsible for supervising unregulated activities and establishing relationships with the global financial community;

  • The Appeals Body which is an independent body established to hear appeals against decisions of the Regulatory Authority;

  • The Tribunal (Civil and Commercial Court) which solves disputes relating to QFC activities or events occurring in the QFC; and

  • The CRO which is responsible for the incorporation and registration of companies and other entities carrying on business in the QFC.

71. The QFCRA is responsible for the authorization of firms seeking to conduct Regulated Activities in the QFC and for the on going supervision of those firms to ensure they remain in compliance with the various QFC requirements, including AML/CFT requirements. The QFCRA as an independent body also has power to discipline those firms and individuals that fail to comply with QFC requirements.

72. Within the QFC, there are two categories of Permitted Activities categorized as either Regulated Activities or Non-Regulated Activities. The Permitted Activities as defined in Schedule 3 of the QFC Law, which are also considered Regulated Activities, are as follows: (i) financial business, banking business of whatever nature, and investment business, including (without limit) all business activities that are customarily provided by investment, corporate and wholesale financing banks, as well as Islamic and electronic banking business;(ii) insurance and reinsurance business of all categories;(iii) money market, stock exchange and commodity market business of all categories, including trading in and dealing in precious metals, stocks, bonds, securities, and other financial activities derived therefrom, or associated therewith; (iv) money and asset management business, investment fund business, the provision of project finance and corporate finance in all business fields and Islamic banking and financing business; (v) funds administration, fund advisory and fiduciary business of all kinds; (vi) pension fund business and the business of credit companies; (vii) the business of insurance broking, stock broking, and all other financial brokerage business; (viii) financial agency business and the business of provision of corporate finance and other financial advice, investment advice and investment services of all kinds; and (ix) the provision of financial custodian services and the business of acting as legal trustees.

73. The distinction between regulated activities and non-regulated activities is significant in that firms conducting Regulated Activities require a license from the QFC Authority and authorization from the QFCRA whereas firms conducting solely Non Regulated Activities only need a license from the QFC Authority.

74. Permitted activities as defined in Schedule 3 of the QFC Law, which are not considered Regulated Activities are as follows: (i) the business of ship broking and shipping agents; (ii) the business of provision of classification services and investment grading and other grading services; (iii) business activities of company headquarters, management offices and treasury operations and other related functions for all kinds of businesses, and the administration of companies generally; (iv) the business of providing professional services including but not limited to audit, accounting, tax, consulting, and legal services; (v) business activities of holding companies, and the provision, formation, operation, and administration of trusts and similar arrangements of all kinds; and (vi) the business of provision, formation, operation and administration of companies.

75. A person who carries on any Regulated Activities and/or a person who conducts, and in so far as they conduct, any of the following activities is considered a relevant person: (i) providing auditing, accounting, tax consulting, legal, and notarization services; (ii) providing trust services by way of the provision, formation, operation, and administration of trusts and similar arrangements; and (iii) providing company services by way of the provision, formation, operation, and management of companies.

76. Any financial institution conducting financial activities in or from the QFC must be authorized by the QFCRA. As of the mission date, there were 12 firms authorized and regulated by the QFCRA.

77. Although the majority of the regulated institutions have been authorized, only two have commenced operations.

1.4 Overview of the DNFBP Sector

78. Casinos: Gambling is prohibited in Qatar and sanctioned under Article 275 of the Penal code. According to Article 274 of the Penal code, gambling is “any game in which the probability of gain and loss depends on luck and not on controlled factors and each party agrees to give the amount of money, in case of loss, to the winning party”. Even if prices for the winners of camel and horse races are significant, it is not considered as gambling because there is no betting on a winning party. Casinos or gambling are not included in the activities permitted in the QFC according to the Schedule 3 of the QFC Law No. 7 of 2005.

79. Real Estate Agents: There are 970 companies acting in the real estate sector registered at the Qatari Chamber of Commerce. The exercise of the profession of real estate agent is subject to the provisions of the law on real estate brokerage. Real estate agents are licensed and monitored by the MEC and have to be authorized by the real estate registration department of the MOJ. Buying or selling real estate is not included in the activities permitted in the QFC according to Schedule 3 of the QFC Law No. 7 of 2005, but it may be performed on an ancillary basis by professionals performing other activities. The real estate sector is growing rapidly and the recent possibility offered to foreigners to buy property in some designated areas in Qatar constitutes a major development that will contribute to changing its structure and functioning. Unless measures are taken, it may increase the risk of being abused by criminal elements.

80. Dealers in precious metals and stones: There are 22 shops selling gold and 197 jewelers, all licensed and supervised by the MEC. The 19 exchange houses licensed and supervised by the QCB are also permitted to engage in the purchase or sale of precious metals and gold bullions. Concerning gold, exchange houses may act as wholesalers for jewelers. Schedule 3 of the QFC Law No. 7 of 2005 provides for dealing in precious metals as a permitted activity which, subject to the provisions of the QFC Regulations shall be regulated activities. However, the QFC Financial Services Regulations do not identify dealing in precious metals as a regulated activity despite the possibility offered by the Law. Dealing in precious stones is therefore not identified as a permitted activity in the QFC. Consequently, neither dealing in precious metals nor dealing in precious stones can be conducted in the QFC.

81. Lawyers: They are approved by the lawyer’s registration committee. The legal profession is organized pursuant to the Law No. 23 of 2006 on Lawyers. There is no bar association, but there is an association of lawyers with voluntary, but wide, membership. Pursuant to a resolution issued by the MOJ, branches of international law firms may be authorized to work in Qatar. Their staff is constituted of lawyers and legal advisers. Only Qatari citizens may be lawyers. Foreign citizens may act as legal advisers. The division of disciplinary cases at the MOJ is competent to apply sanctions to the legal profession. There are eight firms licensed by the QFCA that provide legal services.

82. Notaries: In Qatar, the notaries are civil servants, working for the MOJ, in charge of the certification of real estate transactions. A total of nine notaries are working in the MOJ. Schedule 3 of the QFC Law No. 7 of 2005 does not list notaries as a permitted activity in the QFC. Accordingly, the profession of notary as defined by the glossary to the FATF 40 Recommendations does not apply in Qatar.

83. Accountants: They are registered and monitored pursuant to law No. 30 of 2004 by the legal affairs department of the MEC. According to Article 5 of this law, an accountant should work in the review of accounts at one of the accounting offices and practice main work in accounting or monitoring accounts or inspection of accounts at one of the ministries or institutions, public or private authorities, or companies. The business of providing professional services including audit and accounting is a permitted activity in the QFC. There are two firms licensed by the QFCA to conduct auditing and accounting services in the QFC.

84. Trust and company service providers (TCSP): In Qatar, trust and company service providers are not registered as an identified business or profession. Although the authorities were not aware of the presence of TCSP in the country, the mission found out, however, that there were several recently established. Lawyers, accountants, and private companies may provide trust and company services. The following table summarizes the activities performed by each profession. TCSP and accountants are subject to the monitoring of the MEC. Lawyers and legal advisers are subject to the sanctions of the division of disciplinary cases of the MOJ. All activities performed by trust and company service providers are permitted under Part 2 of Schedule 3 of the QFC Law and are not activities regulated by the QFCRA, other than in respect of AML/CFT requirements. The following table summarizes the professions that currently accomplish the different trust and company services.

Table 3.

Professions Engaged in Trust and Company Services

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85. The following table summarizes the licensing and AML supervision process of the DNFBPs present in Qatar:

Table 4.

Licensing and AML supervision process of the DNFBPs

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1.5 Overview of Commercial Laws and Mechanisms Governing Legal Persons and Arrangements

86. Domestic Sector: Commerce in Qatar is regulated by the Commercial Companies Law (CCL) No. (5) of 2002 amended by Law No. (16) of year 2006. Companies are created under the CCL on the basis of a Memorandum of Agreement, which must contain, inter alia, the company name, address, names of the partners/promoters, the object (activities to be conducted); and capital.

87. The CCL provides for the following seven types of companies: (i) partnership company; (ii) limited partnership; (iii) particular partnership; (iv) joint-stock company; (v) limited partnership by shares; (vi) limited liability company; and (vi) individual company.

88. Bearer shares: Bearer shares are explicitly prohibited in Qatar pursuant to the CCL. The MEC, which is in charge of the corporate registry, indicates however that it does not allow companies to issue these instruments.

89. Beneficial Right Owner: In undertaking its due diligence, the MEC requires applicants to produce personal identification documents and evidence of beneficial ownership.

90. Registration of companies in Qatar: The MEC is responsible for the registration of all business in Qatar. Businesses are required to be registered in the commercial registry. MEC reports that, in practice, businesses are registered prior to commencing operations and taking up occupation of premises. This makes the ministry an important first line of defense in the fight against money laundering and terrorist financing.

91. Trusts in domestic sector: The Qatari legislation does not provide for the creation of trusts or other similar legal arrangements. At the time of the assessment, there was no information available that would indicate that the private sector holds funds under foreign trusts and/or provides other trust services.

Table 5.

Number of Companies Registered in the Domestic Sector

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Source: MEC, February 2007.

92. QFC: The QFC was established in 2005. It aims to provide a financial and business center to attract international financial services institutions and multinational corporations wishing to participate in Qatar’s growing economy

93. Article 11 of the QFC Law provides that corporations, individuals, businesses and other entities may be approved, authorized or licensed to incorporate or establish in the QFC and to carry out permitted activities in or from the QFC.

94. Article 27 of the Financial Services Regulations (FSR) provides that an application for authorization to conduct regulated activities in the QFC may be made by a body corporate; a partnership; or an unincorporated association

95. Similarly, Article 19 of the QFC Authority Regulations provides that the same type of entities may apply for a license to conduct permitted activities in the QFC.

96. QFCRA Public Registers: The QFCRA Public Registers are a public record of previous and current authorized firms, approved individuals or Waiver and Modification Notices

97. The Public Registers are provided online to enable users to conduct searches and print information. The following QFC Authority Public Registers are also maintained on the QFC Website: (i) licensed Firms; (ii) Companies Registration Office and (iii) approved auditors.

98. Trusts in QFC: The QFCA has issued Regulation No. 12, dated February 28, 2007, which enables the creation of trusts under the QFC laws (the QFC trusts). The regulation defines trusts as “a right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds the legal title” and is applicable to express trusts, charitable trusts, non-charitable trusts and trusts created pursuant to law or judgment that requires the trust to be administered in the manner of an express trust. There is no registration of trusts in the QFC.

1.6 Overview of Strategy to Prevent Money Laundering and Terrorist Financing

AML/CFT Strategies and Priorities

99. The Qatari authorities are very conscious of the potential reputational risk to Qatar posed by money laundering and the financing of terrorism. Public officials and the private sector alike realize that disreputable business leading to investigations and negative press would be damaging for Qatar. Domestic cooperation on AML/CFT issues is facilitated by the NAMLC. Nevertheless, there is currently no overall government policy on AML/CFT matters.

The Institutional Framework for Combating Money Laundering and Terrorist Financing Ministries, Committees or other bodies to coordinate AML/CFT action

100. National Anti-Money Laundering Committee (NAMLC). It is the competent government authority in charge of drawing the AML/CFT policy of the State of Qatar. The NAMLC was established in 2002 under the presidency of the Deputy Governor of the QCB to ensure coordination amongst the authorities involved in AML. In accordance with Article 8 of the AML Law, it comprises two representatives of the MOI, including the director of the General Administration of Passports (Vice President of the NAMLC), a representative of the Ministries of Civil Service Affairs and Housing, MEC, Finance and Justice, as well as an additional representative of the QCB and of the Customs and Ports General Authority. Although not specified in the AML Law, the State Security Bureau (which is an independent body that reports directly to the Emir) is also represented in the NAMLC. The statutory functions of NAMLC are the following: to prepare, adopt, and follow-up the implementation of AML plans and programs; to ensure coordination among the competent entities in order to implement the provisions of the legislation and agreements related to AML issues; to follow international ML trends; propose the necessary measures in this regard; and prepare the necessary reports, statistics and data on AML efforts (Art. 9 of the AML Law).

101. Coordination committees for the fight against terrorism. A first coordination committee was established in January 2002 in the form of an interdepartmental committee for the coordination of the implementation of the UN resolutions on the fight against terrorism. It comprised representatives from the Ministries of Civil Service Affairs and Housing, Finance, Economy and Commerce, Interior, and Justice, as well as representatives from the Ministry of Awqaf and Islamic Affairs, the QCB (which is represented by the FIU), and the Chamber of Commerce and Industry. The original mandate of the first coordination committee covered the implementation of UNSCR 1373. It was subsequently enlarged in order to encompass coordination in the implementation of all UN resolutions on terrorism (Council of Ministers’ decisions of January 12, July 7, and July 21, 2002). In 2007, the committee was replaced by a new one, the National Committee for Fighting Terrorism (NCT), by decision of the Council of Ministers dated March 26, 2007. The NCT is composed of representatives from the MOI, the Qatar Armed Forces, the State Security Bureau, the Internal Security Force, the Ministry of Civil Service and Housing Affairs, the Ministry of Finance, the MEC, the MOJ, the Ministry of Endowment and Islamic Affairs, the General Secretariat of the Council of Ministers, the QCB, the General Authority of Customs and Ports, and of the Qatar Chambers of Commerce and Industry (Article 1 of the abovementioned decision). Its main functions are to make plans and programs to fight terrorism, to coordinate national efforts in the implementation of the obligations arising from UNSCR 1373, and to take action to implement the obligations set out in the international conventions against terrorism to which Qatar is a party (Article 3 of the same decision). The implementation of other relevant UN resolutions, and in particular of UNSCR 1267 and its successor resolutions, does not fall within the remit of the new NCT and is currently unaddressed.

102. MOI: According to Article 20 of the AML Law, the Minister of Interior, in coordination with the Governor of the QCB and on the basis of a proposal by the NAMLC, shall issue the executive resolutions of the provisions of this law. The ECPD is the department within the MOI in charge of ML investigations. The ministry has other functions that have impact on the AML/CFT framework, including the issuance of residence/work permit to every foreigner residing in Qatar, the issuance of a personal identification number to both foreign national and Qatari citizens, and the authorization to sell gold.

103. Ministry of Civil Service Affairs and Housing. The ministry houses the Coordination Committee on the implementation of the UN resolutions on the fight against terrorism. It is also in charge of the regulation of private institutions and associations. As registration authority, the Ministry of Civil Service Affairs and Housing has information on the general evolution and size of the NPO sector.

104. MOJ. The real estate registration department of the MOJ is competent for the authorization of real estate agents. Certification of real estate transactions is done by notaries, which are civil servants, working for the MOJ. Another department of the ministry, the lawyer’s registration committee, is in charge of approving lawyers and authorizing branches of international law firms and their staff of legal advisers to work in Qatar. The division of disciplinary cases at the MOJ is the competent authority which applies sanctions to the legal profession.

105. MEC. Is in charge of the supervision of insurance companies and agents, all DNFBPs active in Qatar except lawyers and legal advisers, as well as all other types of companies in the domestic sector. The Minister is empowered to enact all regulations (or amendments, modifications to, or repeal of existing regulations) submitted to him by the QFC Authority, the QFC Regulatory Authority, and the QFC Appeals Body.

106. Ministry of Foreign Affairs (MOFA). The ministry is the recipient of the UNSCR 1267 lists and the 1373 requests which it forwards to the coordination committee on the implementation of the UN resolutions on the fight against terrorism.

Law enforcement, criminal justice, and operational agencies

107. PPO: The principal authority in the investigation of ML/FT cases is the public prosecutor’s office. It controls the primary conduct of ML/FT investigations and confiscation actions. Investigation officers act under the supervision of the General Prosecutor. They have broad powers to investigate crimes, search the perpetrators and collect all the necessary evidence.

108. ECPD (MOI): The work of the ECPD is regulated by Resolution No. 29 of 2004 issued by the MOI affairs on July 28, 2004. The ECPD, affiliated with the director of criminal investigation department, is specialized in the investigation of ML and other offenses such as e-crimes, counterfeiting, and falsification of currency.

109. Department of International Cooperation (MOI). The department of international cooperation receives and requests police information from its foreign counterparts. Its other functions include preparing and participating in local, regional and international conferences, implementing, in coordination with other competent authorities, international resolutions and recommendations, as well as developing and enhancing the cooperation with regional and international organizations.

110. SSB. It is an independent body established in 2003 that reports directly to the Emir. The SSB is in charge of the investigation into terrorism and financing of terrorism offenses.

111. General Directorate for Customs and Ports (GDCP): It is an independent agency responsible for monitoring for economic and excise purposes the national territory and borders of Qatar. It includes monitoring the movement of currency at borders (land, ports, and airports).

112. FIU. The Qatari FIU is an administrative unit established pursuant to Resolution 1 of 2004 issued on August 8, 2004 on “the creation of the Financial Information Unit and the approval of its organizational structure” by the President of the NAMLC. The AML Law gives the coordinator of the NAMLC the competence to receive reports related to suspicions of money laundering crimes from the competent parties and taking the legal measures pertaining to them and to follow up on the measures of tracking, collecting information, and investigations carried out by the competent parties.

Financial Sector Bodies

113. QCB. The QCB establishes the licensing requirements for banks, investment companies, finance companies and exchange houses. It is also empowered with the responsibility to supervise and control said institutions, including with respect to ML. The Governor of the QCB has the power to freeze accounts, assets, and properties suspected of or linked to money laundering offenses. The Deputy Governor of the QCB is the president of the NAMLC. The QCB also houses the FIU. Access to all information covered by the banking secrecy requires a prior authorization of the Governor of the QCB, except to those institutions authorized and operating out of the QFC, where their own banking secrecy requirements apply.

114. DSM. The commission is the supervisor for the brokerage companies within the Doha Securities Market, which is the principal stock market of Qatar. The market was founded in 1997 by the decree law.

115. QFCA. The QFCA is responsible for developing the commercial strategy of the QFC and establishing relationships with the global financial community. It proposes regulations for enactment by the MEC. The QFCA is responsible for the licensing process of firms conducting non regulated activities in the QFC.

116. QFCRA. The QFCRA is the unitary financial services regulator of the QFC. It is responsible for the authorization of firms seeking to conduct Regulated Activities in the QFC and for the ongoing supervision of those firms to ensure they remain in compliance with the various QFC requirements, including regulating licensed firms in respect to AML/CFT requirements. The QFCRA as an independent body has power to discipline those firms and individuals that fail to comply with QFC requirements. The QFCRA is also able to propose regulations for enactment by the minister of economy and commerce.

Non-Profit Organizations

117. Qatar Authority for Charitable Activities (QACA). This organization was created in 2004. It is the authorizing and supervisory authority for the charities in the domestic sector.

Approach Concerning Risk

118. Qatar has not adopted an overall risk-based approach to its AML or CFT framework and the authorities have not conducted an overall assessment of the ML and TF risks that exist in Qatar. The current AML/CFT legal and supervisory framework has, therefore, been developed without considering ML/FT risks.

119. In the domestic sector, the QCB is the only supervisory authority that has adopted a risk-based approach to both prudential and AML/CFT supervision which was at a very early stage of implementation at the time of the on-site visit. The new approach had been implemented only once. Supervisory authorities like the DSM and the MEC have not established a risk-based approach to AML/CFT supervision. There are no reduced or simplified customer due diligence measures in place for financial institutions in the domestic sector.

120. The QFC AML Regulations have been drafted in accordance with a risk-based approach and proportionate anti-money laundering systems and controls. Article 15 of the QFC AML Regulations specifically requires that a relevant person must ensure that it adequately addresses the specific money laundering risks which it faces taking into account the vulnerabilities of its products, services, and customers. Enhanced due diligence is required for higher-risk areas of money laundering as detailed in Appendix 2 of the AML Rulebook.

Progress since the last IMF/WB assessment or mutual evaluation

121. Qatar underwent a mutual evaluation by the FATF/GCC in 2001. The evaluation team visited Qatar from May 21–23, 2001. The mutual evaluation was based on the then existing FATF 40 Recommendations. The Special Recommendations on Terrorist Financing had not been adopted by the time of the on-site visit and the mutual evaluation also pre-dated the adoption by the FATF, IMF and the World Bank of a methodology for assessing compliance with the FATF 40+9. Qatar’s Mutual Evaluation Report was adopted by FATF in June 2002.

122. The main deficiencies identified in the Mutual Evaluation Report were as follows:

  • Legislation: There was no specific money laundering offense in the Qatari Penal Code. Moreover, the existing legislation on confiscation and provisional measures was inadequate for dealing with money laundering. Article 43 of the Narcotic Drugs Law No. 9 of 1987 only dealt with narcotics-related funding and failed to cover individuals, other than the perpetrator or his family, who may have acquired, transferred, or retained such funds. With regard to freezing or seizing of funds or property, the QCB was the only authority with the power to take such an action.

  • Financial sector: Anti-money laundering measures for the financial sector were essentially based on requirements imposed by the QCB through Circular No. 33 of 1999. Customer identification provisions did not require financial institutions to take steps to determine the true identity of persons on whose behalf a transaction was conducted when there were doubts as to whether a customer was acting on his own or another’s behalf. The Department of Commercial Affairs of the Ministry of Finance, Economy and Commerce had implemented certain anti-money laundering measures regarding insurance and securities, although those for securities were less comprehensive than those contained in QCB regulations.

  • Reporting of STRs: There were also several weaknesses in the obligation for reporting suspicious transactions. The QCB reporting requirement was weak in that it required reporting only when the institution detected “crime or money laundering attempts rather than suspicions of money laundering. The configuration of the reporting chain was also a potential weakness. The fact that the QCB received the report and passed it to the MOI seemed to be an additional layer in the reporting chain that did not improve the overall efficiency of the system.

123. International cooperation: Extradition for money laundering was not possible and the Qatari authorities were not permitted to honor foreign requests for imposition of provisional measures against funds or property located in Qatar. Authorities were also not allowed to provide information on suspicious transactions to foreign requesters.

124. Since last evaluation, several laws and regulations have been amended or enacted, in particular the AML Law and the CT Law which also incriminates, to a certain extent the financing of terrorism. However, the FATF standard has undergone significant changes since Qatar was last assessed and the AML Law was enacted. Moreover, the FATF standard now requires that key measures be contained in laws, regulations, or other enforceable instruments and that the effective implementation of the measures in place also be assessed. Accordingly, the progress made by the authorities since the last assessment has been over-shadowed in many areas by the stricter requirements of the new standard.

2 Legal System and Related Institutional Measures

2.1 Criminalization of Money Laundering (R.1 & 2)

2.1.1 Description and Analysis

125. Qatar criminalized money laundering in 2002 with the adoption of Law (28) of 2002 (the AML Law). It amended the money laundering offense in 2003 through Decree Law (21) of 2003 in order inter alia to include terrorist crimes in the list of predicate offenses.

126. The provisions of the AML Law remain untested by the courts. One prosecution has been conducted on the basis of the AML Law in 2006 but was subsequently abandoned when it was established that the source of the funds was legitimate.

127. In some instances, the text of the law is vague both in the original Arabic version and in the English translation (see for example the exact scope of the ML offense). As it is not a common legislative practice in Qatar to supplement draft laws with any type of explanation or guidance, there is no explanatory note that would assist the assessors and the authorities in understanding the ratio legis of the dispositions of the AML Law. Since the courts have not yet applied the AML Law, there is no case law either that would clarify the possibilities offered and boundaries imposed by the law in money laundering prosecutions and trials.

128. Criminalization of Money Laundering (c. 1.1 - Physical and Material Elements of the Offense). Qatar has ratified the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention) on May 4, 1990. It criminalized illicit traffic in narcotic drugs through Law (9) of 1987 (as amended by Law (7) of 1998 and subsequent laws) which pertains to combating drugs and psychotropic substances, and regulates their use and trade. The latest amendment to the law limited the illicit drug trafficking offense to “dangerous” drugs. The purpose of this amendment was to exclude from the scope of the law the latest medicinal drugs that may contain extracts of the substances covered by the law. This amendment was reflected in the AML Law, where the word “dangerous” was added to the predicate offense dealing with illicit drug trafficking.

129. Qatar has not ratified the 2001 United Nations Convention against Transnational Organized Crime (the Palermo Convention) but the ratification process was underway at the time of the assessment. Organized crime, domestic and/or transnational, is not an offense under the Qatari legislation unless its purpose is to commit a terrorist crime (Articles 3 and 7 of the Law (3) of 2004 on combating terrorism).

130. Articles 3(1)(b) and (c) of the Vienna Convention and 6(1) of the Palermo Convention require countries to establish as a criminal offense the following intentional acts (material elements): the conversion or transfer of proceeds; the concealment or disguise of the true nature, source, location, disposition, movement or ownership of, or rights with respect to proceeds; and, subject to the fundamental or constitutional principles and basic concepts of the country’s legal system (Article 2(1) of the Vienna Convention and Article 6(1) of the Palermo Convention), the acquisition, possession or use of criminal proceeds (Article 3(1)(b) (i)–(ii) of the Vienna Convention and Article 6(1)(a)(i)–(ii) of the Palermo Convention). They furthermore require participation in, association with or conspiracy to commit, attempts to commit, and aiding, abetting, facilitating and counseling the commission of any of the foregoing to be included in the offense (Article 6(1)(b)(iii) Palermo).

131. The English version of Article 2 of the AML Law (as amended by Article 1 of the Decree Law (21) of 2003) provides that “he who commits any of the following acts shall commit a money laundering crime: Any person who earns, possesses, disposes of, manages, exchanges, deposits, adds, invests, transports, or transfers funds obtained from the crimes of drugs and dangerous psychotropic substance; extortion and looting; forgery, counterfeiting and imitation of notes and coins; illegal trafficking in weapons, ammunitions and explosives; crimes related to environment protection; or the crimes of trafficking in women and children; or the crimes considered by law as terrorist crimes, with the intention of hiding the real sources of the funds and show that their source is legal. Any employee in the financial institutions who receives cash amounts or securities, transfers or employs such amounts in financial or banking transactions, knowing or having a reason to believe that such amounts resulted from one of the crimes stipulated in the previous paragraph.”

132. By providing that the money laundering offenses applies to any person who earns, possesses, disposes of, manages, exchanges, deposits, adds, invests, transports, or transfers funds obtained from the predicate crimes, the law covers a broad range of material elements.

133. However, the material application of the offense is narrowed down by the mental prerequisite: the money laundering offense only applies to the acts conducted with the intention of “hiding the real sources of the funds and show[ing] that their source” is legitimate. While one could argue that this also captures the concealment or disguise of the true nature of the funds, one cannot infer from the text of the law that the money laundering offense extends to acts aimed at concealing or disguising the location, the disposition and movement of the funds, nor their ownership. Accordingly, the acts carried out with the intention of hiding the location of the funds and/or the way that they were disposed of, as well as those carried out with a view to helping a person (the author of and/or any participant in the predicate offense) evade criminal liability for the crime that generated the proceeds would not fall within the scope of the money laundering offense if they do not also serve the purpose of concealing the illegitimate source of the funds. Consequently, the scope of the money laundering offense is too limited to address all the aspects covered in the Vienna and Palermo Conventions.

134. It is unclear whether the legislator intended to limit the scope of the offense in such a way or whether this is merely the result of unfortunate legal drafting. Discussions with the law enforcement agencies to establish whether, notwithstanding the text of the law, the authorities would prosecute acts aimed, for example, solely at protecting the persons involved in the crime from criminal liability, but proved inconclusive. These discussions also revealed that the authorities’ understanding of the requirements set out in the Vienna and Palermo Conventions was limited. There is, therefore, a risk that the authorities would apply Article 2 of the AML Law stricto sensu and that they would consider that intentional acts aimed at concealing aspects other than the illegitimate source of the funds do not constitute money laundering.

135. The Laundered Property (c. 1.2). Article 2 of the AML Law refers to “proceeds” of the listed predicate crimes, which are defined as “any funds or property earned directly or indirectly by committing one of the crimes stipulated in this law” (Article 1 of the AML Law). 3 This definition is broad enough to cover all types of property listed in the Vienna and Palermo Conventions. It was also confirmed during discussions with the relevant authorities (and with the public prosecution in particular) that, although this definition has not been tested in court, the authorities’ interpretation of the AML Law and their understanding of “proceeds” in the general context of the Qatari criminal laws is that it covers all assets derived directly or indirectly from crime, including assets of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and legal documents or instruments evidencing title to, or interest in, such assets.

136. Proving Property is the Proceeds of Crime (c. 1.2.1). Article 11 of the AML Law provides that the investigation of a money laundering offense may be conducted independently from the investigation of the predicate offense. No mention is made of the need, or lack thereof, for a conviction for the predicate offense to secure a conviction for money laundering. When questioned whether the distinction between the two crimes could extend beyond the investigation stage and enable the prosecution of money laundering independently from that of the predicate offense, the public prosecutors and judges responded that while investigations may be conducted separately and independently, a clear link has to be established at the prosecutorial stage between the two crimes. The initial discussions revealed some level of confusion as to whether a conviction for the predicate offense was the only means by which the necessary link could be established, but further discussions suggested that this was not the case. Indeed, the authorities maintain that a conviction for money laundering is possible even in the absence of a prior conviction for the predicate offense and that circumstantial evidence that assets have been criminally acquired would be sufficient to apply the money laundering offense.

137. The Scope of the Predicate Offenses (c. 1.3). Qatar adopted a list approach by enumerating, in Article 2 of the AML Law (as amended in 2003), the predicate offenses to money laundering. The list contains only seven predicates and therefore does not cover all the categories of offenses designated in the FATF Glossary. The predicate offenses listed and the legal basis for their criminalization are:

  • Crimes of drugs and dangerous psychotropic substances: Law No. 9 of 1987 (as amended by Law (7) of 1998) pertaining to combating drugs and psychotropic substances and regulating their use and trade. The term “dangerous” was added both in the AML Law and the Law (9) of 1987 in order and exclude from the scope of both laws medicinal substances that include some amount of “drugs” in their composition.

  • Forgery, counterfeiting and imitation of notes and coins: Article 218–226 of the Criminal Code. The standard sanctions vary between five and fifteen years of imprisonment and a fine but may go up to life imprisonment if the offense resulted in a reduction of the national currency rate.

  • Illegal trafficking in weapons, ammunitions, and explosives: Articles 38–54 of Law (14) of 1999 on weapons, ammunition, and explosives. The sanctions applicable range from several months imprisonment and a fine to several years of imprisonment and a fine.

  • Terrorist crimes: Article 1 and following of Law No. 3 of 2004 on Combating Terrorism (CT Law). According to the authorities, the notion of “terrorist crimes” under Article 2 of the AML Law covers all the crimes listed in the CT Law, including the terrorist financing offense of Article 4 of the CT Law, and not only those that are specifically referred to as “terrorist crimes” under Article 1 of the CT Law.

  • Extortion and looting: Article 352 of the Criminal Code. The basic sanction is imprisonment for up to three years.

138. The choice of predicate offenses in the AML Law appears somewhat arbitrary in the sense that it does not reflect all the main proceeds generating crimes that occur in Qatar. While the authorities did not provide the assessors with comprehensive statistical information on the types of crimes investigated, prosecuted, and sentenced in Qatar, they did mention on a number of occasions that the most frequent proceeds generating crimes are drug trafficking, credit card fraud and corruption, counterfeiting of currency and counterfeiting and piracy of goods, insider trading and market manipulation. Article 2 of the AML Law covers drug trafficking and counterfeiting of currency, but it does not cover fraud, corruption, counterfeiting and piracy of goods, insider trading and market manipulation. This proved too limitative in practice: the public prosecutor’s office received six potential money laundering cases from 2002 to 2006 but had to abandon five of them because the underlying offense was not listed under Article 2 of the AML Law.

139. In addition to the offenses listed above, Article 2 of the AML Law also mentions crimes related to the protection of the environment and trafficking in women and children as predicate offenses, but neither of these conducts is criminalized under Qatari laws. Without clear criminalization and definition of the material and mental elements of these conducts, their inclusion in the list of predicate offenses to money laundering is pointless.

140. The following categories of offenses designated by FATF are not included in the Qatari AML framework: (i) murder and grievous bodily injury; (ii) participation in an organized criminal group and racketeering; (iii) trafficking in human beings and migrant smuggling; (iv) sexual exploitation, including sexual exploitation of children; (v) illicit trafficking in stolen and other goods; (vi) corruption and bribery; (vii) fraud; (viii) counterfeiting (other than that of currency)and piracy of products; (ix) environmental crime; (x) kidnapping, illegal restraint and hostage-taking; (xi) robbery or theft; (xii) smuggling; (xiii) forgery; (xiv) piracy; and (xv) insider trading and market manipulation.

141. The limited list of predicate offenses entails that the Qatari authorities are not in a position to prosecute and sanction money laundering cases to the extent required by the standard.

142. Threshold Approach for Predicate Offenses (c. 1.4): This criterion is not applicable since the Qatari authorities opted for a list approach.

143. Extraterritorially Committed Predicate Offenses (c. 1.5): Unless a person was already convicted or acquitted for the same facts by a foreign state, the Qatari courts maintain their jurisdictions over crimes committed abroad in a number of circumstances: when the crime occurred partially or totally in Qatar; when a crime or a felony (or misdemeanor) was committed in Qatar but occurred partially or totally outside Qatar and is criminalized in both countries; when the crime was directed against the internal or external security of the State of Qatar or in case of falsification and imitation of Qatari official documents, seals, marks, stamps and currency of the State of Qatar and possession or promotion of these falsified currencies; when a person committed or participated in drug trafficking, trafficking of human beings, piracy or international terrorism (Articles 16, 17 and 18 of the Criminal Code).

144. Consequently, crimes other than those directed against the security of the State, falsification of official documents and currency, possession or promotion of falsified documents and currency, drug trafficking, trafficking in human beings, piracy and international terrorism have to occur or be committed, at least partially, in Qatar. The authorities have no jurisdiction over predicate offenses that were entirely committed in another country, even if there is dual criminality.

145. In the absence of dual criminality on the predicate offense, money laundering charges cannot be brought before the Qatari courts. Considering the limited number of predicate offenses under Qatari law, this severely limits the authorities’ ability to investigate and prosecute money laundering cases.

146. Laundering One’s Own Illicit Funds (c. 1.6). The AML Law does not distinguish self-laundering from third party laundering and there appears to be no constitutional or fundamental principle of Qatari law that would preclude the application of the money laundering offense to the person who committed the predicate crime. This view was shared by the authorities during the on-site visit: Representatives from the public prosecutor’s office and the courts maintain that self-laundering may be prosecuted to the same extent as third-party laundering. In the absence of any specific impediments to prosecute self-laundering, this approach is fully in line with the standard.

147. Ancillary Offenses (c. 1.7). The Criminal Code addresses the ancillary offenses in a comprehensive way by providing for several forms of participation that are applicable to all crimes, including money laundering. It distinguishes the “committer” of an offense from the “participant.” The “committer” of a crime is the person who: conducted one or all of the acts constituting the crime; provided assistance in the execution of the crime and was present at the moment of the crime; or “used other persons by any means to execute” the crime (Article 38 of the Criminal Code). The “participant” in a crime is whoever “prompted another person to commit” a crime and had a direct effect on the commission of the crime, “agreed with another person to commit the crime which was carried out on the basis of this agreement, as well as whoever intentionally gave the perpetrator “a weapon, machines, or anything else used in committing the crime,” or helped him in any other way to prepare, facilitate or complete the commission of the crime (Article 39 of the Criminal Code). According to the authorities, conspiracy and counseling are covered respectively by the notions of “agreement to commit a crime” and “help in any other way.” The authorities took a tough stance on participation with the recent amendment to the Criminal Code which provides that, unless a specific law mentions otherwise (which the AML Law does not), the participants in a crime are subject to the same penalties as the main authors of the crime (Article 40 of the Criminal Code).

148. With respect to money laundering, Article 3 of the AML Law specifically provides that any person who, by virtue of his professional position, obtains information related to a money laundering crime and does not take the legal measures prescribed by the law commits a “crime related to the money laundering crime.”

149. The attempt to commit a felony (i.e., a crime punished by death, life imprisonment, or a maximum imprisonment sentence of more than three years; Article 22 of the Criminal Code) or misdemeanor (i.e., a crime punished by a maximum imprisonment sentence of three years at the most and/or a fine of no more than one thousand Riyals; Article 23 of the Criminal Code) is also an offense. The notion of attempts covers situations where a person started an act with the intention to commit a felony or a misdemeanor, but then brought his or her action to an end, or was stopped against his or her will (Article 28 of the Criminal Code). The sanctions applicable to the attempt to commit a felony are: life imprisonment when the penalty of the crime is a death sentence; imprisonment for a period between five and fifteen years, if the penalty for the completed crime is life imprisonment; and imprisonment for not more than half the imprisonment sentence applicable to the completed crime (Article 29 of the Criminal Code). The law also specifies the cases where the attempt to commit a misdemeanor is sanctioned as well as the applicable penalty (Article 30 of the Criminal Code). The mere intention to commit a felony or misdemeanor is not sanctioned (Article 28 of the Criminal Code).

150. The provisions of the Criminal Code on the attempt and the various levels of participation are sufficiently broad to cover all the aspects required by the standard and to ensure that all persons involved in a money laundering crime may be prosecuted.

151. Additional Element (c.1.8). The Criminal Code requires dual criminality for the underlying offenses in all cases (Articles 16 and 18 of the Criminal Code). Consequently, the money laundering offense does not apply when the proceeds derive from a conduct that occurred in another country if it is not an offense in the other country, even if it would have constituted a money laundering offense had the predicate crime occurred in Qatar.

152. Liability of Natural Persons (c. 2.1). The money laundering offense applies to natural persons who intentionally engage in money laundering activities. The Criminal Code provides that the moral element of an offense consists of the intent and the “fault”, which it defines as follows: the intent is the will of the committer to commit an act or abstain therefrom, in order to produce the result which is subject to penalty; the fault is available when the result sanctioned by the law “happens because of the fault of the committer, whether this error was due to negligence, carelessness, [lack of caution], rashness or non-complying with the law of the lists”. It also specifies that the “committer shall be asked for the crime whether committed on purpose or by error, if the law [did not] stipulate the intent openly” (Article 32 of the Criminal Code). This last part would tend to indicate that, in the case of money laundering, where Article 2 of the AML Law specifically refers to the intention of concealing the source of funds, the “fault”, or recklessness, would not be sanctioned. From the explanations provided during the on-site visit, it also appeared that, regardless of the wording of the money laundering offense, only the actual knowledge is sanctioned and it does not extend the dolus eventualis. This, however, is not required by the standard. It results from the above that the Qatari Criminal Code and AML Law are in line with the standard on this point.

153. The Mental Element of the ML Offense (c. 2.2). Pursuant to Article 232 of the Criminal Procedure Code, the principle of free evaluation of the evidence applies. The prosecution does not have to bear the burden of demonstrating actual knowledge of the illicit nature of the proceeds; the judges may freely appreciate the evidence before them and may infer the mental element of the offense from objective factual circumstances.

154. Liability of Legal Persons (c. 2.3). The Criminal Code provides that legal persons may be held liable for the crimes committed by their representatives, managers and agents acting in their name (Article 37). Article 14 of the AML Law also explicitly extends the criminal liability for money laundering to legal persons by providing that the legal person “shall be fined an amount not less than the value of the instrumentalities, returns and proceeds of the crime” and that an order may be issued to cancel or suspend the legal person’s license. While Article 14 of the AML Law has not been tested before the courts, legal entities have been sanctioned for other crimes under the general provisions of the Criminal Code, which indicates that the prosecution and the criminal courts are, in practice, familiar with the concept of corporate liability.

155. Liability of Legal Persons should not preclude possible parallel criminal, civil or administrative proceedings (c. 2.4). Article 14 of the AML Law clearly specifies that sanctioning the legal entity does not prevent the authorities from sanctioning the individual who committed the crime. According to the authorities, parallel administrative or civil sanctions against the corporate entity may also be applied.

156. Sanctions for ML (c. 2.5). Pursuant to Article 13 of the AML Law, the money laundering offense is sanctioned by imprisonment of no more than seven years and by a fine of no less than fifty thousand Qatari Riyals (approximately US$13,700) and no more than the value of funds, subject of the crime. As mentioned above, the same sanctions apply to the participant in a money laundering offense. The law also provides that the person who obtains information related to a money laundering crime by virtue of his profession and does not take the legal measures prescribed by the AML Law shall be punished by imprisonment of no more than three years and by a fine of no more than ten thousand Qatari Riyals (Articles 3 and 13 of the AML Law). In both cases, the sanctions shall be doubled if the crime is committed by two or more persons acting in collaboration as well as in case of recidivism. A person is considered a recidivist if he or she commits a similar crime “within five years before the end of term of the sanction or before the prescription of this sanction.” The sanctions set out in the AML Law appear to be dissuasive and proportionate. It is also specified that, in any event, and without prejudice to the rights of bona fide third parties, the Court shall order the confiscation of the instrumentalities and proceeds of the crime.

157. Effectiveness and Statistics. Between 2004 and 2006, a total of 82 investigations into potential ML cases were led by the ECPD. All cases resulted from STRs, as indicated in the table below. In all cases, the investigations indicated that the origin of the funds was legitimate.

Table 6.

ML Investigations Conducted by the ECPD

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158. The PPO led the inquiry into a ML case on one occasion but it was then established that there was no money laundering activity and the case was therefore closed. The prosecution received five further cases of potential money laundering, but was unable to start an inquiry because the underlying crimes were not listed as predicate offense to money laundering under Article 2 of the AML Law.

159. The following information pertains to the prosecutions conducted in 2006 with respect to the money laundering offense and the (FATF) predicate offenses (without a money laundering component):

Table 7.

Prosecutions Conducted in 2006

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160. No similar statistics were provided for the previous years, but, as mentioned above, the assessment team was informed that the (unsuccessful) prosecution for money laundering indicated in the table, was the only led so far. Consequently, even though the money laundering offense has been in force since 2002, and despite the occurrence of several of the predicate offenses in the State of Qatar, no money laundering charges have been brought before the courts.

161. As mentioned above, the money laundering offense only applies to a limited number of predicate offenses. This (and the fact that the source of the funds may indeed have been legitimate) explains the low number of investigations and prosecutions for money laundering but only partially: the assessment team found that, despite their willingness to fight money laundering effectively, the law enforcement authorities, as is often the case in countries which, like Qatar, have a recent AML/CFT system in place, lack sufficient understanding of the money laundering typologies and of the AML Law to be in a position to use the tools at their disposition to the fullest extent.

2.1.2 Recommendations and Comments

162. The AML Law provides for the basic elements of the money laundering offense but still suffers from major shortcomings, in particular with respect to the limited number of predicate offenses, and does not enable the authorities to prosecute money laundering in a fully effective way.

163. The authorities are recommended to:

  • Amend the AML Law to clarify and extend the scope of the money laundering offense in order to cover all intentional acts aiming to conceal or disguise not only the source of the funds but also the true nature, location, disposition, movement, or ownership of or rights with respect to proceeds of crime. This could be achieved either by clearly specifying the purpose in the AML or by deleting altogether the intended purpose.

  • Criminalize, where necessary, the following conducts and add them to the list of predicate offenses in the AML Law: participation in an organized (non terrorist) criminal group and racketeering; trafficking in human beings and migrant smuggling; sexual exploitation, including sexual exploitation of children; illicit trafficking in stolen and other goods; corruption and bribery; fraud; counterfeiting and piracy of products; environmental crime; murder, grievous bodily injury; kidnapping, illegal restraint and hostage-taking; robbery or theft; smuggling; forgery; piracy; and insider trading and market manipulation.

  • Ensure that predicate offenses for money laundering all extend to conduct that occurred in another country when there is dual criminality.

  • Provide in-depth training to the law enforcement agencies on the AML Law and on money laundering trends and typologies, as well as training on investigations into and prosecutions of money laundering offenses.

  • Although the authorities maintain that the terrorist financing offense is covered by the notion of the “terrorist crimes” that appears in Article 2 of the AML Law, it is also recommended, for the sake of clarity, to specifically mention the terrorist financing offense in the list of predicate offenses.

2.1.3 Compliance with Recommendations 1 & 2

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2.2 Criminalization of Terrorist Financing (SR.II)

2.2.1 Description and Analysis

164. Qatar took legislative measures to counter terrorism in 2004 with the issuance of the CT Law.

165. Criminalization of Financing of Terrorism (c. II.1). Article 1 of the CT Law provides an extensive definition of terrorist crimes: 5 all crimes are terrorist crimes when the motive behind the use of force or violence or the threat thereof is to undermine the provisions of the Qatari Constitution or the Qatari law, to breach the public order, to jeopardize the safety and security of the society, to undermine the national unity in a way that can harm or terrorize people, to put their lives or freedom in danger, to harm the environment or public health, to weaken the national economy, to cause damage to annexes, installations, public or private properties, to hinder the performance of their work or to prevent or hinder the public authorities from doing their work. This provision is broad enough to cover all forms of terrorist acts pursuant to the 1999 International Convention for the Suppression of the Financing of Terrorism (ICSFT) Article 2 para. 1 (b). However, the motive required under the law is not in line with the treaties mentioned in Article 2 para. 1 (a) of the ICSFT (see in particular the unlawful seizure of an aircraft with no intention to terrorize, cause harm, death or material damage and with no political motives: it would not be considered as a terrorist act under the CT Law).

166. With the exception of the 1997 International Convention for the Suppression of Terrorist Bombings and the 1999 International Convention for the Suppression of the Financing of Terrorism,6 all the UN Conventions and Protocols against terrorism have been ratified by Qatar,7 and the relevant acts criminalized in the Qatari legislation.

167. The CT Law establishes in Articles 2 to 13 the sanctions applicable to the terrorist acts listed in Article 1 and to various forms of participation or assistance. 8

168. Article 4 sets out the terrorist financing offense. 9 It may be summarized as follows (highlights made by the assessment team):

  • Any person who supplies weapons or explosives to a group or organization formed with a view to commit a terrorist crime shall be punished with life imprisonment;

  • The same sanction will apply to any person who supplies the groups or organization mentioned in the previous paragraph in full knowledge of their purpose with weapons, ammunitions, technical information, material or financial assistance, information, tasks or machines, or anyone who sends supplies to such groups or collects financial assistance 10 for them, or offers a shelter, a place to meet or other facilities to their members.

169. The full text of Article 4 clearly links the terrorist financing offense to the terrorist acts defined under Article 1. The terrorist financing offense, therefore, suffers from the same shortcomings as the terrorist crimes in the sense that it would not apply to the acts mentioned in Article 2 para. 1 (a) of the ICSFT when the motive set out in Article 1 of the CT has not been established.

170. Criterion II.1 (a): The law does not specify whether the provision and collection of the financial assistance and money must be direct and/or indirect for the offense to be committed. This would suggest that the means by which the funds are provided or collected is irrelevant and that both the direct and indirect provision and collection are covered by the law. The authorities share this view.

171. While the law specifically mentions terrorist groups and organizations, it does not extend the terrorist financing offense to the collection and provision of funds to individual terrorists and for terrorist acts.

172. The CT Law does not define “material or financial assistance” and no explanatory note or case law provides further guidance on the parameters of these terms. According to the authorities, the terrorist financing offense was deliberately drafted in broad terms in order to cover all forms of financing. On the basis of the text of the law and the discussions held with the authorities, the assessment team was satisfied that the notion of “material and financial assistance” is sufficiently broad to cover all the funds as defined in the ICSFT (i.e. “assets of every kind, whether tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form, including electronics or digital, evidencing title to, or interest in, such assets, including but not limited to bank credits, travelers checks, bank checks, money orders, shares, securities, bonds, drafts, letters of credit”).

173. Criterion II. 1 (b): The law does not make reference to the source (either legitimate or illegitimate) of the “financial assistance.” The absence of a reference to a criminal source would tend to indicate that no limitation applies and that the offense covers the collection and provision of financial assistance whether from legitimate or illegitimate source. This view was shared by the authorities during the on-site visit.

174. Criterion II. 1 (c): According to the authorities, the terrorist financing offense does not require that the funds were actually used to carry out or attempt a terrorist act, or be linked to a specific terrorist act.

175. Criterion II. 1 (d): The attempt to commit the terrorist financing offense is not specifically addressed in the CT Law. It is nevertheless punishable under the general dispositions of the Criminal Code. The financial support and the other acts of assistance listed under Article 4 of the CT Law constitute felonies (Article 21 of the Criminal Code). The attempts to commit these crimes is, therefore, an offense punishable with imprisonment for a period between five to fifteen years (Article 29 of the Criminal Code).

176. Criterion II.1 (e): The CT Law addresses in detail various levels of participation in the terrorist crimes listed under Article 1 but participation in, organization of, and contribution to the terrorist financing offense is not specifically addressed. These acts are nevertheless punishable by application of the general dispositions of the Criminal Code (Articles 38, 39 and 40).

177. Predicate Offense for Money Laundering (c. II.2). Qatar amended the AML Law in 2003 in order to add “terrorist crimes” to the list of predicate offenses to money laundering (Article 2 of the AML Law as amended by Article 1 of the Decree Law No. (21) of 2003). According to the authorities, this includes all the crimes listed in the CT Law, including the terrorist financing offense.

178. Jurisdiction for Terrorist Financing Offense (c. II.3): The CT Law does not specify whether it would apply to the author of the terrorist financing offense who is not in the same country as the organization he or she assisted or intended to assist and/or the country where the terrorist acts has or would have occurred. The Criminal Code is more precise in the sense that it explicitly provides that its provisions applies to anyone who has committed or participated in a crime, outside Qatar, against “the internal and external security” of the State of Qatar as well as to anyone who, although in Qatar, committed or participated in “international terrorism” abroad (Articles 16 and 17 of the Penal Code). Because it addresses both the commission of and the participation in international terrorism without requiring a geographical link between them, the Qatari legislation complies with the standard on this point.

179. The Mental Element of the TF Offense (applying c. 2.2 in R.2): The CT Law refers to supplying financial assistance to a terrorist group or organization knowing its purpose beforehand (Article 4) thus requiring an intentional element. As for money laundering, the principle of free appreciation of the evidence applies to terrorist financing proceeding and the intentional element of the offense may be inferred from objective factual circumstances.

180. Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2): According to the authorities, although it is not specified in the CT Law, the criminal liability of legal persons envisaged under Article 37 of the Criminal Code is applicable to those that collect or provide financial support to terrorist groups, without precluding parallel civil or administrative proceedings.

181. Sanctions for FT (applying c. 2.5 in R.2): The sanction applicable to the persons who collect any form of material and/or financial assistance for terrorist groups or organizations and/ or provide material and/or financial assistance is life imprisonment (Article 4 of the CT Law). The law also provides that the perpetrator of “a crime” (which, according to the authorities includes the terrorist financing offense) will be exempted from all penalties if he or she informs the competent authorities before the beginning of the execution of the crime (Article 14 of the CT Law). This disposition mirrors the general exemption clause provided in the Criminal Code. According to the representatives of the Public Prosecutor’s Office, it is only applicable when the information given is sufficiently comprehensive and timely to enable the authorities to prevent the commission of the terrorist acts. Exemption of all penalty may also be possible if the informer enables the authorities to arrest the other perpetrators (Article 14 of the CT Law). However, the sanction may not be reduced on the sole basis that the circumstances of the crimes or the personal situation of the perpetrator of these crimes call for mercy (Article 92 of the Criminal Code). The law also allows for the confiscation of “the seized things, assets, weapons and machines resulting from or used in or that could be used in” a terrorist act (Article 15 of the CT Law; see under SR III for further details). As an exception to the general criminal procedure rules, no statute of limitations applies to the offenses and the penalties provided in the CT Law.

182. Effectiveness: Overall, the terrorist financing offense meets most of the requirements set out in the ICSFT. However, several shortcomings remain: the coverage of terrorist acts is not sufficiently broad to be fully in line with the standard (for example, unlawful seizure of an aircraft is not considered a terrorist act in the absence of an intention to cause harm, death, terror or damage); this also limits the notion of terrorist groups or organizations; and the law does not cover the collection and provision of funds when there is no link to a terrorist group or organization. These shortcomings unduly limit the application of the terrorist financing offense.

183. The statistics provided by the public prosecutor’s office with respect to the predicate offense to money laundering (see under Recommendations 1 and 2) indicate that, in 2006, eight prosecutions have been, or were in the process of being conducted for various forms of terrorist crimes, but none related to the financing of terrorism. The police also confirmed that no investigation has been conducted since or before 2006 on the basis of Article 4 of the CT Law. This would indicate that while they investigate terrorist acts and terrorist organizations as such, the law enforcement authorities tend to disregard the financing of these acts and organizations. It further entails that the precise scope and limitations of the terrorist financing offense remain untested by the courts.

184. The Qatari anti-terrorism measures are, like in many other countries, counterbalanced by provisions that aim at ensuring the protection of freedom-fighters: the Qatari Constitution explicitly mentions that the foreign policy of the State of Qatar “shall support the right of peoples to self-determination” (Article 7); Qatar is also party to the 1998 Arab Convention for the Suppression of Terrorism, which provides a broad definition of terrorism of which the struggle, including armed struggle, against foreign occupation and aggression for liberation and self-determination is specifically excluded. While the right for self-determination is an undisputable principle of international law reflected in the UN Charter, it should not serve to undermine the fight against terrorism (and its financing) as defined by the UN counter-terrorism Conventions and Protocols. The authorities, in an effort to uphold the right for self-determination, refused to extradite a Chechen rebel who was suspected of having committed violent acts against civilians of a foreign country. The individual in question was the subject of an arrest warrant issued by Interpol in 2001 and was designated as a terrorist by the UN Security Council 1267 Committee in June 2003. His name was included in the 1267 consolidated list from June 2003 onwards. The process that led the authorities to refuse the extradition and the exact response given to the requesting state were not shared with the assessors. The authorities mentioned during the on-site visit that the purpose of their refusal was to ensure the protection of a freedom fighter. They also indicated that none of the measures called for under the UNSC Resolution 1267 were taken with respect to this particular individual. It is, therefore, clear that from moment of the designation by the UN Security Council 1267 Committee in June 2003, until the individual’s death in February 2004, the authorities provided him with a safe harbor and acted in violation of the UNSC Resolution 1267. In the circumstances, it would appear that there is a need for the authorities to reconsider how they strike the balance between an effective fight against terrorism and its financing, on the one hand, and the protection of the peoples’ right to self-determination, on the other, bearing in mind that the designations made under UNSCR 1267 afford no discretion: the measures called for in the resolution are mandatory and the principle of self-determination does not apply with respect to the designated persons.

2.2.2 Recommendations and Comments

185. It is recommended that the authorities:

  • Amend the CT Law to ensure that the acts covered by Article 2 Paragraph 1 (a) of the ICSFT are criminalized in line with the conventions and that the provision or collection of funds with the intention that they should be used, in full or in part, to commit any of the acts mentioned in Article 2 Paragraph 1 (a) of the ICSFT are considered as terrorist acts even when the motive mentioned in Article 1 of the CT Law is not established.

  • Amend the CT Law to ensure that the terrorist financing offense is considered to have been committed by any person who by any means, directly or indirectly, willfully, provides or collects funds, or attempts to do so, with the intention that they should be used or in the knowledge that they are to be used in full or in part to carry out a terrorist act; or by an individual terrorist.

  • Ensure that investigations into and prosecutions for terrorist crimes also cover the financing of these crimes.

  • Provide training to all relevant authorities on the fight against TF.

2.2.3 Compliance with Special Recommendation II

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2.3 Confiscation, freezing, and seizing of proceeds of crime (R.3)

2.3.1 Description and Analysis

186. Confiscation of property related to ML, FT, or other predicate offenses including property of corresponding value (c. 3.1): The AML Law specifically provides that “in all cases, and without prejudice to the rights of the other bona fide parties, the court shall order the confiscation of the instrumentalities, proceeds and returns of the crime”(Article 13 paragraph 6). Instrumentalities are defined as “everything used or intended to be used for committing the money laundering crime.” Proceeds and returns cover “any funds or property earned directly or indirectly by committing one of the crimes stipulated in this law” (Article 1 of the AML Law). According to the authorities, these definitions cover all assets that have a link with the money laundering offense (or the predicate), whether movable or immovable, including income, profits, interests, and other benefits from crime. The only limitation to confiscation is the protection of thirds parties who hold the assets in good faith. The confiscation of instrumentalities used or intended to be used in the commission of the predicate crime (as opposed to the instrumentalities of the money laundering offense) is not specifically mentioned in the AML Law but is covered by Article 76 of the Criminal Code which provides for the confiscation of “things” that result from, or have been used in or that were intended to be used in the commission of a felony or a misdemeanor. This would apply to the instrumentalities of the following predicate offenses: drug-related crimes, illegal trafficking in weapons, ammunitions and explosives, forgery, counterfeiting and imitation of notes and coins; and terrorist crimes. Confiscation is a mandatory penalty which has to be ordered by the courts even when it has not been requested by the prosecutor.

187. Since no money laundering charges have been brought to court, no confiscation orders have been issued on the basis of the AML Law and Art 13 of the law remains untested. The authorities nevertheless established that they have experience in confiscating both the proceeds and the instrumentalities of other crimes.

188. Confiscation of Property Derived from Proceeds of Crime (c. 3.1.1 applying c. 3.1): Article 13 of the AML Law allows for the confiscation of the “proceeds and returns of the crime” as defined above “in all cases and without prejudice to the rights of other bona fide parties.”

189. Provisional Measures to Prevent Dealing in Property subject to Confiscation (c. 3.2): The Criminal Procedure Code sets out the general framework for the precautionary measures that the Public Prosecutor may take (Article 126–145) but is superseded by the AML Law which provides a specific framework for the provisional measures that may be taken in the case of suspicions of money laundering. Article 12 of AML Law (as amended by the Decree Law (21) of 2003) provides that the Governor of the QCB may order the freezing of funds or property when there are any concerns that they might be disposed of, for a period not to exceed ten days. The governor must, however, notify the Public Prosecutor of the freezing or seizing order within three days, otherwise the order will be deemed null. The Public Prosecutor is then entitled to cancel the order or renew it for a maximum period of three months. A further extension of the freezing or seizing period is possible, but only through an order from the Supreme Criminal Court acting at the request of the Public Prosecutor. The renewal can be made for the same period (s) until the criminal case is settled by a final judgment.

190. This procedure applies regardless of the nature of the property to be frozen or seized. For funds held by banks, the Governor of the QCB sends a letter to all the banks operating in Qatar, usually at the request of the FIU, with an order to freeze the accounts of a specific person in application of Article 12 of the AML Law. The facts that give rise to the freezing measures are kept within the FIU and the governor’s office, and only the name of the person or legal entity whose accounts must be frozen are provided to the banks, thus ensuring the confidentiality of the procedure. For property other than funds, the authorities informed the assessment team that the governor would apply a similar procedure by notifying the relevant authority, such as the registry for real estate in the case of immoveable property and the registry of commerce in the case of a company. This, however, has not been tested to date: only a few freezing orders have been issued and they all referred to bank accounts.

191. The governor is the sole initiator of the freezing or seizing measures under the AML Law in all cases, including when the funds or property are held by persons or institutions that fall within the remit of other supervisory bodies, such as the QFCRA. This is due to the fact that the AML Law and the freezing or seizing set out in Article 12 of the law are of a criminal nature, as opposed to a supervisory one, and, as such, apply to all the authorities in Qatar. 11

192. Ex Parte Application for Provisional Measures (c. 3.3): There are no provisions in the law that require the initial application of freezing or seizing measure applicable to property subject to confiscation to be carried out without prior notice to the owner of the assets. The authorities confirmed, however, that, in practice, all freezing or seizing measures are taken ex parte.

193. Identification and Tracing of Property subject to Confiscation (c. 3.4): Articles 27 to 36 of the Criminal Procedure Code define the officers in charge of criminal investigations and their powers. Members of both the Public Prosecutor’s office and the police are the “investigation officers” under the law (Article 27 of the Criminal Procedure Code). With Resolution (1) of 2005, the Public Prosecutor extended the list of investigation officers by granting the head of the FIU the capacity of a judicial police officer in the investigations led on the basis of the AML Law. Article 29 of the Criminal Procedure Code provides that the investigative officers “investigate crimes, search their perpetrators, and collect all necessary evidence for the investigation and the trial.” In doing so, they are entitled to make the necessary inspections, hear any person who has information on the crimes or their perpetrators and question the suspects (Article 34). The powers of the PPO in pre-trial investigations are further defined under Articles 63 to 145 of the Criminal Procedure Code and include summoning the defendant or placing him/her under arrest, searching properties, seizing of correspondence and parcels in the post office, wire tapping, and witness hearing. Access to information covered by the banking secrecy, however, requires the prosecutors to apply for a court order. According to the authorities, obtaining an order for the disclosure of banking records is straightforward and does not cause undue delay.

194. Protection of Bona Fide Third Parties (c. 3.5): Article 13 of the AML Law provides that any confiscation measures must be taken “without prejudice to the rights of the bona fide parties.” According to the authorities, should such a measure nevertheless infringe these rights, the bona fide third party may challenge the confiscation order before the ordinary courts of appeal.

195. Power to Void Actions (c. 3.6): Article 16 of the AML Law specifically provides that “without prejudice to the rights of bona fide third parties, the contract in which one of the parties or all of them know or have reason to believe that the objective of the contract is to prevent the confiscation of the instrumentalities, revenues or proceeds related to the money laundering crime, shall be deemed null and void.” Actions other than contractual that have been conducted with the intention of avoiding the recovery of property of criminal origin may be defeated by the general confiscation measures as described above.

196. Additional Elements (Rec. 3)—Provision for a) Confiscation of assets from organizations principally criminal in nature; b) Civil forfeiture; and, c) Confiscation of Property which Reverses Burden of Proof (c. 3.7): There are no specific provisions dealing with the confiscation of criminal organizations, civil forfeiture, or the reversal of the burden of proof.

2.3.2 Recommendations and Comments

197. Overall, the AML Law and the Criminal Procedure Code enable the authorities to confiscate all assets linked to a money laundering crime.

198. While not technically at odds with the standard, the fact that the provisional measures set out in the AML Law are issued by a supervisory body seems to disregard the fact these measures are of a criminal nature. It would seem to be more appropriate to grant the initial powers to freeze and seize to the public prosecutors, who are more familiar with criminal proceedings, or even the FIU, which is more familiar with the facts of the case and which usually must pursue its analysis of the STR during the duration of the freezing/seizing measure. It may, therefore, be worthwhile to reconsider the Governor of the QCB’s role in and the overall effectiveness of the current AML framework for freezing and seizing.

199. As mentioned above, only a few provisional measures have been taken in application of Article 12 of the AML Law. This and the lack of confiscation measures ordered in a trial for money laundering prevented the assessors from establishing whether the framework set out in the AML Law is fully effective. Furthermore, the lack of comprehensive statistical information on the provisional and confiscation measures ordered in other types of investigation and prosecutions also prevented the assessors from having a general idea of how the authorities apply these measures in the broader context.

200. Considering the above, it is recommended that the authorities:

  • Reconsider the role of the Governor of the QCB in the application of provisional measures under the AML Law.

  • Maintain comprehensive statistics on the freezing, seizing, and confiscation measures ordered.

2.3.3 Compliance with Recommendation 3

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2.4 Freezing of Funds Used for Terrorist Financing (SR.III)

2.4.1 Description and Analysis

201. Under Special Recommendation III, countries should have laws and other procedures in place that enable them to freeze without delay funds and other assets of persons designated pursuant to UNSCR 1267 and 1373. Laws and other measures should also provide for provisional measures, including the freezing and/or seizing of property, to prevent any dealing, transfer or disposal of property subject to confiscation. Such freezing should take place without delay and without prior notice to the designated persons involved. In practice, countries should designate a specific authority responsible for receiving and disseminating the UNSCR 1267 lists and the requests made under UNSCR 1373.

202. On January 16, 2002, the Council of Ministers established an interdepartmental Committee charged with the implementation of UNSCR 1373 (the Coordination Committee). 12 It subsequently extended the Committee’s mandate to the implementation of all UN Resolutions dealing with the fight against terrorism, including UNSCR 1267 and its successors, and enlarged the permanent membership of the Coordination Committee (Council of Ministers decisions of July 7 and July 21, 2002, respectively, forwarded to the Ministry of Civil Service Affairs and Housing on July 13 and 21, 2002). On March 26, 2007, the Council of Ministers replaced the Coordination Committee with a new one, the National Committee for Fighting Terrorism (NCT). The main functions of the NCT are to make plans and programs to fight terrorism, to coordinate national efforts in the implementation of the obligations arising from UNSCR 1373, and to take action to implement the obligations set out in the international conventions against terrorism to which Qatar is a party (Article 3 of the Council of Ministers’ decision of March 26, 2007). The implementation of other relevant UNSCR, and in particular of UNSCR 1267 and its successor resolutions, however, does not fall within the remit of the NCT and remains unaddressed since.

203. The NCT is composed of representatives from the MOI, the Qatar Armed Forces, the State Security Bureau, the Internal Security Force, the Ministry of Civil Service and Housing Affairs, the Ministry of Finance, the MEC, the MOJ, the Ministry of Endowment and Islamic Affairs, the General Secretariat of the Council of Ministers, the QCB, the General Authority of Customs and Ports, and the Qatar Chambers of Commerce and Industry (Article 1 of the abovementioned decision). The MOFA is not a permanent member of the NCT (nor was it a member of the previous committee) but is in most cases invited to attend the meetings. The supervisory or monitoring authorities of the relevant financial institutions and DNFBPs are all represented in the Coordination Committee (either directly or by their respective ministry), with the notable exception of the QFC (which was established as an independent body in 2005). The committee is chaired by the representative of the MOI. Meetings are held every two weeks or more often if necessary. Pursuant to Article 6 of the Council of Ministers’ decision, the NCT may request information pertaining to its functions from any authority.

204. Freezing Assets under S/Res/1267 (c. III.1) and Freezing Assets under S/Res/1373 (c. III.2): From the establishment of the former Coordination Committee, in 2002, until its dissolution, in March 2007, both the UNSCR 1267 lists, on the one hand, and the notifications and request made under UNSCR 1373, on the other, were dealt with in a similar way: they were sent to the MOFA which forwarded them to the Coordination Committee, whose main functions were to coordinate the implementation of all UNSC resolutions dealing with the fight against terrorism. The president of the Committee would then forward the designations to all members of the Committee and to the QFC. The authorities established that some of the updates to the 1267 list were forwarded to the private sector but it also transpired that this only occurred in a limited number of instances. The QCB has, on a few occasions, sent the consolidated lists to the domestic banks with a request to freeze the accounts and inform the QCB within 3 days in case of a positive match. The QFCRA has sent a few emails to the institutions operating in or from the QFC with a link to the UNSC website requesting the QFC institutions to check the updates. It is unclear whether the DSM and other relevant authorities have sent any designations at all.

205. This mechanism was the result of the practice, rather than of a clear procedure set out in the 2002 decision (which established the former Coordination Committee). This decision provided the general legal basis for the coordination of the implementation of both UNSC resolutions from 2002 until March 2007 but it did not grant the Coordination Committee the authority (or any other authority) to designate terrorists, nor did it provide a specific legal basis for the issuance of freezing orders.

206. The 2007 decision (which established the current NCT) provides a similar legal basis for the coordination of the implementation of the relevant Conventions and of UNSCR 1373, but it is silent as far as other relevant UNSCR, and 1267 in particular, are concerned. As was the case under the previous Committee, the NCT is not empowered with the authority to take position on the request made and, if necessary, designate terrorists (nor is any other Qatari authority), and there are no legal basis and no clear mechanisms in place to ensure the freezing of funds and other assets without delay outside criminal proceedings. With the establishment of the new NCT, the mechanism that previously dealt with the reception and dissemination of the updates to the UNSCR 1267 consolidated list has been abolished. No alternative mechanism has been created.

207. No specific reason was mentioned as to why the functions of the NCT do not cover the implementation of all relevant UNSCR and it would appear that this was the result of an oversight rather than a deliberate omission. The fact nevertheless remains that there is currently no mechanism in place dealing with the implementation of UNSCR 1267 and no legal basis to require the freezing of assets as set out under SR III.

208. In 2006, the QCB issued the AML/CFT instructions for the banking and financial institutions under its supervision that require the latter to freeze funds or assets belonging to terrorists and persons who finance terrorism and terrorist organizations “according to court judgments or instructions issued by the Governor [of the QCB]” (Article 8 paragraph 3). The instructions are, however, only enforceable within the QCB’s purview and do not apply to other financial institutions, such as those that act in or from the QFC in particular. Furthermore, no court judgment has been passed on this issue and no further instructions (that would include the name of the persons whose funds and assets should be frozen) have been published. The requirement set out in the instructions, therefore, remains an empty shell.

209. On a first reading, several other dispositions of the Qatari legislation could apply to all the financial institutions and provide a legal basis for the freezing mechanism, but fail to do so on further analysis;

  • Article 21 of the CT Law enables the public prosecutor to “provisionally” issue an order preventing the accused from disposing of or managing his assets on condition that sufficient evidence is provided on the seriousness of the accusation. The Prosecutor’s decision may extend to the assets of the spouse or minor children of the accused, if it is proven that “these assets were possessed from him.” However, the authorities confirmed that this disposition refers only to cases where criminal proceedings have been initiated.

  • Article 12 of the AML Law, as amended by Article 1 of the Decree Law No. (21) of 2001, enables the Governor of the QCB to freeze “funds or properties” for a period of ten days when there are any concerns that their owner might dispose of them, and enables the Public Prosecutor, in a first stage, and the Supreme Criminal Court, in a second stage, to extend the freezing order (see write-up on Recommendation 3). However, this disposition only applies when there are suspicions of money laundering, not terrorist financing.

  • Article 126 of the Criminal Procedure Code also enables the Public Prosecutor to freeze assets 13 under certain circumstances, but it only applies within the ambit of criminal proceedings for crimes other than terrorist financing (and money laundering).

210. It results from the above that there are no effective laws and regulations in place in Qatar to freeze terrorist funds or other assets without delay and without prior notice in accordance with UNSCR 1267 and 1373.

211. The fact that the QFC and DSM are not members of the Coordination Committee entails that they are not immediately and directly informed of the actions taken by the Committee. The authorities established that, in practice, the QFC is informed of the decisions taken by the NCT (and its predecessor). It is unclear, however, to the assessors whether the fact that the information is not provided to the QFC at the same time as the members of the NCT, and the fact that the QFC is not in a position to provide its input in the NCT discussions hinder the swift implementation of the UNSC Resolutions within the QFC. No information was provided with respect to the communication (or absence thereof) with the DSM.

212. The Qatari authorities provided safe harbor to a foreign individual who was designated by the UNSC 1267 Committee in June 2003 as an individual having links with Al Qaeda, Usama bin Laden and/or the Talibans, from a date unknown until the individual’s death in February 2004. No action has been taken to trace and freeze this individual’s assets.

213. Freezing Actions Taken by Other Countries (c. III.3). Pursuant to the Council of Minister’s decision of January 2002, the Coordination Committee was responsible for the coordination of the implementation of the relevant UNSC resolutions. Acting on this basis, the Committee examined the actions initiated under the freezing mechanisms of other countries. The authorities informed the assessment team that, where necessary, the Chairman of the Committee requested the initiating State to provide more detailed information (such as, for example, the precise names of the persons subject to the freezing mechanisms) and, when satisfied with the information received, forwarded the lists to all the relevant agencies and the private sector. However, no indication was provided on the level of detail that is required before the names may be forwarded, and on what would constitute reasonable grounds or a reasonable basis to initiate the freezing mechanism in Qatar. The procedure in place since the establishment of the NCT in March 2007 is supposedly the same. In all events, the problems raised above remain: no authority has been given the powers to take a view on the requests made and if necessary, designate terrorists, and there is no legal basis to require the freezing of funds outside criminal proceedings.

214. Extension of c. III.1–III.3 to funds or assets controlled by designated persons (c. III.4). In the absence of clear freezing orders, it has not been established that the reporting entities are requested to freeze funds or other assets owned or controlled by designated persons, terrorists and those who finance terrorism or terrorist organizations, as well as funds or other assets are derived or generated from funds or other assets owned or controlled by these same persons and entities.

215. Communication to the Financial Sector (c. III.5). Although they established that some updates to the UNSCR 1267 consolidated list have been disseminated to the private sector, the authorities failed to establish that this was the case with respect to all updates and all requests made by another country.

216. Guidance to Financial Institutions (c. III.6). No freezing mechanism is in place. Consequently, no guidance is provided to the financial institutions and other persons or entities that may hold targeted funds or other assets that should be subject to freezing.

217. De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7). There are no publicly-known procedures for considering de-listing requests and for unfreezing the funds or other assets of de-listed persons.

218. Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c. III.8). The authorities mentioned that they found a positive match with one of the names listed under UNSCR 1267 and that one bank account was frozen as a result. Further investigations were conducted and revealed that the individual in question was not the suspect mentioned in the 1267 list but a homonym (“false positive”). The authorities, therefore, ordered the lift of the freezing measures. While this case illustrates the authorities’ willingness to comply with the requirements of UNSCR 1267 as well as their capacity to investigate, freeze and if necessary unfreeze the funds, it does not allow the assessors to ascertain whether these measures were taken in a timely fashion.

219. There are no publicly-known procedures for unfreezing, in a timely manner, the funds or other assets of persons or entities inadvertently affected by a freezing mechanism.

220. Access to frozen funds for expenses and other purposes (c. III.9). Similarly, there are no procedures in place to authorize access to funds and other assets that have been frozen and that are necessary for basic expenses (nor are there any procedures for determining the funds that are necessary to cover the basic expenses) in accordance with UNSCR 1452. No request to authorize access to the funds was made in the case of the “false positive” mentioned above. The authorities, therefore, have no practical experience in this matter.

221. Review of Freezing Decisions (c. III.10). No procedures have been issued to enable a person or entity whose funds or other assets have been frozen to challenge these measures.

222. Freezing, Seizing and Confiscation in Other Circumstances (applying c. 3.1–3.4 and 3.6 in R.3, c. III.11). In the case of terrorist acts, provisional measures are possible as follows: Article 21 of the CT Law provides that “If enough evidence is given about the gravity of the accusation, in the crimes provided for in this Law, the Public Prosecutor may temporarily order the accused to stop disposing of or managing his assets, in addition to other provisional measures. This decision may extend to cover the assets of the spouse or minor children of the accused, if these assets are established to be assigned to them through accusations. This also applies to the management of assets.”

223. The law allows for the confiscation of “the seized things, assets, weapons and machines resulting from or used in or that could be used in” a terrorist act (Article 15 of the CT Law). “Things” are not defined in the law. According to the authorities, the term is generally used in a broad sense and covers “anything that might be used or becomes the proceeds of any terrorism or terrorism financing crime.”

224. Protection of Rights of Third Parties (c. III.12). There is a legal requirement in the CT Law to take the rights of bona fide parties into consideration before ordering the confiscation of assets (Article 15). The Criminal Procedure Code specifies the measures that may be taken by bona fide parties. Article 127 stipulates that “any concerned person may appeal against the issued order of the said prohibition in the previous article to the criminal court within six months from the date of issuance or notification, whichever is later. The court must decide on the appeal, within a period not exceeding thirty days from the report date.” Article 128 states that “the General Prosecutor may cancel or amend the prohibition order, unless the order is issued by the court or the case is referred to it.” Article 129 further provides that “the competent court may, upon considering the case, on its own or on the basis of the general prosecution request or the concerned persons, decide the cancellation or amendment of the prohibition issued order.”

225. Enforcing the Obligations under SR III (c. III.13). Qatar has not implemented an appropriate legal mechanism to freeze assets in accordance with SR III and, consequently, has not established measures to monitor the compliance with the obligations under SR III.

226. Additional Elements (SR III)—Implementation of Measures in Best Practices Paper for SR III (c. III.14) and Implementation of Procedures to Access Frozen Funds (c. III.15). None of the measures set out in the FATF Best Practice Paper for SR III have been implemented and no procedure has been adopted to authorize access to funds and other assets that have been frozen to cover the necessary basic expenses.

2.4.2 Recommendations and Comments

227. The Council of Ministers’ decision to establish a Coordination Committee for the implementation of the UN counter-terrorism resolutions was timely and provided a useful platform reuniting all the relevant authorities at the time. The current NCT provides an equally useful platform but could have proven more so if the QFC and other authorities (such as the public prosecutor’s office and the supervisory authority for capital markets) were also included. Although the previous framework enabled the authorities to circulate the UNSCR 1267 list among them, as well as to discuss the requests received from foreign countries under UNSCR 1373, there is currently no mechanism in place to deal with the implementation of UNSCR 1267. Furthermore, the existing framework does not provide for a formal and mandatory freezing mechanism. The framework should be expounded upon by any legal measures necessary to enable the authorities to designate suspected terrorists and freeze their assets in compliance with both UNSCR 1267 and 1373.

228. The authorities should take the necessary measures to enable them to comply with SR III. They are in particular recommended to:

  • Designate an authority responsible for analyzing the requests made under UNSCR 1373 and for the designation of terrorists.

  • Designate an authority responsible for receiving and disseminating the updates to the consolidated list established pursuant to UNSCR 1267.

  • Include the QFC and consider including the PPO and the DSM in the NCT.

  • Establish the necessary legal basis for the issuance by a competent authority of mandatory freezing orders of funds or other assets owned or controlled by designated persons, terrorists and those who finance terrorism or terrorist organizations, as well as funds or other assets that are derived or generated from funds or other assets owned or controlled by these same persons and entities.

  • Establish an effective mechanism for the dissemination of UNSCR 1267 lists and actions taken under UNSCR 1373 to the financial institutions and DNFBPs immediately upon receipt of the lists and upon taking decisions under UNSCR 1373.

  • Provide guidance to the financial institutions and DNFBPs regarding their obligations in taking action in the freezing mechanisms.

  • Issue effective and publicly-known procedures for considering de-listing requests and unfreezing the funds and other assets of de-listed persons or entities in a timely manner.

  • Issue effective and publicly-known procedures for unfreezing in a timely manner the funds and other assets of persons or entities inadvertently affected by the freezing mechanisms upon verification that that person or entity is not the designated person.

  • Issue appropriate procedures for determining upon request the funds needed to cover basic expenses and for authorizing access to the funds or other assets frozen pursuant to UNSCR 1267 and that have been determined to be necessary to cover basic expenses.

  • Establish the legal basis for ordering the necessary provisional measures.

  • Establish appropriate procedures for challenging the freezing measures before the courts.

  • Define the funds and other assets that may be confiscated in a manner consistent with the international standard.

  • Establish an effective mechanism to monitor compliance with the relevant laws and regulations governing the freezing mechanisms under UNSCR 1267 and 1373.

2.4.3 Compliance with Special Recommendation III

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2.5 The Financial Intelligence Unit and its Functions (R.26)

2.5.1 Description and Analysis

229. Establishment of FIU as National Center (c. 26.1). Article 10 of the AML Law states that the coordinator of NAMLC is competent to receive reports related to suspicion of money laundering crimes from the competent parties and to take the legal measures pertaining to them. Article 20 provides that the minister of interior, in coordination with the Governor of QCB shall, based on a proposal by the NAMLC, issue the executive resolutions of the provisions of the AML Law. In 2004, the President of NAMLC issued Administrative Order No. 1 of 2004 with the aim of establishing the FIU. The Administrative Order further describes the powers, functions, and structure of the FIU. In practice, the FIU has been established and operates on the basis of the Administrative Order. However, the president of NAMLC did not have the power to issue such Administrative Order. The latter, therefore, has no legal basis. Furthermore, in establishing the FIU, the Administrative Order is inconsistent with the text of the AML Law which gave the coordinator of NAMLC the power to receive, analyze, and disseminate STRs.

230. Notwithstanding the conflict between the powers and functions of the coordinator of the NAMLC and the FIU, as established under the Administrative Order, the FIU became operational on October 16, 2004. It functions as an administrative unit and its mandate covers fighting money laundering and combating the financing of terrorism.

231. Pursuant to the Administrative Order, the FIU has the following powers and responsibilities:

  • receiving suspicious transaction reports related to money laundering and terrorism financing directly from all concerned entities in Qatar (including all financial and non financial institutions and law enforcement agencies);

  • analyzing suspicious transaction reports and taking appropriate decisions thereon;

  • filing suspicious transaction reports proved not to be suspicious and forwarding the ones it deems suspicious to law enforcement agencies and the Public Prosecution. The unit may request further information from all law enforcement agencies regarding suspicious transaction reports; and

  • exchanging information with counterpart financial intelligence units and international bodies and organizations, in accordance with the provisions of the AML Law and its amendments and the principles of exchanging information issued by the Egmont Group.

232. In practice, the FIU serves as a national centre for analyzing STRs. Such analysis is conducted by monitoring the STRs that are submitted, conducting databases checks and disseminating them to the PPO, as necessary. The FIU sometimes requests additional information from available databases such as real estate registration, authentication register, financial instruments register for the purpose of analysis but it does not do so in all cases where this would be necessary. Apart from a few cases, the FIU has not requested any additional information from the reporting entities and the ECPD. The CRS is a system established by QCB to inspect banks and financial institutions under its supervision remotely in addition to the on-site visits. The system enables the direct access to customer accounts, including the movement of accounts, transactional information, as well as all personal information received through application of Customer Due Diligence. The FIU is, in practice, is not using the Central Reports System (CRS).

233. Article 8 of the AML Regulations imposes obligations on authorized persons to ensure that the Money Laundering Reporting Officer (MLRO) receive internal STRs from employees. It further provides that the MLRO investigate the circumstances of the internal STR and that the MLRO files an external STR to the FIU in accordance with the AML Law requirements. The QFCRA disseminated letters to DNFBPs that include information on regulatory reporting requirements. The letters state that relevant persons are subject to certain mandatory reporting requirements under the QFC Anti Money Laundering Regulations. These include providing the QFCRA with a copy of the required annual MLRO to senior management; notifying the QFCRA of any STRs made to the local FIU, and notifying the QFCRA of any suspicions of money laundering notwithstanding that an STR has not been filed with the local FIU.

234. Guidelines to Financial Institutions on Reporting STR (c. 26.2). A standard form for STRs has been developed by the FIU and was transmitted to reporting entities. Although the FIU encourages reporting entities to use this form. STRs submitted in other forms are accepted.

235. The assessors were informed that the FIU has met with representatives of the financial institutions, DNFBPs, and NPOs and provided them with informal “verbal” guidance. The FIU has not yet issued any written guidelines to financial institutions, DNFBPs, NPOs or other reporting entities. Representatives of the FIU stated that the reason for which guidelines had not yet been developed was the reliance on personal relationships, which they have fostered with banking personnel, compliance officers working in DNFBPs and other reporting entities. The lack of written guidelines and guidance accessible to all precludes the reporting entities from having a common understanding of the reporting requirements.

236. Access to Information on Timely Basis by FIU (c. 26.3). The FIU has direct/indirect access to some databases:

  • The employees of the FIU have access to the FIU’s own database that includes all information related to suspicious transaction reports. The FIU’s database consists of an electronic archive that includes all correspondence and documents issued to or by the FIU.

  • Pursuant to Article 3 of the Administrative Order, the FIU may request further investigations from law enforcement agencies regarding information contained in STRs. The FIU cooperate with the ECPD to benefit from administrative or law enforcement information. The ECPD access the databases of the MOI which include the personal details of citizens and residents, car numbers and owners, their sale and export, companies and institutions systems and activities, register of entering and leaving the country, visa system, telephone numbers, and the geographical locations guideline of the ministry. Furthermore, the Criminal records department, which includes a database of suspects, names of previous criminals and their criminal practices, is part of the MOI and can be accessed by the ECPD.

237. The FIU is also developing links to other databases:

  • The QCB developed a link with the commercial register, which will be accessible to the FIU in the near future. The commercial register is a system of central registration where the main ownership and control details for all companies registered in the domestic sector are maintained.

  • A secure online submission system is currently being developed and should become operational in the near future.

  • The CRS system enables direct access to customer’s accounts, including the movement of accounts, transactional information, as well as all personal information received through application of CDD. Although the CRS may provide the FIU with information regarding all the bank accounts, the STR form also must spell out the obligation of reporting entities to provide all necessary information when filing an STR.

  • The accounts of the financial institutions operating in the QFC will not be accessible through the CRS. Article 8(6) of the AML Regulations provides that the FIU has direct access to relevant persons and is able to get information in a timely manner. More specifically, Article 8(6) requires a relevant person to ensure that its MLRO is responsible for acting as a point of contact within the firm for the FIU, other competent Qatar authorities and the QFCRA regarding Money Laundering issues. A relevant person must respond promptly to any request made by the FIU, the QFC Authority, the QFCRA or other competent state authorities.

238. Additional information from reporting parties (c.26.4). Pursuant to Article 6 of the Administrative Order, the FIU is empowered to ask financial institutions whether they have conducted transactions with a person subject of an STR, or to request additional information/documentation. However, it is not empowered to make such requests to DNFBPs. In practice, the FIU has requested additional information from reporting entities operating within the domestic sector but has not done so with regard to financial institutions operating in QFC.

239. Dissemination of Information (c. 26.5). Pursuant to Article 3 of the Administrative Order the FIU is empowered to forward STRs to law enforcement agencies and the PPO. To date, the FIU has not determined any objective criteria to disseminate reports. The head of the FIU decides to file or to disseminate the cases to the PPO. The practice is to forward cases, which are still deemed suspicious after analysis, to the PPO who then either continues the judicial investigation or commences criminal proceedings. Only one ML case was deemed suspicious and has been forwarded to the Public Prosecutor who then determined that there was no basis to proceed further. No STRs regarding terrorist financing have been disseminated to the PPO.

Figure 1.
Figure 1.

Information flows to and from the FIU

Citation: IMF Staff Country Reports 2008, 322; 10.5089/9781451832631.002.A001

240. Operational Independence (c. 26.6). Article 1 of the Administrative Order provides the legal basis for the FIU’s operational independence. However, as outlined above, the Administrative Order appears to be inconsistent with the provisions of the AML Law which gave the powers to receive, analyze and disseminate STRs to the coordinator of NAMLC rather than the FIU. This inconsistency may undermine the FIU independence.

241. Article 2 of the Administrative Order states that “the president of NAMLC shall issue a decree nominating the head of the unit and approving its organizational structure and financial budget.” With the exception of freezing orders, in practice the head of the FIU has a broad range of competencies ensuring the operational independence and autonomy of the FIU.

242. Protection of Information Held by FIU (c. 26.7). The authorities believe that the information received by the FIU staff is subject to the provisions on the protection of information provided in various laws such as Article 5 of the AML Law, the provisions on confidentiality of banking transactions pursuant to Law (33) of 2006 and Article 332 of the Penal Code that sanctions the violation of professional secrecy. However, the assessment team’s view is that there is some uncertainty surrounding the provisions mentioned above and that these provisions are not sufficient to protect the information held by the FIU. In practice, the STRs and related information held by the FIU are entered into the database. There is no log history to record all the queries made by FIU employees. The authorities state that only FIU staff and relevant IT department staff are permitted access.

243. Publication of Annual Reports (c. 26.8). The FIU has not yet released any statistics, trends analysis, and/or typologies concerning its activities. An annual report was published in 2006 which consisted of the AML/CFT laws and regulations in force in Qatar. The FIU manages its own website that contains information on the AML/CFT regulations and the 40+9 FATF recommendations.

244. Membership of Egmont Group (c. 26.9). The FIU was recognized as an Egmont Group member in July 2005 and has recently joined the Egmont IT Working Group.

245. Egmont Principles of Exchange of Information among FIUs (c. 26.10). Pursuant to Article 3 of the Administrative Order, the FIU should exchange information with foreign FIUs according to Egmont principles. According to the authorities, the FIU takes account of the Egmont principles in practice when exchanging information with its overseas counterparts. It requested information from other FIUs in 4 cases, one of them through the Egmont Secure Web. Qatar’s FIU did not sign any bilateral or multilateral MOUs for cooperation with other foreign FIUs. The FIU received only two requests from foreign counterparts.

246. Adequacy of Resources to FIU (c. 30.1). The FIU has 10 full-time staff: In addition to the head of the Unit, the staff comprises 1 Analyst, 1 researcher, 2 IT/analysis specialists, 2 for secretariat services and 2 for administrative support, one part-time legal advisor and 2 part-time IT experts.

Figure 2.
Figure 2.

FIU Organizational Structure

Citation: IMF Staff Country Reports 2008, 322; 10.5089/9781451832631.002.A001

247. The structure of the FIU comprises the three following specialized operational divisions:

  • Analysis and Dissemination Division: Specialized in receiving suspicious transactions reports from all parties, analyzing and disseminating STRs, and distributing the warnings that the FIU receives from security authorities.

  • Studies and Follow-up Division: Specialized in carrying out studies and research, preparing AML/CFT reports, keeping abreast of international and regional developments in this regard, and monitoring compliance of reporting entities.

  • I.T. and International Cooperation Division: Specialized in fulfilling all technical duties related to computer issues, database, and exchange of information with foreign counterparts. The FIU manages its own website that contains information on the AML/CFT regulations and the 40+9 FATF recommendations.

248. The FIU currently has one staff (head of the financial analysis and dissemination division) in charge of monitoring the STRs that are submitted; he conducts database checks and analysis and disseminates STRs, as necessary.

Table 8.

Budget of the FIU

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249. The 2007 Budget contains the following provisions: (i) 100,000 Riyals: subscription in Reuters, Telerate, Swift and press agencies; (ii) 50.000 Riyals: connection to internet; (iii) 50,000 Riyals: development of electronic archive. The amounts assigned for analysis represent only1.6 percent of the FIU budget (QR 200,000/12,386,000).

250. Overall, the FIU does not appear to have the appropriate level of human resources to properly undertake its functions. In particular, the resources allocated to the analysis of STRs are insufficient and does not reflect the importance that should be devoted to this function.

251. Integrity of FIU Authorities (c. 30.2). All FIU incoming employees undergo background checks and a security clearance which includes criminal record checks and interviews to ensure that the appropriate security measures are in place to maintain the integrity of the FIU operations.

252. Training for FIU Staff (c. 30.3). Although some staff have received training and have provided some training for private sector entities as well as the concerned authorities, additional specialized and practical in-depth training would be highly beneficial.

253. Statistics (applying R.32 to FIU). The FIU keeps an electronic database (and a manual database), which stores the STRs received by the FIU since October 2004, the date the FIU became operational. It classifies them by entities sending the information.

254. The total number of STRs and other information sent by concerned authorities in the database from January 1, 2002 to December 31, 2006 is 266. Before the FIU became operational, STRs were filed with a specialized department at QCB.

Table 9.

STR and Other Relevant Information Received by the FIU

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255. The FIU receives ML and TF related information from other sources that are considered an STR and recorded as such. No statistics are kept on the number of referrals made by the FIU to national authorities. Only one case was transmitted to the PPO. The FIU has not received any STR related to FT. It requested information from other FIUs in 4 cases, one of them through the Egmont Secure Web. The FIU does not review periodically the effectiveness of the system to combat ML and FT.

2.5.2 Recommendations and Comments

256. The authorities are recommended to:

  • Address the legal basis that established the FIU as a national centre for receiving, analyzing and disseminating disclosures of STRs and other relevant information concerning suspected ML or FT activities. While the FIU appears to operate in practice, it should be grounded on a sound legal basis.

  • Ensure that the QFCRA removes the third point from the letters disseminated to DNFBPs that includes the obligation to notify QFCRA of any suspicion of ML notwithstanding that an STR has not been made to the local FIU.

  • Ensure that the FIU provides financial institutions and other reporting parties with guidance regarding the manner of reporting, including the procedures to be followed when reporting.

  • Ensure that the FIU (i) enhances the depth and quality of its STRs analysis, in particular by accessing the CRS and requesting on a regular basis additional information from reporting entities and the ECPD; (ii) uses, when necessary, the CRS, the link to the commercial register developed by the QCB, the real estate register and all available databases to enhance its STR analysis; (iii) undertakes a study focusing specifically on the risks of ML and FT associated with certain businesses.

  • Ensure that the FIU establishes mechanisms for cooperation with regulators, supervisors, reporting entities and law enforcement authorities to optimize its analysis and establishes an information flow that protects confidentiality while enhancing its analysis capacity.

  • Grant the FIU the power to ask the DNFBPs whether they have had transactions with a person who was the subject of an STR, or to demand additional information from them.

  • Ensure that the FIU periodically reviews the effectiveness of the system to combat ML and FT and improves its collection of statistics

  • Ensure that the FIU publishes periodically annual reports, typologies and trends of ML/FT.

  • Ensure that the FIU provides additional specialized and practical in-depth training to its employees. This training should cover, for example, the scope of predicate offenses, analysis and investigation techniques and familiarization with prosecution of ML/FT techniques, and other areas relevant to the execution of the FIU staff functions.

2.5.3 Compliance with Recommendation 26

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2.6 Law enforcement, prosecution and other competent authorities—the framework for the investigation and prosecution of offenses, and for confiscation and freezing (R.27, and 28)

2.6.1 Description and Analysis

257. Designation of Authorities ML/FT investigations (c. 27.1). The investigation officers are: (i) Members of the PPO; (ii) Members of the Police Force; (iii) Members of the SSB; (iv) Members of Customs; and (v) the head of the FIU with respect to any crimes committed under the AML Law.

258. Qatar separates the authorities in charge of investigations and the legal authorities in charge of the judgment of criminal offenses. The authorities in charge of AML/CFT investigations operate independently and are mainly the responsibility of four separate authorities: (i) the ECPD (ECPD) within the MOI; (ii) the General Prosecutor; (iii) the SSB; and (iv) the customs.

259. Investigation officers are subject to the Public Prosecutor’s supervision with respect to criminal investigations (Article 8 of CPC). They investigate crimes, search for their perpetrators, and collect all necessary evidence for the investigation and the trial (Article 29 of the CPC). Investigation officers have the mandate to collect all necessary clarifications to facilitate investigations of received or otherwise known facts, and undertake all security preserving measures to conserve the evidence. (Article 31 of CPC)

260. The work of the ECPD is regulated by Resolution No.(29) of 2004, issued by the MOI on July 28, 2004. The ECPD is affiliated to the director of the criminal investigation department. The ECPD is specialized in the investigations of ML, e-crimes and counterfeiting and falsification of currency and is further responsible to investigate crimes concerning the protection of copyright and neighboring rights. The ECPD works in collaboration and coordination with the FIU and the PPO.

Figure 3:
Figure 3:

Structure of the Economic Crimes Prevention Unit

Citation: IMF Staff Country Reports 2008, 322; 10.5089/9781451832631.002.A001

Figure 4:
Figure 4:

Structure of the Criminal Investigation Department

Citation: IMF Staff Country Reports 2008, 322; 10.5089/9781451832631.002.A001

261. The Fighting Money Laundering Unit is the designated law enforcement agency for AML investigations, while CFT investigations are the sole responsibility of the SSB.

262. The ECPD receives requests for information from the FIU, and carries out the necessary investigations to identify the suspect’s transactions, relations, commercial activities, real estate properties and the persons with whom the suspect is dealing as well as the extent of their participation in the ML offence. The Division collects information in cooperation with other departments at the MOI, then notifies the FIU of the investigation’s findings and if the ML offence or an attempt has been established, it refers the suspect to the PPO.

263. The PPO is headed by the General Prosecutor. Its functions and jurisdiction are regulated by law No.(10) of 2002 that established the PPO. The General Prosecutor is assisted by two senior Advocates-General and three District Prosecutors. In total, the PPO consists of 145 members. At the time of the assessment, the PPO had received, investigated one case of ML forwarded by the FIU.

264. The SSB has been a separate bureau with a direct reporting line to the Emir since its establishment pursuant to No. 5 of 2003. The powers of the SSB regarding the investigation into ML/TF crimes are set out in Article 2 of Law No.5 of 2003 as follows: (i) safeguarding the regime of the State and its constitutional bodies; (ii) safeguarding the State and its safety and protecting its national unity from any destructive or vandalistic activities or actions inside it or abroad; (iii) combating activities harmful to the safety, stability and status of the State and its ties with other countries; (iv) protecting the political, economical, social and religious values of the State; (v) combating the activities harmful to the economy of the State and its revenues and (vi) combating espionage. According to the SSB, it has the mandate to use its powers with respect to ML/FT crimes based on paragraphs 4 and 5 of Article 2.

265. Pursuant to article 3 of Law No. (5) of 2003, the SSB have the authority of surveillance and investigation through different technical and professional means. The SSB enjoys large competences, it has the power to carry out investigations and collect evidence of crimes. The SSB, FIU and PPO cooperate through NAMLC. According to the authorities, a copy of all STRs and related documents is usually sent by the FIU to the SSB to perform investigations about suspects. The SSB has the discretion to decide on whether to investigate cases depending on the seriousness of the crime suspected. Since the SSB has the exclusive authority over any other law enforcement authority, conflicts of authorities and overlap in investigations between the SSB and other law enforcement authorities may arise in certain circumstances.

266. Law No. (40) of 2002 regulates the work of the customs. They have the usual customs investigating powers, including the right to stop people and goods at the border, and to check for, search, and seize restricted and prohibited goods.

267. Ability to Postpone / Waive Arrest of Suspects or Seizure of Property (c. 27.2). Postponing arrests or seizures for investigative and identification of suspects persons is considered to be within the investigation officer’s police powers, although this assertion is not supported by any formal legal text. The PPO is using his discretionary power to undertake action to arrest a suspect, to seize property or to postpone such actions.

268. Additional Element—Ability to Use Special Investigative Techniques (c. 27.3). Telephone tapping of conversations occurring in private places is allowed pursuant to Article 77 of the CPC in fighting (i) crimes committed against the internal and external national security (ii) illicit trafficking in narcotic drugs and psychotropic substances and (iii) illicit arm trafficking. In these cases, the telephone tapping may be conducted by members of the PPO based on a written order by the Public Prosecutor. Otherwise and in all other crimes, the written order must be issued by any of the judges of the competent court of first instance. The measure must not exceed a period of thirty days and is renewable for a similar period or periods as long as the initial reason for its issuance remains.

269. Additional Element - Use of Special Investigative Techniques for ML/FT Techniques (c. 27.4). The ECPD and the SSB which are the competent authorities in investigating and collecting information related to ML and FT offences respectively reported that they make regular use of telephone tapping in conducting the investigations. To this end, technologies are used, such as listening devices, cameras, computer verification and e-mail tracking.

270. Additional Element—Specialized Investigation Groups & Conducting Multi-National Cooperative Investigations (c. 27.5). The SSB is competent to investigate FT offenses and within the MOI, the ECPD investigates ML offenses. To date, authorities have not considered putting in place specialized investigation groups or conducting multi-national cooperative investigations.

271. Additional Elements—Review of ML & FT Trends by law enforcement authorities (c. 27.6). ML methods, techniques and trends are not reviewed by law enforcement authorities on a regular, interagency basis. No analysis or studies are conducted or disseminated.

272. Ability to Compel Production of and Searches for Documents and Information (c. 28.1). According to Article 75–77 of the CPC, law enforcement agencies have the powers to be able to compel production of documents, search persons or premises and seize and obtain documents. Such powers are exercised when written permission are obtained from the PPO. The SSB has the power to carry out investigations and collect evidence about crimes that fall under its powers or which are submitted to it by the Emir (Article 6 of the SSB Law). It is not possible for any person or governmental or nongovernmental party to conceal any information or data that the president of the Service or the person whom he delegates for this purpose demands in writing.

273. Law enforcement authorities have full powers to compel production of bank account records, account files, business correspondence, and other records, documents or information, held or maintained by financial institutions and other businesses or persons. The FIU is also capable of obtaining transaction records and identification data through the CDD process from financial institutions. The CRS that enables direct access to customer’s accounts, including the movement of accounts, transactional information, as well as all personal information received through application of CDD should be available to the FIU’s access in the future.

274. Power to Take Witnesses’ Statement (c. 28.2). Article 84 of the CPC provides that PPO shall hear witnesses’ statements to establish or facilitate the establishment of the crime and the conditions thereof, to attribute the crime to the suspect, or declare him innocent. The PPO shall hear witnesses and those whom the accused and the victim request to be heard, unless otherwise decided by the prosecution member. Article 3 of the Law No.(5) of 2003 provides that the SSB shall have the authority of the police force as defined in the CPC. Therefore, both the PPO and the SSB have the power to take witnesses’ statement in ML/FT cases.

275. Adequacy of Resources to Law Enforcement (c. 30.1). The budget of the ECPD is decided by the minister of internal affairs. Currently, nine full time officers work at the ECPD. Three of them are appointed for full time job at the fighting ML Unit and six officers from other units can assist if necessary. In case the AML Law will be modified to include all “designated categories of offenses” the current staff at the ML Unit would not be able to deal with all requests for information forwarded from the FIU. The number of staff at the PPO seems to be sufficient but the level of specialized qualification/expertise does not appear to be adequate at this stage. Although the SSB indicated that they had adequate staff, the number was not revealed for national security reasons. The Customs Authority numbers approximately 1,350 officers.

276. Integrity of Competent Authorities (c. 30.2). Article (11) of the Police Law (23) of 1993 provides that officers shall be appointed as per an Emiri Resolution, at the suggestion of the Minister of Interior. Article (12) also provides that the officers should have a good conduct and good reputation; No judgment should have been rendered against them in a dishonorable crime or integrity crime, unless he was rehabilitated. They should not have been dismissed from public service pursuant to a final disciplinary judgment or decision due to serious violations of work duties. They should not be affiliated to any political party and should have graduated from a recognized police college or institute. According to Article 28 of the CPC, the PPO may request that a disciplinary action be taken against the officers without prejudice to the right to initiate a criminal prosecution. Prosecutors are appointed by the Emir and are subject to the legal profession disciplinary rules.

277. Training for Competent Authorities (c. 30.3): According to the authorities, the members of the ECPD were selected after personal interviews, an integrity check, and were provided with AML/CFT training sessions. Prosecutors have taken part in several training sessions related to fighting terrorism, money laundering and corruption. The PPO did not provide adequate and relevant training such as the scope of predicate offenses, ML and FT typologies, and techniques to investigate and prosecute these offenses. SSB conduct frequent internal training programs and has also received training from foreign intelligence agencies. Each customs officer receives 10 hours of training on AML matters when he is appointed as inspector. Nevertheless, the lack of trained customs officials constitutes a serious handicap.

278. Additional Element—Special Training for Judges (c. 30.4). Judges do not benefit from any special training or any educational programs concerning AML/CFT matters.

279. Statistics (applying R.32). The ECPD keep statistics on ML suspicious cases that were transmitted by the FIU. The PPO received only one case from the FIU where it considered that no offense was committed. No confiscations have been pronounced in ML/FT cases. Annual statistics are kept on the some crimes and judicial actions. The statistics provided did not, however, contain information on the amount of seized and confiscated criminal proceeds.

280. The customs do not use an electronic database to keep all statistics on crimes and trafficking. Therefore, the statistical and analytical tools are not available.

281. The investigative and prosecutorial authorities need to focus more on investigating and prosecuting of ML offence and not just on the predicate offenses. Considering the lack of comprehensive statistics (especially the number of investigations initiated in AML/CFT area and the percentage of total investigations solved), it is not possible to assess whether law enforcement and prosecution authorities effectively perform their functions.

2.6.2 Recommendations and Comments

282. The authorities are recommended to:

  • Ensure that law enforcement authorities keep statistics on the amount of criminal proceeds seized and confiscated and on the number of ML/TF investigations, prosecutions, and judgments to measure the effectiveness and competence of the AML/CFT system.

  • Provide additional specialized and practical training to law enforcement and prosecution personnel as well as to police officers and customs agents on the fight against ML/FT. This training should cover, for example, the scope of predicate offenses, ML and FT typologies, investigation techniques and familiarization with prosecution of ML/FT techniques and the use of information technology and other areas relevant to the execution of the law enforcement staff functions.

  • Take a more proactive approach to investigating and prosecuting ML/FT.

2.6.3 Compliance with Recommendations 27 and 28

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2.7 Cross Border Declaration or Disclosure (SR.IX)

2.7.1 Description and Analysis

283. Mechanisms to Monitor Cross-border Physical Transportation of Currency (c. IX.1). The General Directorate for Customs and Ports (GDCP) is responsible for monitoring the national territory and borders of Qatar. Article 1 of Law No. 40 of 2002 (Customs Law) provides the GDCP with the authority to enforce the provisions of the Law on all territories, including the regional sea, that are subject to Qatar’s state sovereignty. The GDCP can carry out control, checks and inspections, so as to ensure the correct application of customs, taxes and foreign exchange regulations.

284. There is some inconsistency with the measures in place to detect physical cross-border transportation of currency and bearer negotiable instruments. Initially, the Administrative Circular No. 40 of 2001 concerning Money Laundering and Suspicious Operations (Circular 40-2001) adopted a system to control the transportation of cash by money changers and natural individuals and the transportation of gold and other metals. In 2005, a declaration system was adopted (Resolution 5-2005) and was replaced in 2006 by a disclosure system (Resolution 37-2006). Some provisions in the Resolution 5-2005 were amended by Resolution 37-2006 to reflect the change from a declaration system to a disclosure system but others were not. Consequently, in the current regulation (Resolution 5-2005 amended by Resolution 37-2006), some provisions mention “declaration” while others mention “disclosure”. 14

285. Article 5 of the Resolution 5-2005 requires travelers to declare cash and other bearer negotiable instruments (such as precious metals or documents) on the form prescribed for this purpose. Notwithstanding article 5, the threshold for declaration was never set and, in practice, the system was never implemented.

286. Article 5 of Resolution 5-2005 was replaced by a new article 5 of Resolution 37-2006 that adopted a disclosure system. The new Article 5 states that “the Customs Officer, in case of suspicion, shall request travelers to disclose any cash money or any negotiable financial instruments in their possession by filling out a form specifically designed for this purpose.” Even though Article 5 was amended to create a disclosure system, the other articles of Resolution 5-2005 amended by Resolution 37-2006 still mention the word “declaration” which might create a confusion as to the system established in Qatar. Moreover, the disclosure system set by the new Article 5 concerns the physical transportation of currency and bearer negotiable instruments and does not extend to the shipment of currency through containerized cargo and mailing of currency or bearer negotiable instruments.

287. In addition, the system adopted applies to incoming transportation of currency and bearer negotiable instruments and does not extend to outgoing transportation of currency and bearer negotiable instruments.

288. The cash and bearer’s negotiable financial instruments shall be disclosed by using the form prescribed for this purpose, stating: (i) the date, traveler’s name, nationality and number of passport/ID; (ii) travel statements and destination; (iii) the statement of money in local or foreign currencies; (iv) the type and sum of currency or negotiable financial instrument; (v) the purpose for carrying the money; and (vi) the address of the traveler in resident and destination country.

289. The assessment team observed that the current system for detecting and preventing cross-border movements of currency or bearer negotiable instruments related to money laundering or terrorist financing is neither implemented nor effective. The current wording of the regulation creates a high level of confusion as to what measures are in place to detect the physical cross-border transportation of currency and bearer negotiable instruments. Furthermore, the level of awareness across the operational customs units appears to be uneven.

290. Request Information on Origin and Use of Currency (c. IX.2). Pursuant to Article 6 of Resolution 5-2005, customs officials have the authority to request and obtain further information from the carrier regarding the origin and intended use of the currency or bearer instruments.

291. Restraint of Currency (c. IX.3). Resolution 5-2005 provides that the customs officials can request and obtain further information from the carrier with regard to the origin of the currency or bearer negotiable instruments and their intended use. However, customs officials may stop or restrain the currency or bearer negotiable instruments only in case of suspicion of both money laundering and terrorist financing. In addition, they do not appear to have any power to stop or restrain in cases of false disclosure. To date, no currency was retained by the customs authorities based on suspicion. Finally, the duration of restraining measures has not been determined.

292. Retention of Information of Currency and Identification Data by Authorities when appropriate (c. IX.4). Resolution 5-2005 amended by Resolution 37-2006 is silent with regard to the retention of the amount of currency or bearer negotiable instruments and of the identification data of the bearer (s). Circular No. 40-2001 provides that customs declarations made by individual persons shall be kept for a period of at least five years but it is not implemented in practice.

293. Access of Information to FIU (c. IX.5). There does not appear to be a system in place whereby the FIU is notified about suspicious cross-border transportation incidents or disclosure information directly available to the FIU. Only one case was transmitted to the FIU in 2006 through the representative of customs in NAMLC.

294. Domestic Cooperation between Customs, Immigration and Related Authorities (c. IX.6). An ongoing coordination and cooperation among customs authorities, other law enforcement authorities and the FIU to implement the general policy set by the NAMLC is in place. Nevertheless, no policies or procedures related to the implementation of SRIX were adopted or implemented to date.

295. International Cooperation between Competent Authorities relating to Cross-border Physical Transportation of Currency (c. IX.7). The organizational structure of the GDPC includes a special division in charge of exchanging information and reports, and cooperating with Customs Services in other countries. The assessors have been informed by the representatives of the GDPC that Qatari customs authorities engage in exchanges of information and reports about suspicious transactions and other aspects related to customs with other countries. To strengthen this international cooperation, Qatari authorities declared that they have entered into a number of agreements of bilateral cooperation with other agreements under negotiation. In addition, there is a project underway to create an automated connection for GCC countries to exchange information about customs statements. The assessors could not verify whether such international cooperation is effective in place.

296. Sanctions for Making False Declarations/Disclosures (applying c. 17.1–17.4 in R.17, c. IX.8). The customs officials do not appear to have any power to sanction for making false disclosure.

297. Confiscation of currency pursuant to UNSCRs: The representative of customs receives the UN lists through the representative of customs in the NCT. The assessors were informed that the list is disseminated to be used for checking against the passenger lists. However, it could not be verified that in practice the names of travelers are checked against the various UN terrorist lists.

298. Notification of Foreign Agency of Unusual Movement of Precious Metal and Stones (c. IX.12). Qatar does not appear to have a formal system in place for its customs services to notify their counterparts in other countries of unusual cross-border movements of gold, precious metals or precious stones. The mission was not able to determine whether the customs or other competent authorities have ever notified any country nor if they cooperate with a view toward establishing the source, destination, and the purpose of the movement of such items toward the taking of appropriate action.

299. Safeguards for Proper Use of Information (c. IX.13). According to circular 40-2001 information about individual suspected of ML should be treated as highly confidential. However, there are no special mechanisms for safeguarding such information or information related to cross-border transactions. Since only one case was transmitted to the FIU in 2006 through the representative of customs in NAMLC and the authorities did not retain the documentations in a database, the assessors were not able to determine if such provision are implemented.

300. Additional Element—Implementation of SR.IX Best Practices (c. IX.14). The authorities have not given consideration to the implementation of the measures set out in FATF International Best Practices Paper on Cross Border Transportation of Cash by Terrorists and other Criminals.

301. Additional Element—Computerization of Database and Accessible to Competent Authorities (c. IX.15). The customs authorities retain passenger and shipments records in hard copy. There is no online access to this information by other law enforcement authorities or the FIU.

2.7.2 Recommendations and Comments

302. The implementation of SR IX is based on mechanisms that are inconsistent and incomplete. The implementation of SRIX does not appear to be effective. The authorities should take the necessary measures to enable them to comply with SR. IX. They are in particular recommended to:

  • Adopt a national strategic approach to detect the physical cross-boarder transportation of currency and bearer negotiable instruments and amend Resolution 37-2006 to provide a clear legal basis for a disclosure system. An internally consistent regulation should be issued reflecting the following characteristics:

    • The system should apply to both incoming and outgoing transportation of currency and bearer negotiable instruments and extend to the shipment of currency through containerized cargo and mailing of currency or bearer negotiable instruments.

    • Article 6 of Resolution 5-2005 should be amended to give the power to customs to request and obtain further information from the carrier with regard to the origin of the currency or bearer negotiable instruments and their intended use in case of suspicion of money laundering or terrorist financing.

    • Customs should be able to stop or restrain cash or bearer negotiable instruments for a reasonable time in order to ascertain whether evidence of money laundering or terrorist financing may be found, where there is a suspicion of money laundering or terrorist financing; or where there is a false declaration or false disclosure.

  • Enhance exchange of information between the customs and the FIU and create a database at the customs to record all declared data related to currencies and bearer financial instruments.

2.7.3 Compliance with Special Recommendation IX

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3 Preventive Measures—Financial Institutions

3.1 General

303. The Qatari financial system could be best described as a “dual onshore financial sector” where services provided by financial institutions are available to both residents and nonresidents. To ensure clarity and consistency within the report, reference will be made to the “Domestic sector” and QFC when describing financial institutions as follows:

  • Domestic sector: It comprises financial institutions under the supervision of QCB, MEC, and DSM. It consists of 17 banks, 3 investment companies, 19 exchanges houses, and 1 finance company (under the QCB); 8 insurance companies (under the MEC); and 7 brokerage firms (under the DSM).

  • QFC: Established in 2005 the QFC is a business and financial center located in Doha, providing legal and business infrastructure for financial services and designed to attract international financial and non-financial institutions. These institutions can establish their presence within the designated QFC zone to undertake and provide a broad range of activities, services and products available to both residents and nonresidents. As of the mission date, there were 12 firms registered within the QFC including commercial banks, funds managers, and other financial institutions. At the time of the visit only 2 firms were operational.

304. All financial institutions and other non-financial entities in both the domestic sector and the QFC are subject to the obligations imposed by the AML Law. Under the AML Law, financial institutions are defined as “any companies or institutions licensed to carry out banking or financial businesses such as banks, exchange bureaux, investment companies, finance companies, insurance companies, companies or professionals carrying out financial services, brokers of shares and securities, or any similar individuals or entities.” Although the definition covers a large number of financial institutions within the Qatari financial sector, it does not cover the full range of financial institutions listed in the FATF Glossary. The AML Law does not cover persons and institutions providing the following activities: financial leasing, issuance of traveler’s checks and money orders, safekeeping and administration of cash or liquid securities on behalf of other persons and participation in securities issues and the provision of financial services related to such issues.

305. Chapter 3 of the AML Law sets out, albeit in a very limited way, the duties of the financial institutions and the responsibilities of the competent entities: prohibition of tipping off ; obligation to report suspicious transactions to the FIU. The AML Law does not address customer identification and customer due diligence requirements. These are addressed (to some extent) in other texts (see below). The AML Law also sets out, in very broad terms, the legal basis for AML supervision.

306. The following gives an overview of the supervisory framework and of the enforceability of the texts issued within the remit of the respective supervisory authorities.

Domestic Sector. QCB: Articles 1 and 7 of the AML Law mentioned above clearly designate the QCB as the supervisory authority for AML issues on the financial institutions that it regulates. This is also mirrored in Article 5 paragraph 12 of the Law No. (33) of 2006 (QCB Law). In 2006, the QCB issued “Instructions of Combating Money Laundering and Terrorism Financing” to the banking and financial institutions under its responsibility (Chapter 6 of the “Instructions to Banks” as of March 2006; QCB AML/CFT Instructions). These instructions require the banking and financial institutions to: know their customers; develop AML/CFT programs including training; pay attention to extraordinary, complex, and large transactions; report suspicious transactions; avoid tipping off customers; maintain documents for at least 15 years; and freeze funds or assets suspected or linked to money laundering and terrorism financing. The first chapter of the Instructions is drafted in mandatory terms, while the second chapter, entitled “Guidelines” is mere guidance.

307. Enforceability of the QCB AML/CFT Instructions. The QCB is clearly empowered by law to issue AML/CFT measures and supervise their implementation (Article 5 paragraph 12 of the QCB law), as well as to sanction the non-compliance with its AML/CFT instructions (Article 58 of the QCB law and Paragraph 16 of the QCB AML/CFT instructions). The measures set out in Chapter 1 of the instructions are mandatory in their wording and enforceable. They may not be considered as “law or regulation” for the purpose of this assessment because they have not been issued by the Council of Ministers or one of its members (see write up under Section 1.1). While the Governor of the QCB holds the title of “minister”, he does not perform the functions of a government minister and is not a member of the Council of Ministers. Furthermore, the Instructions do not explicitly refer to the relevant dispositions of the AML Law and the QCB Law. Chapter 1 of the QCB AML/CFT Instructions may however be considered as “other enforceable means” for the purposes of this assessment because it sets out enforceable measures. Chapter 2 is drafted in broad, non-mandatory terms and is therefore regarded as pure guidance.

308. DSM: Article 11 of Law No. (14) of 1995 (DSM Law) empowers the DSM to oversee and regulate the activity of trading in securities. The authorities indicated that these powers extend to inspection of compliance with the AML Law. In its Decision No. (16/3) of 2005 (Decision 16/3), the DSM requires brokerage firms to: verify the customer’s identity and conduct due diligence; report cash transactions exceeding the established threshold; maintain documentation for at least 15 years and avail this information to the DSM, the FIU, and judicial authorities; establish internal restrictions, procedures, and rules to detect and report suspicious transactions; establish supervisory procedures and training programs; appoint a money laundering reporting (liaison) officer; and avoid tipping off.

309. Enforceability of the DSM Decision 16/3. It may not be considered as “law and regulation” because, like the QCB Instructions, it has not been issued by the executive body. Article 15 of the Decision refers to the sanctions mentioned under the AML Law (i.e. sanctions for money laundering activities and for “tipping-off”). The authorities informed the assessment team that this is not a limitative disposition and that noncompliance with the requirements of the Decision would be sanctioned under the general sanctioning powers granted to the DSM in Article 20 of the DSM Law. Issued pursuant to the powers given under the DSM Law, and drafted in mandatory terms, with sanctions for noncompliance with its requirements, the DSM Decision constitutes “other enforceable means” for the purpose of this assessment.

310. MEC: Unlike the QCB and the DSM, the MEC has not legal basis to conduct AML/CFT supervision. It is nevertheless acting as de facto supervisor for AML requirements and has issued AML measures in Circular No. (1) of 2007. The latter “requires” insurance companies to identify the customers and conduct due diligence; pay special attention to unusual transactions or companies in countries that do not apply or insufficiently apply the provisions; maintain documentation for at least five years; establish policies and plans to combat money laundering and terrorist financing including supervisory measures and training; appoint a money laundering reporting (follow-up) officer; report suspicious transactions to the FIU; and prohibition of tipping off. However, the measures listed in the Circular are not enforceable. They do not constitute law or regulation and cannot be considered as “other enforceable means” for the purpose of this assessment.

311. QFC. Article 3 of Law No. (7) of 2005 (the QFC Law) provides that the business of operating the QFC should be managed in accordance with its objectives in Article 5 by an authority known as the QFC Authority (QFCA). The QFCA should have an independent legal personality and full capacity to act as such in accordance with the QFC Law, and should have the financial and administrative independence from the State. Article 8 of the QFC Law establishes the QFC Regulatory Authority (QFCRA) for the purposes of regulating, licensing, and supervising the banking, financial and insurance-related businesses carried on in or from the QFC. It is the only QFC body with the powers to regulate, license, and supervise the activities listed under Schedule 3 of the QFC Law. It is also a body corporate owned by the State of Qatar. The QFC Authority, the QFC Regulatory Authority, and the QFC Appeals Body all have powers to prepare and submit to the MEC such regulations (or amendments, modifications to a repeal of existing regulations) as they deem appropriate to achieve their respective objectives, including in the “prohibition of money laundering and other financial improprieties” (Articles 9 and Schedule 2, paragraph 8 of the QFC Law). The criminal laws (including the AML Law) of the State of Qatar apply within the QFC. The civil laws, rules, and regulations of the State of Qatar also apply within the QFC, save to the extent that the QFC Regulations exclude them or conflict with them, in which case the QFC Regulations prevail (Article 18 of the QFC Law).

312. In September 2005, the Minister of Economy and Commerce enacted the QFC Anti-Money Laundering Regulations (QFC Regulation No. (3) of 2005, or QFC AML Regulations) under Article 9 of the QFC Law. These Regulations set out measures that are mandatory for all persons and institutions acting in or from the QFC. Pursuant to Schedule 2 of the QFC Financial Services Regulations, all duties, functions and powers relating to monitoring, supervision and investigation, enforcement and related powers in respect of the regulations enacted in relation to the prevention and detection of money laundering (including responsibility for overseeing compliance by persons to whom such Regulations apply) are vested in the QFC Regulatory Authority. Noncompliance with the requirements set out in the QFC AML Regulations may be sanctioned by the QFC Regulatory Authority by any of the disciplinary measures listed in Part 9 of the QFC Regulations No. (1) (QFC Financial Services Regulations).

313. Enforceability of the QFC AML Regulations. The QFC Regulations have been enacted by a Minister member of the Council of Ministers and have been forwarded to the entire Council. They are drafted in mandatory terms, carrying sanctions for noncompliance and make clear reference to the relevant laws (such as the QFC law) and the QFC’s powers to issue AML regulations. Considering in particular the fact that they have been enacted by a member of the executive body acting on a clear legal basis, the QFC AML Regulations may be considered as secondary legislation for the purpose of this assessment. It should nevertheless be mentioned from the outset that, at the time of the assessment, none of the measures contained in the regulations had been enforced. This was entirely due to the fact that., at the time of the onsite visit, most of the persons and institutions acting in or from the QFC were still setting up business, and none of the QFCRA’s decisions had been brought before the QFC Appeal Body.

314. In October 2005, the QFCRA issued the Anti-Money Laundering Rulebook (AML Rulebook) under the powers provided by Paragraph 2 of Schedule 2 of the QFC Financial Services Regulations. According to the preamble (“Background to the Rulebook”), the Rulebook “extends and clarifies the provisions of the AML Regulations.” It contains rules made and guidance issued by the QFC Regulatory Authority. The assessors consider that the Rulebook is of a dual nature: some of its provisions are drafted in mandatory terms and constitute clear requirements, while others, notably those that are preceded by the sub-title “Guidance,” are not mandatory. Noncompliance with the first set of dispositions would entail the application, by the QFC Regulatory Authority of the disciplinary sanctions listed in Part 9 of the QFC Financial Services Regulations. Non-compliance with the second set of dispositions is not enforceable. For the purpose of this assessment, the first category is considered to constitute “other enforceable means,” while the second category is viewed as non-binding guidance. While it appears where relevant in the description of the QFC AML/CFT framework, the non-binding guidance was not taken into account in the ratings. It is also worth noting that the write-up below often refers to the measures listed in the Appendix of the Rulebook. Although the wording of the Appendix is somewhat confusing in the sense that most of the measures listed appear under the sub-title “Guidance” which would suggest that they are not binding, Rule 3.8.4 of the Rulebook specifically refers to the measures contained in Appendix 1 as “rules” with which the financial institutions “must comply.” This would imply that noncompliance with these rules would be sanctioned as mentioned above. The assessors, therefore, consider that the full list of measures mentioned in Appendix 1 constitute “other enforceable means.” It must, however, also be noted that, as is the case for the AML Regulations, the QFC AML Rulebook had not been enforced at the time of the assessment given the recent establishment of the financial institutions within the QFC. While the QFC Regulations and Rulebook may not contradict the AML Law, they may go beyond the law. As a result, the businesses and activities carried out within or from the QFC may be subject to more stringent measures than their domestic counterparts.

3.2 Risk of Money Laundering or Terrorist Financing

315. Although the AML Law requires financial institutions to take certain actions to comply with the requirements of the law, these actions do not take into account the degree of money laundering or terrorist financing risk as required by the FATF Recommendations. The authorities have not yet conducted an assessment of potential money laundering and terrorist financing risks affecting the Qatari financial system and/or institutions within the system. Hence, the existing AML/CFT legal and supervisory frameworks have been developed without considering ML/FT risk level.

316. Domestic Sector: The QCB, the supervisor of banks, exchange houses, finance companies, and investment companies, is the only supervisory authority that has recently adopted and established a risk-based approach to supervision, both for prudential and AML/CFT matters. However, the new supervisory approach was adopted in November 2006 and had been implemented only once during a bank inspection that had not yet concluded as of the mission visit. Therefore, the mission could not reach a conclusion on the effectiveness of the QCB’s new risk-based supervisory approach.

317. The Doha Securities Market Commission (DSM) is the competent authority for supervision of securities brokerage firms and intermediaries as empowered by Law 14. The MEC (MEC) which has supervisory responsibility over insurance companies, does not have a risk-based approach to AML/CFT supervision that they conduct on a de facto basis.

318. QFC: The QFC Regulatory Authority (QFCRA) adopted a risk-based approach to supervision of authorized firms for both prudential and AML/CFT matters. This risk-based supervisory approach focuses on risk management measures that identify, assess, and mitigate those risks, including AML/CFT, arising within an authorized firm which present a risk to the objectives of the Regulatory Authority. Central to the risk-based approach is the process of assessing risks. For AML/CFT, the QFCRA utilizes a methodology which includes two broad categories—Business Risks and Control Structure Risks. The business risks category contains those AML/CFT risks arising from the type of business conducted by the authorized firm and is further broken down into the following risk groups: financial soundness, business strategy, market and operational, and organization and regulation. The control structure risks category refers to the internal structure of the authorized firm and is further broken down into the following risk groups: clients, conflicts management, management and control, financial crime, and human and technical resources.

319. In conducting the risk assessment, the QFCRA considers the nature and size of an authorized firm’s business and its internal structures against each of the risks specified above. The QFCRA then assesses and prioritizes each identified risk taking into account the probability of the risks occurring and the impact upon the QFCRA’s objectives. Finally, using this assessment tool, the QFCRA assigns every authorized firm an aggregate risk classification of low, medium, or high. The risk assessment is first undertaken during the initial authorization process, then shortly after the authorization and ongoing during the on-site visits.

3.3 Customer due diligence, including enhanced or reduced measures (R.5 to 8)

3.3.1 Description and Analysis

320. The AML Law is completely silent with respect to customer identification and the customer due diligence process. With the exception of the QFC Regulations, no other piece of primary or secondary legislation addresses the core obligations relating to customer identification.

321. The preventive measures issued by the Qatari supervision and control authorities, the QCB, DSM, MEC, and QCF Regulatory Authority have some of the elements required by the FATF recommendations; however, only the measures issued by the QCB and the QFC are enforceable.

322. The level of guidance provided significantly varies among supervisory authorities. In some cases, it is sufficiently detailed while in others it is too general or too vague and does not provide the financial institution with sufficient guidance to effectively implement the requirements.

323. Prohibition of Anonymous Accounts (c. 5.1). Domestic Sector: Within the Qatari domestic sector, there is no provision, legal or regulatory, that explicitly prohibits the opening of anonymous accounts or accounts in fictitious names.

324. The QCB instructions include customer identification requirements that could entail that anonymous or fictitious accounts are effectively prohibited. The following is a description of the QCB’s AML/CFT measures: In order to open an account, financial institutions must require as core documents the customer’s residence/work permit and personal identification number. The residence/work permit is issued by the MOI to every foreigner residing in Qatar. The personal identification number is also issued by the MOI to both foreigners and Qatari citizens. Other official papers and documents requested and obtained when establishing the account relationship include salary and introduction letters from the customer’s employer. All these documents need to be certified by governmental authorities in Qatar. All financial institutions operating in the State of Qatar must record the identification card number or personal identification number mentioned on the birth certificate, being the only proof of personal identity for all bank transactions and must not accept any other identification document. The DSM Decision 16/3 covers similar aspects of opening accounts/relationship under Article 6 (additional information is provided under criterion 5.2 of this report) with Article 7 providing that a securities account should not be opened if the customer fails to satisfy or provide the information required in Article 6 of the Decision. The QCB and DSM authorities indicated that given the existing controls and requirements in place, financial institutions are required to comply with the account opening requirements described above. Officials from financial institutions visited indicated that their institutions do not open anonymous accounts or accounts in fictitious names. All accounts opened need to comply with the instructions and decisions in place.

325. QFC: Article 12 of the QFC AML Regulations explicitly prohibits firms within the QFC from establishing or keeping anonymous accounts or accounts in false names but neither the QFC AML Regulations nor the QFC AML Rulebook have a specific provision prohibiting a relevant person to establish or keep numbered accounts. relevant person is defined as a person who carries on any regulated activities and/or a person who conducts, and in so far as they conduct, any of the following activities: a) the business of providing the professional services of audit, accounting, tax consulting, legal and notarization; b) the provision, formation, operation and administration of trusts and similar arrangements of all kinds; and c) company services including, the business of provision, formation, operation and management of companies.

326. Regulated activities are defined in Schedule 3 of the QFC Law as: a) financial business, banking business of whatever nature, and investment business, including (without limit) all business activities that are customarily provided by investment, corporate and wholesale financing banks, as well as Islamic and electronic banking business; b) insurance and reinsurance business on all categories; c) money market, stock exchange and commodity market business of all categories, including trading in and dealing in precious metals, stocks, bonds, securities, and other financial activities derived therefrom, or associated therewith; d) money and asset management business, investment fund business, the provision of project finance and corporate finance in all business fields and Islamic banking and financing business; e) funds administration, fund advisory and fiduciary business of all kinds; f) pension fund business and the business of credit companies; g) the business of insurance brokering, stock brokering, and all other financial brokerage business; h) financial agency business and the business of provision of corporate finance and other financial advice, investment advice and investment services of all kinds; and i) the provision of financial custodian services and the business of acting as legal trustees. Article 9 of the QFC AML Regulations imposes strict obligations upon all relevant persons to establish and verify the identity of any customer with or for whom a relevant person acts or proposes to act. The detailed procedures are set out in Appendix 1 of the QFC AML Rulebook. All relevant persons must follow these procedures to establish and verify the true identity of any customer with or for whom they act or proposes to act, regardless of whether the account is named or numbered. Failure to comply with the requirements of the Regulations and Appendix 1 of the Rulebook may be punished by the QFC Regulatory Authority using the powers vested by the Financial Services Regulations which include monitoring, supervision and investigation, and enforcement, including sanctions for noncompliance with the AML Regulations. Additional information addressing sanctioning powers is covered under Rec. 17.

327. When is CDD required (c. 5.2): As mentioned above, the AML Law does not address customer due diligence (CDD) requirements.

328. Domestic sector: No other law or regulation apply. Consequently, the obligation to identify customers is not established by primary or secondary legislation as required by the standard. The obligation is established by Instructions issued by the QCB and Decision issued by the DSM, which are considered as other enforceable means for purposes of this assessment.

329. The QCB 2006 Instructions on Combating Money Laundering and Terrorism Financing establish the obligation on banking and financial institutions under the supervision of the QCB to conduct due diligence when opening an account. Paragraph 1 of the instructions provides that for natural persons, banking and financial institutions should check the customer’s identity or the identity of their representatives by reviewing identification cards and keeping their personal data upon entering in any deals, or transactions with them, or providing services especially when opening accounts, contracting facilities contracts, financial transfers or managing their funds, whether in portfolios, shares in mutual funds, leasing trust funds, or any other banking and financial services.

330. For legal (“juridical”) persons, banking and financial institutions should check the customer’s name and legal status and institution/company’s articles of incorporation and executive regulations, verify the soundness of the information recorded in the documents obtained; check the customer’s legal status stated in the institution/company’s articles of incorporation the executive regulations, verify the soundness of the information recorded in the documents obtained; and in the case of any suspicion about the personal identification or the original country or official offices of customers who open accounts, or make transactions through other customers if there are doubts on customers who delegate others to make their transactions. For example, if the institution/company or any other entity does not exercise any commercial or industrial activities in the country where the main office is located.

331. Paragraph 1.3 of the Instructions also requires banking and financial institutions to undertake due diligence for any banking transaction, particularly those, that exceed 100,000 Qatari Riyals in the various banking activities that can be used for money laundering. It further requires banking and financial institutions to check any other banking and financial transactions suspected to be used in terrorism financing, regardless of the amount.

332. Additional guidance for opening personal deposit accounts is provided to banks and financial institutions under Chapter Three of the QCB Instructions, Second section. Under this section, the institutions must complete and maintain the information, contracts and documents for all types of personal deposit accounts for residents in Qatar or the non-residents, in line with the QCB Instructions.

333. For the brokerage firms, Article 6 of the DSM Decision (16/3) “requires” that customer due diligence be conducted when opening financial securities accounts. It provides guidance as follows: In opening accounts, all particulars of the identity of the customer, his agent or their representatives should be recorded and verified. The customer should submit copies of the required documentation whenever an amendment is made. A securities account should not be opened if the customer fails to satisfy or provide the documentation or information required.

334. Section 1 of Circular No. (1) of 2007 recently issued by the MEC, provides limited guidance to insurance companies with respect to CDD measures. Under this circular, insurance companies are required to conduct CDD for natural persons before executing any financial transaction. For legal persons, CDD is required before and during any insurance transaction. No further guidance is provided.

335. Regardless of the QCB and DSM requirements and the non enforceable nature of the MEC guidance for undertaking customer due diligence measures, for banking and financial institutions, brokerage firms and insurance companies fall short of including measures: when carrying out occasional transactions above a designated threshold both single or multiple operations; when carrying out occasional transactions that are wire transfers, when there is a suspicion of money laundering or terrorist financing; and when the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data. Against this background, the current measures dealing with the timing of the CDD process appear inadequate and clearly not in line with the requirements of the standard.

336. QFC: Article 9 of the QFC AML Regulations sets out the customer identification requirements. It requires a relevant person to establish and verify the identity of any customer, including the beneficial owner with or for whom the relevant person “acts or proposes to act”. Accordingly, the CDD is required at the time of establishment of the relationship and prior to any transactions being undertaken. There are certain limited exceptions to the customer identification requirements contained in Rule 3.9 of the QFC AML Rulebook: a relevant person is not required to establish the identity of a customer if the customer is itself an Authorized firm or a relevant person in the QFC or is a regulated financial sector firm from a FATF Country. However, this exemption is not applicable when the relevant person: i) knows or suspects; or has reasonable grounds to know or suspect that a customer or a person on whose behalf he is acting (including any beneficial owner or other provider of relevant funds) is engaged in money laundering; and ii) will be taken to know or suspect or to have reasonable grounds to know or suspect if any employee handling the transaction or potential transaction or anyone managerially responsible for it knows or suspects or has reasonable grounds to know or suspect that a customer or a person on whose behalf he is acting (including beneficial owner or other provider of relevant funds) is engaged in money laundering.

337. The broad exemption from having to conduct identification requirements as contained in Rule 3.9 does not appear to be consistent with the FATF standard. The exemption as such assumes that if customers are an authorized firm or a relevant person in the QFC or a regulated financial sector firm from a FATF country, they pose a low risk of money laundering and terrorist financing. Although Rec. 5 requires financial institutions to apply identification and due diligence measures, it also gives the authorities the flexibility to determine the extent of these measures on a risk sensitive basis. However, there was no evidence that the authorities had conducted a risk sensitive assessment of such customers, nor FATF countries where such customers are located to determine compliance with and level of implementation of the recommendation. As such, this broad exemption does not appear to be consistent with the FATF Recommendation 5.

338. There is no designated threshold in place within the QFC to require relevant persons conducting due diligence on an occasional transaction. Article 9 of the QFC AML Regulations therefore applies to all transactions regardless of their amount. Consequently, the customer’s identity must be established and verified in all cases, even when occasional transactions are undertaken for small amounts.

339. Article 16 of the QFC AML Regulations addresses the requirements for transfer of funds. Under this Article, when a relevant person is a financial institution and makes a payment on behalf of a customer to another financial institution using an electronic payment and message system, it must include the customer’s name, address and either an account number or a unique reference number in the payment instruction. Also, for such a transaction to occur, the identity of the customer must already have been established and verified.

340. If at any time, a relevant person realizes that it lacks sufficient information or documentation concerning a customer identification, or develops a concern about the accuracy of its current information or documentation, he or she is required by Article 9 (11) of the QFC AML Regulation to obtain promptly all appropriate documentation necessary to verify the customer’s identity.

341. Although the requirements within this criterion are covered by the QFC AML Regulations and the AML Rulebook, the broad exemption from having to conduct identification requirements does not appear to be consistent with the FATF Recommendation 5, as the authorities were not able to demonstrate that a risk-sensitive assessment had been conducted of such customers and FATF countries determine compliance with and level of implementation with the recommendation.

342. Therefore, the QFC Regulation partially meets the standard on this point due to the shortcoming stated above.

343. Identification Measures and Verification Sources (c. 5.3). Domestic Sector: As is the case above, there are no measures in law or regulation that impose an obligation on financial institutions to identify the customer and verify his or her identity.

344. The QCB Instructions, although they are not primary or secondary legislation, nevertheless impose enforceable obligations on the financial institutions under the QCB’s authority. They require the banking and financial institutions to identify the customer both, natural and legal, by obtaining adequate documentation (Chapter VII, second section, 1-1/2) as follows.

345. For natural persons, the requirement is to obtain: (i) identification cards and personal data; (ii) customer’s full name as mentioned in the passport or the personal identification card for residents and Qatari citizens; (iii) passport or personal identification card number and its validity date; (iv) nationality; (v) place and date of birth; (vi) profession and work place; (vii) place of residence; (viii) postal address; (ix) customer’s signature or thumb print plus the identifier’s signature as in signature form; (x) name and address of the sponsor or the work entity for residents in Qatar; and (xi) copies of registers and signature and delegating letters from the account owner.

346. For legal persons, the instructions require documentation supporting; the corporate name and legal status; articles of incorporation; customer’s name and legal status; institution/company’s articles of incorporation and executive regulations; and customer’s legal status stated in the institution/company’s articles of incorporation and executive regulations.

347. The current measures for identifying legal persons are too limited as they do not require to identify the customer (whether occasional, and whether natural or legal persons or legal arrangements) and verify that customer’s identity using reliable, independent source documents, data or information (identification data). Furthermore, they do not address corporations/partnerships; mutual/friendly societies; cooperatives, charities, clubs and associations; trusts and foundations; and professional intermediaries. In view of the above, the Qatari framework would partially meet the standard on this point in the banking sector, but fails to do so because the requirements are not set in primary or secondary legislation.

348. DSM: Decision No. 16/3 requires the brokerage firms to obtain the following information for a natural person or agent: (i) full name; (ii) full address; (iii) nationality; (iv) profession; and (v) complete details of identity card or passport

349. With respect to verification measures, Article 8 requires brokerage firms to verify by reference to a valid official identity document the identity and address of the natural person. A copy of this official document should be attached to the application.

350. For legal persons, brokerage firms are required to obtain the following information: (i) name; (ii) legal form; (iii) commercial registration; (iv) objectives; (v) address of main office and branch, if any; (vi) particulars of the shareholders and main founders of the company; (vii) names of members of the Board of Directors; (viii) name and address of the legal representative of the company and details of his identity; (ix) names of the persons authorized to sign on behalf of the legal person and specimens of their signatures; (x) the memorandum and articles of incorporation authenticated by the concerned authority in the state.

351. Verification measures for legal persons include verifying the existence of the customer, its legal status and form and continuation of its business by way of official documents pertaining to the incorporation and licensing. There is also a recommendation to verify the existence of actual valid authorization of the person acting on behalf of the company/establishment and verification of the real owner, besides verification of the correctness of signatures of applicants and opening of bank accounts outside Qatar through attestation by banks, chambers of commerce or notary public outside Qatar besides legalization of these documents by the Qatar Embassy and MOFA or any other authority to be approved by the market for this purpose.

352. MEC: Verification measures under Circular No. 1 of 2007 call on financial institutions to conduct due diligence on the natural person or his representative based on obtaining an official ID document and registration of all ID details before executing any financial transaction with the natural person. For legal persons, this is limited to conducting due diligence of the customer’s activity process based on the commercial register and the license details, and verifying the actual status of the company representative’s authorization by checking the official documents and verifying the identity of the real owner. As mentioned above, the MEC circular is not mandatory and enforceable, and may only constitute guidance. Furthermore, this guidance is clearly not adequate as it fails to provide the financial institutions with specific types of customer information that should be obtained and the identification data that should be used to verify that information.

353. QFC: Article 9 of the QFC AML Regulations sets the primary obligation on all relevant persons to establish and verify the identity of any customer with or for whom a relevant person acts or proposes to act. The “customer” is defined as any person engaged in or who has had contact with a relevant person with a view to engaging in any transaction with a relevant person on his own behalf or as agent for or on behalf of another. Section 3.8 of the QFC AML Rulebook requires firms to comply with the customer identification requirements set out in Appendix 1 of the Rulebook. These requirements are extensive and include the use of independent source documents, data, and other relevant identification data in a way which is in line with the standard.

354. Identification of Legal Persons or Other Arrangements (c. 5.4). Domestic Sector: There is no requirement in law (primary or secondary) to verify that a person purporting to act on behalf of the customer is so authorized, and to identify and verify the identity of that person.

355. The requirement on identification of legal persons or other arrangements is established under Article 1, paragraph 1.2.3 of the QCB Instructions where financial institutions are obliged to obtain information when a suspicion arises about the personal identification or the original country or official offices of customers who, on behalf of their clients, open accounts, or make transactions through other customers if there are doubts on customers who delegate others to make their transactions. For example, financial institutions are required to identify and verify the identity of the person acting on behalf of the customer when an institution/company or any other entity does not exercise any commercial or industrial activities in the country where the main office is located. In addition, paragraphs 1.2.1 and 1.2.2 provide that financial institutions should check and verify the customer’s name and legal status and institution/company’s articles of incorporation and executive regulations, and verify the customer’s legal status stated in the institution/company’s articles of incorporation and the executive regulations, as well as verify the existence of the documents for the person acting on behalf of the customer and the accuracy of such documents and of the information recorded in the aforementioned documents. However, the requirement falls short of providing financial institutions with guidance on how the information should be verified and validated.

356. DSM: Article 6 of the Decision 16/3 requires all brokerage firms to record and verify all particulars of the identity of the customer, his agent or their representatives when opening securities accounts. This should be done in addition to obtaining and verifying the name; legal form; commercial registration; objectives; address of main office and branch, if any; particulars of the shareholders and main founders of the company; names of members of the Board of Directors; name and address of the legal representative of the company and details of his identity; names of the persons authorized to sign on behalf of the legal person and specimens of their signatures; and the Memorandum and Articles of incorporation authenticated by the concerned authority in the State.

357. MEC: Circular No. 1 calls on insurance companies to verify the actual status of the company representative’s authorization by checking the official documents and verifying the identity of the real owner. The MEC has not yet provided additional guidance to instruct insurance companies as to how to implement this circular. The domestic framework falls short of the standard on this point because the verification requirements are not set out in primary or secondary legislation and the MEC measures are not enforceable.

358. QFC: Section A 1.2 of Appendix 1 of the QFC AML Rulebook sets out the requirements with respect to the verification of the identity and authority of the person, including the beneficial owner, purporting to act on behalf of a legal person or arrangement. Specifically, where the customer is itself a relevant person or a public registered company, the relevant person is required to obtain a list of authorized signatories or satisfactory evidence that the individuals representing the company have the necessary authority to do so. Further, with respect to private companies, unincorporated businesses, partnerships, clubs, cooperatives, charitable, social, or professional societies, a relevant Person is required to identify the authorized signatories and obtain necessary documentation to establish and verify the identities of the signatories.

359. Verification procedures with respect to the legal status of legal persons or legal arrangements are established under Section A1.2 of the QFC AML Rulebook which requires the relevant persons to verify the legal status of a public registered company by obtaining copies of the following documents: (i) certificate of incorporation or extract from the relevant register or an enquiry search via a company enquiry agent; (ii) the latest reports and accounts; and (iii) satisfactory evidence that the individuals representing the company have the necessary signing authority to do so (e.g., list of authorized signatories).

360. When verifying the legal status of a private corporate entity, a relevant person is required to obtain the following documents: (i) registered corporate name and any trading names used; (ii) complete current registered address and any separate principal trading addresses, including all relevant details with regards to country of residence; (iii) telephone, fax number and email address; (iv) date and place of incorporation; (v) corporate registration number; (vi) fiscal residence; (vii) business activity; (viii) regulatory body, if applicable; (ix) name and address of group, if applicable; (x) legal form; (xi) name of the external auditor; (xii) information regarding the nature and level of the business to be conducted; (xiii) information regarding the origin of the funds; and (xiv) information regarding the source of wealth or income.

361. A relevant person is also required to record the name, country of residence, nationality of the directors or partners and members of the governing body and to obtain a certified copy of the list of authorized signatories specifying who is authorized to act on behalf of the company and of the relevant board resolution authorizing the signatories to act on behalf of the company. When dealing with unincorporated business or partnerships, a relevant person is required to obtain the latest annual report and accounts and a certified copy of the partnership deed. In relation to clubs, cooperative, charitable, social, or professional societies, a relevant person is required to obtain a certified copy of the constitution of the organization.

362. The QFC requirements for CDD measures with respect to legal persons or legal arrangements are extensive and include the use of independent source documents, data, and other relevant identification data, in a way which is in line with the standard.

363. Identification of Beneficial Owners (c. 5.5; 5.5.1 & 5.5.2). Domestic Sector: There are no requirements in law or regulation to identify the beneficial owner and to take reasonable measures to verify the identity of the beneficial owner using relevant and reliable information.

364. The QCB nevertheless addressed the identification of the customer or his representatives and the verification of their identity of the beneficial owner under Paragraph 1.2.2 of the Instructions. The Instructions set out an obligation to determine whether the customer is acting on behalf of another person and if so, to obtain sufficient information to verify the identity of that other person and of the beneficial owner.

365. The DSM authorities indicated that in practice, securities brokerage firms are documenting and verifying the identity of the person acting on behalf of the customer. However, there was no evidence to support the legal basis of this practice.

366. There is no specific obligation imposed by the QCB on financial institutions to take reasonable measures to understand the ownership and control structure of the customer or to determine who are the natural persons that ultimately own or control the customer. The current requirement focuses on obtaining, checking and verifying the customer’s name, legal status, and the institution/company’s articles of incorporation. No further guidance is provided to instruct financial institutions.

367. Article 6 of the DSM Decision 16/3 calls on brokerage firms to identify the particulars of the shareholders and main founders of the company, name and address of the legal representative of the company and details of his identity, and the names of the persons authorized to sign on behalf of the legal person and specimens of their signatures. However, it does not address control structure of the customer and determining who are the natural persons that ultimately own or control the customer. Again, the DSM authorities indicated that in practice, securities brokerage firms are documenting and verifying the control structure over a legal person, but there was no evidence to support the legal basis of this practice.

368. The MEC has a general guidance for insurance companies to verify the actual status of the company representative’s authorization by checking the official documents and verifying the identity of the real owner, but it is not mandatory. Furthermore, it does not call on the insurance companies to take reasonable measures to understand the ownership and control structure of the customer or to determine who are the natural persons that ultimately own or control the customer. In conclusion, none of the measures examined comply with the standard as they are not set out in law or regulation (and are incomplete).

369. QFC: Article 9 of the QFC AML Regulations sets out the primary customer identification requirements, including for beneficial owners. Article 9(1) of the QFC AML Regulations provides that a relevant person must establish and verify the identity of any customer with or for whom the relevant person acts or proposes to act.

370. Article 9(4) of the QFC AML Regulations requires that whenever a relevant person comes into contact with a customer with or for whom it acts or proposes to act, it must establish whether the customer is acting on his own behalf or on behalf of another person.

371. Article 9(5) of the QFC AML Regulations requires that a relevant person must establish and verify the identity of both the customer and any other relevant person on whose behalf the customer is acting or appears to be acting. This includes verification of the Beneficial Owner of the person and/or relevant funds which may be the subject of a Transaction to be considered. In such cases, the relevant person is required to obtain sufficient and satisfactory evidence as to their identities.

372. Moreover, Rule 3.8.1 of the QFC AML Rulebook requires a relevant person to obtain a statement from a prospective customer to the effect that the customer is or is not acting as principal. In cases where the customer is acting on behalf of a third party, a relevant person must obtain a written statement confirming the statement made by the customer, from the parties (including any Beneficial Owner, if different from the third party).

373. Appendix 1 of the QFC AML Rulebook sets out in great detail the customer identification requirements in relation to understanding the ownership and control structure of the customer. Appendix section A1.2.1 (11) requires that, in addition to the information obtained during the identification process of the legal persons, a relevant person should obtain the following: (i) certified copy of the Articles of association or statutes; (ii) certified copy of either the certificate of incorporation or the trade register entry and any trading license including renewal date; (iii) latest annual report, audited and published, if applicable; (iv) certified copies of the identification documentation of the authorized signatories; (v) certified copies of the list of authorized signatories specifying who is authorized to act on behalf of the customer account and of the board resolution authorizing the signatories to operate the account;(vi) certified copies of the identification documentation of the authorized signatories; (vii) names, country of residence, nationality of directors or partners and of the members of the governing body; (viii) list of the main shareholders holding more than 5 percent of the issued capital; and (ix) identification evidence of those shareholders with interests of 10% or more in the capital of the company.

374. In relation to public registered companies, a relevant person is required to obtain a certified copy of the latest report and accounts which will provide details of significant shareholders. In accordance with Paragraph 9 under rule A 1.2.1, a relevant person need not verify the identity of the individual shareholders or directors of a company listed on a designated exchange as such entities are considered to be publicly owned and generally accountable.

375. In relation to those Customers who are private corporate entities, paragraph 11 under rule 1.2.1 paragraph 11 h) of the Appendix 1 requires a relevant person to obtain a list of all shareholders holding more than 5 percent of the issued share capital of the company. Further, a relevant person is required to obtain identification evidence in respect of those shareholders holding more than 10 percent of the capital of the company.

376. In relation to unincorporated businesses or partnerships, paragraph 29 i) of rule 1.2.1 of the Appendix 1 requires a relevant person to verify the identity of all controllers and/or partners.

377. In relation to trusts, nominees and fiduciaries, the guidance set out under paragraph 6 a) of rule 1.2.2 pf Appendix 1 requires a relevant person to identify any settlor, trustee, or principal controller who has the power to remove the trustee as well as the identity of the beneficial owner; a certified copy of the trust deed, to ascertain the nature and purpose of the trust; and documentary evidence of the appointment of the current trustees.

378. In relation to clubs, cooperatives, charities, or professional societies, Appendix 1, rule 1.2.7 requires the relevant person to identify the principal signatories and controllers in accordance with the relevant customer identification requirements for private individuals.

379. Appendix 1, Rule 1.2.5, provides that when the applicant for business is a supra-national organization, a governmental department or a local authority, the relevant person must take steps to verify the legal standing of the applicant, including its ownership and its principal address. The relevant person should also obtain a certified copy of the resolution or other document authorizing the opening of the account or undertaking the transaction. Evidence that the official representing the body has the relevant authority to act should also be obtained. The QFC framework fully meets the standard on this point.

380. Information on Purpose and Nature of Business Relationship (c. 5.6). Domestic Sector: Paragraph 2 of the QCB Instructions requires banking and financial institutions to obtain information on the purpose of opening any account. However, there is no explicit requirement to obtain information on the intended nature of the business relationship as well. There are no requirements on the financial institutions supervised by the DSM, and the MEC to obtain information on the purpose and intended nature of the business relationship. Therefore, the Qatari domestic framework falls short of the standard on this point.

381. QFC: Rule 1.1.1 of Appendix 1 of the QFC AML Rulebook provides that in order to comply with the “Know Your Customer” requirements prescribed under Article 9 (1) of the QFC AML Regulations, a relevant persons must:

  • With respect to personal details, obtain and verify the true full name or names used and the current permanent address;

  • With respect to the nature and level of business to be conducted, obtain information regarding the nature of the business that the customer expects to undertake, and any expected or predictable pattern of transactions, including the purpose and reason for opening the account or establishing the business relationship, the anticipated level and nature of the activity that is to be undertaken and the various relationships of signatories to the account (if any) and details of any underlying beneficial owners;

  • With respect to the origin of funds, identify how all the payments are to be made, from where, and by whom and ensure that all payments are recorded to provide an audit trail; and

  • With respect to the source of wealth, establish a source of wealth or income, including how the funds were acquired, to assess whether the actual transaction pattern is consistent with the expected transaction pattern and whether this constitutes any grounds for suspicion on money laundering.

The QFC framework fully meets the standard on this point.

382. Ongoing Due Diligence on Business Relationship (c. 5.7; 5.7.1 & 5.7.2). Domestic sector: There are no specific legal or regulatory requirements imposed by the QCB, the MEC, and the DSM for financial institutions to conduct ongoing due diligence on the business relationship. Therefore, the Qatari domestic framework falls short of the standard on this point.

383. QFC: Under Rule 3.8.2 of the QFC AML Rulebook, a relevant person is required to undertake a periodic review to ensure customer identity documentation is accurate and up to date. Additionally, Rule 3.8.3 of the QFC AML Rulebook requires a relevant person to undertake the periodic review mentioned under Rule 3.8.2 when: (i) the relevant person changes its Know-Your-Customer documentation requirements; (ii) a significant transaction with the customer is expected to take place; (iii) there is a material change in the business relationship with the customer; or (iv) there is a material change in the nature or ownership of the customer.

384. Article 3.1.1 (D) of the QFC AML Rulebook sets out the general principle that a relevant person must put in place satisfactory Know Your Customer Requirements to identify the users of services, the principal beneficial owners and the origin of any funds being deposited or invested with or through a relevant person. Satisfactory procedures include knowing the nature of the business that the customer normally expects to conduct and being alert to transactions that are abnormal within the relationship.

385. Under Appendix 1, Customer Identification Requirements, rule 1.1.1 (c) a relevant person is required to identify how all payments are to be made, where they were made from, and by whom. They must also ensure that all payments are recorded in order to provide an audit trail. Under paragraph (d), they must establish the source of the wealth or income and how the funds were acquired, with a view to assess whether the actual transaction pattern is consistent with the expected transaction pattern and whether this constitutes any grounds for suspicion of money laundering.

386. Article 15 (6) of the QFC AML Regulations requires a relevant person to establish and maintain policies, procedures, systems, and controls in order to monitor for and detect suspicious transactions.

387. Article 16 of the QFC AML Regulations requires that where a relevant person is a financial institution and makes a payment on behalf of a customer to another financial institution using an electronic payment and message system, it must include the customer’s name, address, and either an account number or a unique reference number in the payment instruction.

388. Article 9 (10) of the QFC AML Regulations requires that a relevant person must ensure that the information and documentation concerning a customer’s identity remains accurate and up to date.

389. Rule 3.8.4 of the QFC AML Rulebook requires a relevant person to adopt a risk-based approach for the customer identification and verification process.

390. Depending on the outcome of the money laundering risk assessment of its customer, the relevant person should decide to what level of detail the customer identification and verification process will need to be performed. The QFC framework fully meets the standard on this point.

391. Risk—Enhanced Due Diligence for Higher Risk Customers (c. 5.8). Domestic sector: Paragraph 3 of the QCB Instructions requires banking and financial institutions to perform enhanced due diligence by obtaining additional information when opening accounts for non-residents. The additional information includes a letter of introduction or recommendation from reputable banks or financial institutions overseas and ensuring that the authentication of the account opening application, signed by the customer is adequate. It also requires that the financial institutions and banks be well known. There are no other legal, regulatory or other enforceable obligations to perform enhanced due diligence measures for higher-risk categories of customer, business relationship, or transaction. Under the current AML/CFT regulatory regime, there is no distinction between low- and high-risk customers, business relationships, or transactions. The Qatari domestic framework, therefore, clearly falls short of the standard on this point.

392. QFC: Appendix 1 (Customer Identification Requirements) of the QFC AML Rulebook requires a relevant person to adopt a risk-based approach to the customer identification process. Depending on the money laundering risk assessment regarding the customer, the relevant person should decide at what level of detail the customer identification and verification process will need to be performed. The risk assessment regarding a customer should be recorded in the customer file. The Appendix clarifies that the risk-based approach does not release a relevant person from its general obligation to identify fully and obtain evidence of customer identification to the Regulatory Authority’s satisfaction. It also provides that a relevant person should, in cases of doubt, adopt a stricter approach in its judgment concerning the risk level and the level of detail to which customer identification is performed and evidence obtained.

393. Enhanced due diligence for Nonresident customers: relevant persons are required to ensure that they are dealing with an existing person by virtue of Rule 1.2.1 of Appendix 1 of the QFC AML Rulebook. Provisions in section A 1.2 of the Rulebook require the relevant person to verify the address of the client, whether it is a natural or legal person. Accordingly, relevant persons must always determine if their clients are resident by obtaining copies of the identification card issued by the MOI.

394. Appendix 2 of the QFC AML Rulebook provides requirements and guidance to firms in respect of the risk assessment process and in paragraph 7, the QFCRA requires that where a relevant person has customers located in countries:

  • (1) without adequate anti-money laundering strategies;

  • (2) where cash is the normal medium of exchange;

  • (3) which have a politically unstable regime with high levels of private or public sector corruption;

  • (4) which are known to be drug producing or drug transit countries; or

  • (5) which have been classified as countries with inadequacies in their anti money laundering regulations.

It should consider which additional “Know your Customer” and monitoring procedures may be necessary to compensate for the enhanced risk.

395. Guidance is also provided under paragraph 8 of the Appendix A2.1 as to the enhanced due diligence procedures which a relevant person may undertake when dealing with a Customer who is classified as high risk, including:

  • requiring additional documentary evidence;

  • taking supplementary measures to verify or certify the documents supplied;

  • requiring that any initial transaction is carried out through an account opened in the customer’s name with a credit or financial institution subject to the AML Regulations and Rules or regulated in a FATF Country;

  • performing direct mailing (registered mail) of account opening documentation to the named customer at an independently verified address;

  • establishing telephone contact with a customer prior to opening the account on an independently verified home or business number or a “welcome call” to the customer utilizing a minimum of two pieces of personal security information that have previously been provided during the setting up of the account;

  • obtaining a local legal opinion on the ability of the customer to open an account and transact business with the relevant person. Local counsel should also conduct a local company search (if applicable);

  • obtaining an introduction certificate from another regulated financial institution in accordance with procedures set out above; and

  • an initial deposit check drawn on a personal account in the customers name at a bank in a FATF Country.

396. Enhanced due diligence for Private Banking customers: The QFC AML Regulations and AML Rulebook do not make any separate provision for private banking. Firms undertaking private banking are subject to the same customer identification requirements as set out in the AML Regulations and the AML Rulebook and described above under criteria 5.2 to 5.7.

397. Enhanced due diligence for Legal Persons & arrangements such as trusts: The standard Customer identification requirements as set out in the QFC AML Regulations and the AML Rulebook apply to legal persons. Specific guidance is provided in respect of the identification of various forms of legal persons in section A 1.2 of the QFC AML Rulebook. It requires that in addition to the identification documentation obtained under private companies, the relevant person should obtain the following documentation:

  • Identity of any settlor, the trustee and any principal controller who has the power to remove the trustee as well as the identity of the beneficial owner;

  • A certified copy of the trust deed, to ascertain the nature and purpose of the trust; and

  • Documentary evidence of the appointment of the current trustees.

398. Rule A1.2.3 of the QFC AML Rulebook requires a relevant person to use its best endeavors to ensure that it is advised about any changes concerning the individuals who have control over the funds and concerning the beneficial owners. Rule A1.2.4 of the QFC AML Rulebook requires that where a trustee, principal controller, or beneficial owner who has been identified is about to be replaced, the identity of the new trustee, principal controller, or beneficial owner must be verified before they are allowed to exercise control over the funds.

399. Enhanced due diligence for companies with nominee shareholders or bearer shares: There is no requirement under the QFC AML Regulations preventing a relevant person from entering into a customer relationship with a corporate entity with nominee shareholders or shares in bearer form. There is, however, an overriding requirement placed upon a relevant person to ensure they identify and verify the beneficial owner. However, there was no information provided to evidence how a relevant person would perform enhanced due diligence when establishing a business relationship with companies that have nominee shareholders or shares in bearer form.

400. Risk—Application of Simplified/Reduced CDD Measures when appropriate (c. 5.9). Domestic sector: The authorities indicated that financial institutions are not permitted to apply reduced or simplified customer due diligence measures when establishing accounts and/or relationships.

401. QFC: The QFC AML Regulations have been drafted in accordance with a risk-based approach and proportionate anti money laundering systems and controls. Article 15 of the QFC AML Regulations specifically requires that a relevant person must ensure that it adequately addresses the specific money laundering risks which it faces taking into account the vulnerabilities of its products, services and customers. The QFC AML Regulations and Rulebook also set out limited prescribed circumstances where a relevant person is not required to carry out full independent verification of a customer.

402. Article 11 of the QFC AML Regulations specifically provides that where a customer is introduced by another member of the relevant person’s group, a relevant person need not re-identify the customer provided that:

  • the identity of the Customer has been verified by the other member of the relevant person’s Group in a manner consistent with these Articles or equivalent international standards applying in FATF Countries;

  • no exception from identification obligations has been applied in the original identification process; and

  • a statement written in English is received form the introducing member of the relevant person’s group confirming that:

  • the Customer has been identified in accordance with the relevant standards under 1 and 2 above;

  • any identification evidence can be accessed by the relevant person without delay; and

  • that the identification evidence is kept for at least six years.

403. Ultimately, if a relevant person is not satisfied that the customer has been identified in a manner consistent with the Articles of the Regulations, the relevant person must perform the verification process itself.

404. Article 9 (12) of the QFC AML Regulations provides that consistent with its powers, duties, and requirements as set out in Part 3 of the QFC Financial Services Regulations, the Regulatory Authority shall adopt rules implementing the provisions of that article concerning customer identification and shall identify in such rules any exceptions that will apply in respect of these requirements.

405. Under Rule 3.9.1 of the QFC AML Rulebook, a relevant person is not required to establish the identity of a customer pursuant to Article 9 (1) of the QFC AML Regulations if the customer is one of the following;

  • an authorized firm or another relevant person; or

  • a regulated financial sector firm from a FATF country.

406. For the purpose of Rule 3.9.(1)(B) of the QFC AML Rulebook, a firm is considered to be from a FATF country if it is a firm whose entire operations are subject to the regulation, including money laundering, by:

  • an overseas Regulator in a FATF Country

  • another relevant authority in a FATF Country or

  • a subsidiary of a firm referred to above provided that the law which apples to the parent entity ensures that the subsidiary also observes the same provisions.

A relevant person is not required to establish the beneficial ownership of a customer and relevant funds if the relevant person’s customer is a person falling within the scope of Rule 3.9.1(1) of the QFC AML Rulebook.

407. Section A1.2 of the QFC AML Rulebook, (Establishing Identity-Identification Procedures), sets out the identification procedures which a relevant person is required to apply. The identification procedures do not require a relevant person to identify the individual shareholders of corporate entities listed on a Designated Exchange or to identify the directors of a listed company.

408. The QFC framework partially meets the standard on this point because of the broad exemption granted to an authorized firm or another relevant person or a regulation financial sector firm from a FATF country without conducting a risk assessment of the customers or evaluated the countries where such customers are located.

409. Risk—Simplification / Reduction of CDD Measures relating to overseas residents (c. 5.10). Domestic sector: This criterion does not apply: There are no provisions that allow the financial institutions under the supervisory responsibility of the QCB, the DSM, and the MEC to conduct reduced or simplified customer due diligence measures with respect to customers who reside in another country. All customers must therefore undergo the same degree of customer due diligence, regardless of their country of origin.

410. QFC: Rule 3.9.1 of the QFC AML Rulebook provides that a relevant person is not required to verify the identity of a customer if the customer is either (1) an authorized firm or is another relevant person or (2) a regulated financial sector firm from a FATF country.

411. Rule 3.9.2 further provides that a firm falls under the abovementioned second category if: (a) a firm whose entire operations are subject to regulations, including anti money laundering, by an overseas regulator in a FATF country or another relevant authority in a FATF country; or (b) a subsidiary of a firm referred to in (a) provided that the law that applies to the parent entity ensures that the subsidiary also observes the same provisions.

412. Article 11 of the QFC AML Regulations provides limited ability for relevant persons to rely upon others to perform certain aspects of CDD. Article 11 states that a relevant person may outsource technical aspects of the customer identification process to a qualified professional. Where a customer is introduced by another member of the relevant person’s group, a relevant person need not re-identify the customer provided that the identification process has been carried out by the other member of the relevant person’s group in a manner consistent with the regulations or equivalent international standards applying in FATF countries and no exemption was allowed from the original identification process; and a statement from the introducing member confirming the customer has been identified according to the mentioned requirements and evidence of identification is available for examination without delay and the evidence will be kept for at least six years. Article 11 further stipulates that if a relevant person is not satisfied that the customer has been identified in a manner consistent with the requirements, the relevant person must perform the verification process itself.

413. Rule 3.11.1 of the QFC AML Rulebook also provides that an authorized firm, another relevant person or a regulated financial sector firm from a FATF country is considered as a qualified professional. A qualified professional is to undertake the identification process as required by Article 9 of the AML Regulations and obtain any additional “Know Your Customer” information and confirming the identification details if the customer is not resident in the state (rule 3.11.2). Also a relevant person must have in place a cooperation agreement with relevant qualified professional that defines the tasks to be outsourced, specifying that they are to be carried out in accordance with the AML Regulations and AML Rulebook. The QFC framework partially meets the standard on this point because of the broad exemption granted to an authorized firm or another relevant person or a regulation financial sector firm from a FATF country without conducting a risk assessment of the customers or evaluated the countries where such customers are located.

414. Risk—Simplified/Reduced CDD Measures Not to Apply when Suspicions of ML/TF or other high risk scenarios exist (c. 5.11). Domestic sector: This criterion does not apply: Simplified CDD measures are not permitted and all customers must therefore undergo the same degree of customer due diligence.

415. QFC: Rule 3.9.1 (4) of the QFC AML Rulebook confirms that simplified Customer Due Diligence (CDD) is not permitted when a relevant person either knows or suspects, or has reasonable grounds to know or suspect, that a customer or a person on whose behalf he is acting (including any beneficial owner or other provider of relevant funds) is engaged in money laundering. The QFC framework meets the standard on this point.

416. Risk-Based Application of CDD to be Consistent with Guidelines (c. 5.12). Domestic Sector: This criterion does not apply. CDD measures on a risk sensitive basis are not permitted. Therefore, all customers undergo the same degree of customer due diligence.

417. QFC: Article 15 of the QFC AML Regulations, enables relevant persons to adopt a risk based approach to CDD and provides for the provision of guidance by the Regulatory Authority to relevant persons in respect of money laundering risks. Detailed guidance is provided by the Regulatory Authority in Appendix 2 of the QFC AML Rulebook. Guidance includes developing the necessary measures for:

  • High risk products, services, customers or geographies;

  • Enhanced customer monitoring;

  • Corporate structures such as limited companies, offshore trusts, special purpose vehicles and nominee arrangements;

  • Politically exposed persons;

  • Suspicious transactions and transaction monitoring.

The QFC framework meets the standard on this point.

418. Timing of Verification of Identity—General Rule (c. 5.13). Domestic sector: The QCB Instructions (Section 1/1) and DSM Decision (16/3) under Article 6 require financial institutions under their responsibility to verify the identity of all customers before establishing a business relationship. The MEC Circular No. 1 Section 1.1 provides similar language but, for the reasons mentioned above, they are not legally binding. The identification of beneficial owners, however, remains unaddressed in all three texts. The Qatari domestic framework, therefore, clearly falls short of the standard on this point.

419. QFC: Article 9 (1) of the QFC AML Regulations the relevant person must establish and verify the identity of any customer with or for whom the relevant person acts or proposes to act. Further, Article 9 (5) of the QFC AML Regulations extends the above identity verification requirement to beneficial owner. Then, in accordance with Article 9 (6) of the QFC AML Regulations the obligation to verify the identity of any customer with or for whom the relevant person acts or proposed to act must take place prior to the commencement of the business relationship and before any transaction is effected. The QFC framework meets the standard on this point.

420. Timing of Verification of Identity—treatment of exceptional circumstances (c.5.14 & 5.14.1). Domestic sector: The QCB instructions (section 1) and DSM decision (Articles 6 and 8) impose an obligation on financial institutions to verify the identity of all customers before establishing a business relationship. The MEC Circular No. 1 section 1, are mere recommendations to that effect. Overall, the Qatari domestic framework falls short of the standard on this point.

421. QFC: Article 9(7) of the QFC AML Regulations allows a relevant person to enter into an insurance contract before the customer has been properly identified (as required by Article 9(6)) only if the relevant person has controls to ensure that any money received is not passed on to any person until the customer identification requirements have been met.

422. In addition Article 9(8) of the QFC AML Regulations provides that if the customer does not supply evidence of identity in a manner that permits the relevant person to comply with the identification and verification requirements, the relevant person must discontinue any activity it is conducting for the customer and bring to an end any understanding it has reached with the customer.

423. Failure to Complete CDD before commencing the Business Relationship (c. 5.15). Domestic sector: The QCB and the MEC do not address the consequences of failure to complete the customer due diligence procedures. The DSM addresses the issue on Article 7 of the Decision where it explicitly states that a securities account should not be opened if the customer fails to satisfy or provide the information required in Article 6 of this Decision. Article 6 covers the requirements in place for opening account for both natural and legal persons. However, the DSM requirement falls short of requiring the institution to consider making a suspicious transaction report. The Qatari domestic framework, therefore, clearly falls short of the standard on this point.

424. QFC: Article 9(8) of the QFC AML Regulations requires that if a relevant person is unable to comply with the CDD requirements it must not open an account for the customer. There is no legal or regulatory requirement for relevant persons to consider making a suspicious transaction report when they are unable to comply with the CDD requirements. The QFC framework only partially meets the standard on this point as it does not require financial institutions to consider making a suspicious transaction report when unable to complete CDD measures.

425. Failure to Complete CDD after commencing the Business Relationship (c. 5.16). Domestic sector: Pursuant to the QCB instructions section 1, financial institutions must verify the identity of and conduct due diligence measures on all customers before establishing a business relationship and conducting transactions. They are not permitted to conduct business until the requirement is met. The MEC Circular No. 1 (section 1) and DSM Decision 16/3 (Article 8) provide something similar, but in non-binding terms.

426. QFC: If a relevant person is unable to comply with CDD requirements, it must immediately terminate the relationship. In the case of the exemption listed under Article 9 (7) of the QFC AML Regulations with respect to insurance contracts, the relevant person must have controls to ensure that any money received is not passed on to any person until the customer identification requirements have been met, otherwise it must not open the account. The QFC framework partially meets the standard on this point as it does not require financial institutions to consider making a suspicious transaction report.

427. Existing Customers–CDD Requirements (c. 5.17). Domestic sector: Article 19, paragraph 19/8 of the QCB Instructions provides that financial institutions should adopt programs for updating customer’s personal information, papers, and documents. There are no requirements for financial institutions under the supervision of the DSM and the MEC to apply CDD requirements to existing customers on the basis of materiality and risk, nor to conduct due diligence on such existing relationships at appropriate times. The Qatari domestic framework clearly falls short of the standard on this point.

428. QFC: Article 9(11) of the QFC AML Regulations provides that if at any time a relevant person becomes aware that it lacks sufficient information or documentation concerning a customer’s identification, or develops concerns about the accuracy of its current information or documentation, it must promptly obtain appropriate material to verify the customer’s identity. Rule 3.8.2 of the QFC AML Rulebook places an obligation upon a relevant person to undertake a periodic review to ensure that customer identity documentation is accurate and up-to-date. Rule 3.8.3 of the QFC AML Rulebook sets out specific circumstances when a specific review is necessary. These circumstances include, inter alia, situations where there is change in CDD requirements, a significant transaction with the Customer is due to take place, there is a material change in the business relationship with the customer, or where there is a material change in the beneficial ownership of the customer. However, the QFC was recently established and, therefore, there are no accounts that predate the regulations. The QFC framework meets the standard on this point.

429. Foreign PEPs—Requirement to Identify (c.6.1). The AML Law 28 of (2002) does not address the issue of Politically Exposed Persons (PEPs).

430. Domestic sector: There are no measures in place for the financial institutions supervised by the QCB, the DSM and the MEC that address any of the essential criteria (c.6.1 to c.6.4) dealing with PEPs (including having appropriate risk management systems to determine whether the customer is a politically exposed person; obtaining senior management approval for establishing business relationships with such customers; taking reasonable measures to establish the source of wealth and source of funds; and conducting enhanced ongoing monitoring of the business relationship).

431. QFC: Article 15 of the QFC AML Regulations provides that “a relevant person must have systems and controls to determine whether a Customer is a Politically Exposed Person”. Article 19 defines PEPs as “natural persons who may constitute a reputational risk and who are or have been entrusted with prominent public functions, such as Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owner corporations, important political party officials; and close family members or close associates of any of those persons”. This definition is in line with the standard. Further requirements and guidance are described under the relevant criteria below.

432. Risk Management (c.6.2; 6.2.1). QFC: The QFC AML Regulations impose, pursuant to Article 15 (1)—“Money Laundering Risks”, a specific obligation on relevant persons to have in place policies, procedures, systems, and controls that adequately address the money laundering risks which take into account any vulnerabilities of its products, services, and customers. Furthermore, Article 15 (5) states that “when a relevant person has a Customer relationship with a Politically Exposed Person, it must have specific arrangements to address the risks associated with corruption and Politically Exposed Persons.”

433. Requirement to Determine Source of Wealth and Fund (c. 6.3). The QFC Rule 2.1.1in Appendix 2 provides additional details with respect to monitoring and due diligence procedures required when dealing with PEPs. These procedures include:

  • an analysis of any complex structures, for example involving trusts or multiple jurisdictions;

  • appropriate measures to establish the source of wealth;

  • the development of a profile of expected activity for the business relationship in order to provide a basis for transaction and account monitoring;

  • Senior management approval for the account opening; and

  • regular oversight of the relationship with a Politically Exposed Person by senior management.

Although not explicitly articulated in the Rule, QFCRA officials stated that the reference to complex structures, particularly the reference to trusts and multiple jurisdictions requires the firms to identify beneficial owners, not merely the apparent owner. However, the requirements fall short with respect to establishing the source of funds of customers and beneficial owners identified as PEPs.

434. Requirement to conduct ongoing monitoring (c. 6.4). With respect to conducting enhanced ongoing monitoring on business relationships with PEPs, Section 2.1 (10) of Appendix 2 states that “the risk for a Relevant Person can be reduced if the Relevant Person conducts detailed “Know Your Customer” investigations at the beginning of a relationship and on an ongoing basis where it knows, suspects, or is advised that, the business relationship involves a Politically Exposed Person. A Relevant Person should develop and maintain enhanced scrutiny and monitoring practices to address this risk.” The QFCRA AML Regulation and AML Rulebook do not specifically require relevant persons to obtain senior management approval to continue the business relationship where a customer has been accepted and the customer or beneficial owner is subsequently found to be, or subsequently becomes a PEP.

Additional Elements—Extension of the requirements of R. 6 to domestic PEPS

435. The definition of PEPs provided by Article 19 of the QFC Regulations is not limited to foreign PEPs and, therefore, also covers persons who hold prominent public functions in Qatar (domestic PEPs).

Cross-Border Correspondent Accounts and Similar Relationships

436. Requirement to Obtain Information on Respondent Institution (c.7.1). Domestic sector: There are no specific measures established by the QCB, the DSM, and the MEC addressing any of the essential criteria (c.7.1 to c.7.5) of this recommendation dealing with establishment of cross-border correspondent banking or other similar relationships. DSM authorities stated that in Qatar, brokerage houses operate domestically only and that for international transactions/orders, these needed to be conducted through a bank, in this case, HSBC Global Custodian services. There was no evidence that insurance firms maintain cross-border correspondent accounts.

437. QFC: Article 12 of the QFC AML Regulations requires that “prior to establishing a business relationship an Authorised Firm must establish and verify its Correspondent Banks identity by obtaining sufficient and satisfactory evidence of the identity”. The identity of the customer with or for whom a relevant person acts or proposes to act should be established and verified pursuant to Article 9 of the AML Regulations.

438. Assessment of AML/CFT Controls in Respondent Institution (c.7.2). Domestic sector: There are no enforceable measures in place.

439. QFC: In establishing and verifying a customer’s true identity, a relevant person must obtain sufficient and satisfactory evidence having considered the customer’s anti-money laundering risk including policies, procedures, systems, and controls with respect to vulnerabilities arising from its products, services, and customers; perform enhanced due diligence investigations for higher-risk products, services, and customer utilizing the guidance provided by the QFCRA Rulebook; risks arising from new or developing technologies; risks regarding corruption and PEPs; and systems in place for suspicious transactions and transaction monitoring.

440. Article 12 of the QFC AML Regulations further states that an Authorised Firm that establishes, operates, or maintains a correspondent account for a correspondent banking client must ensure that it has arrangements to:

  • conduct due diligence in respect of the opening of a correspondent account for a correspondent banking client including measures to identify its:

  • ownership and management structure;

  • major business activities and customer base;

  • location; and

  • intended purpose of the correspondent account;

  • ensure that the correspondent banking client has verified the identity of, and performed on-going due diligence on its customers having direct access to the correspondent account and that the correspondent banking client is able to provide customer due diligence information upon request to the Authorized Firm; and

  • monitor transactions processed through a correspondent account that has been opened by a correspondent banking client, in order to detect and report any suspicion of money laundering.

The same Article prohibits an Authorized Firm from: a) establishing a correspondent banking relationship with a shell bank; b) establishing or keeping anonymous account or accounts in false names; or c) maintaining a nominee account which is held in the name of one person, but controlled by or held for the benefit of another person whose identity has not been disclosed to the Authorized Firm.

441. In addition to the AML regulations, the QFCRA AML Rulebook (AMLR) extends and clarifies the provisions in the AML Regulations, under Rule 3.12 requiring relevant persons to verify if any secrecy or data protection law exists in the country of incorporation of a business partner that would prevent access to relevant data; to have specific arrangements to ensure that adequate due diligence and identification measures with regard to the business relationship are taken and to conduct regular reviews of its relationship with its correspondent banks.

442. Approval of Establishing Correspondent Relationships (c. 7.3). Domestic sector: There are no enforceable measures in place.

443. QFC: Further guidance in the Rulebook provides that specific care should be taken to assess the anti-money laundering arrangements of correspondent banking clients and, if applicable, other qualified professionals relating to customer identification, transaction monitoring, terrorist financing and other relevant elements and to verify that these business partners comply with the same or equivalent anti-money laundering requirements as the relevant person. Information on applicable laws and regulations regarding the prevention of money laundering should be obtained. A relevant person should also ensure that a correspondent banking client does not use the relevant person’s products and services to engage in business with shell banks. If applicable, information on distribution networks and delegation of duties should be obtained. The senior management of a relevant person should give its approval before it establishes any new correspondent banking relationships. Finally, the AML Rulebook further requires a relevant person to have arrangements to guard against establishing a business relationship with business partners who permit their account to be used by shell banks.

444. Documentation of AML/CFT Responsibilities for Each Institutions (c. 7.4) and Payable-Through Accounts (c. 7.5). Domestic sector: There are no enforceable measures in place.

445. QFC: The QFC AML Regulations and AML Rulebook do not specifically establish the requirements when establishing correspondent banking relationships to gather sufficient information about a respondent institution to understand fully the reputation and quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action; and to document the respective AML/CFT responsibilities of each institution.

446. Misuse of New Technology for ML/FT and Risk of Non-Face to Face Business Relationships. Misuse of New Technology for ML/FT (c. 8.1). Domestic sector: There are no specific measures established by the QCB, the DSM, and the MEC that address any of the essential criteria (c.8.1 to c.8.2.1) dealing with money laundering threats that may arise from the new or developing technologies. The QCB Instructions address technology developments; however, the emphasis is more on the relationship between QCB and financial institutions, particularly with respect to call centers, maintenance of banking electronic equipment, and replacement of ATM cards and Debit/Credit Cards. QCB and DSM officials indicated that currently opening accounts/establishing relationships over the internet is not allowed because there is physical presence requirement in place for customers opening accounts/relationships. However, the authorities were not able to provide documentation to support the legal basis for the physical presence requirement. For the DSM, only trading orders are allowed through the internet, but that is after the customer/investor has been properly identified. DSM officials also indicated that all new accounts are opened at the ground level of the DSM building (client’s service counter), but like the QCB, the focus is more on establishing the relationship that on establishing effective measures to address specific money laundering and terrorist financing risks. In order to open an account at the DSM, the following process takes place:

For individuals:

  • Filling out a new investor’s application form to get an investor’s identification number.

  • Submission of the following documents along with the application form:

    • - A copy of a valid passport.

    • - A copy of power of attorney (in case there is a need for one).

    • - A copy of a court decision or a guardianship order (guardian).

    • - A copy of birth certificate if buying/selling securities on behalf of minors (under 18).

For Companies and other entities:

  • Filling out a new investor’s application form to get an investor’s identification number.

  • Submission of the following documents along with the application form:

    • - A copy of a valid commercial registration document showing the authorized persons including their signatures.

    • - An original authorization signature letter issued by the company for the purpose of opening an account with DSM.

447. QFC: Article 15 (3) of the QFC AML Regulations stipulates that a relevant person must be aware of any money laundering risks that may arise from new or developing technologies that may favor anonymity and take measures to prevent their use for the purpose of money laundering.

448. Further guidance is provided in Section A.2.1 of the Appendix 2 of the QFC AML Rulebook where a relevant person should take specific and adequate measures necessary to compensate for the higher risks of money laundering which may arise from products and services such as non-face-to-face business relationship or transaction, such as via email, telephone, or the Internet or internet-based products.

449. Risk of Non-Face-to-Face Business Relationships (c. 8.2 & 8.2.1). Domestic sector: There are no enforceable measures in place.

450. QFC: Article 15 (3) of the QFC AML Regulations specifically requires a relevant person to be aware of any money laundering risks that may arise from new or developing technologies that might favor anonymity and take measures to prevent their use for the purpose of money laundering.

451. Guidance on conducting risk assessments is provided in the Appendix 2 to the QC AML Handbook (Paragraph 2.1.2). It provides that a relevant person should take specific and adequate measures necessary to compensate for the higher risk of money laundering which might arise, for example from the following products, services or customers:

  • non-face-to-face business relationships or Transactions, such as via email, telephone or the Internet;

  • internet-based products;

  • correspondent banking relationships;

  • customers from FATF “Non Cooperative Countries and Territories” and higher-risk countries; and

  • Politically Exposed Persons.

452. Relevant person are also recommended under paragraph 2.1.2 to apply an intensified monitoring of transactions and accounts in relation to these products, services and customers. Such measures may include, for example, the following:

  • requiring additional documentary evidence;

  • taking supplementary measures to verify or certify the documents supplied;

  • requiring that the initial transaction is carried out through an account opened in the customer’s name with a credit or financial institution subject to AMLR and the AML Regulation or regulated in a FATF Country;

  • performing direct mailing (registered mail) of account opening documentation to the named customer at an independently verified address, which such mailing is returned completed or acknowledged without alteration to the name or address;

  • establishing telephone contact with a customer prior to opening the account on an independently verified home or business number or a “welcome call” to the customer utilizing a minimum of two pieces of personal identity security information that have been previously provided during the setting up of the account;

  • obtaining a local legal opinion on the ability of the customer to open an account and transact business with the relevant person. Local counsel should undertake a local company search (if applicable);

  • obtaining an introduction certificate from another regulated financial institution in accordance with the procedures set out above; and

  • an initial deposit check drawn on a personal account in the customer’s name at a bank in a FATF country.

3.3.2 Recommendations and Comments

453. There are substantial shortcomings in the Qatari framework, in particular in the domestic sector, which are largely due to the fact that a number of requirements that should be set out in primary or secondary legislation are addressed through OEMs or non-binding guidance. In a number of instances, the measures in place in the domestic sector are too general and lack the level of detail required under the standard.

454. In order to address the shortcomings in the domestic sector, it is recommended that the Qatari authorities prohibit, through law or regulation, anonymous accounts or accounts in fictitious names; and establish, through law or regulation, clear requirements for financial institutions to:

  • Undertake customer due diligence (CDD) measures when:

    • carrying out occasional transactions above the applicable designated threshold. This also includes situations where the transaction is carried out in a single operation or in several operations that appear to be linked;

    • carrying out occasional transactions that are wire transfers in the circumstances covered by the Interpretative Note to SR VII;

    • there is a suspicion of money laundering or terrorist financing, regardless of any exemptions or thresholds; and

    • the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data.

  • Identify the customer (whether permanent or occasional, and whether natural or legal persons or legal arrangements) and verify that customer’s identity using reliable, independent source documents, data or information (identification data) following the examples of the types of customer information that could be obtained, and the identification data that could be used to verify that information as set out in the paper entitled General Guide to Account Opening and Customer Identification issued by the Basel Committee’s Working Group on Cross Border Banking.

  • Verify, for customers that are legal persons or legal arrangements, that any person purporting to act on behalf of the customer is so authorized, and identify and verify the identity of that person.

  • Identify the beneficial owner, and take reasonable measures to verify the identity of the beneficial owner using relevant information or data obtained from a reliable source such that the financial institution is satisfied that it knows who the beneficial owner is.

  • Determine for all customers whether the customer is acting on behalf of another person, and should then take reasonable steps to obtain sufficient identification data to verify the identity of that other person.

  • Conduct ongoing due diligence on the business relationship.

455. The Qatari authorities are further recommended to establish, through law, regulation, or other enforceable means, clear obligations/requirements for financial institutions to:

  • Obtain information on the purpose and intended nature of the business relationship.

  • Perform enhanced due diligence for higher risk categories of customer, business relationships, or transactions.

  • Reject opening an account when unable to comply with CDD requirements and to consider making a suspicious report.

  • Apply CDD measures on existing customers on the basis of materiality and risk and to conduct due diligence on such relationships at appropriate times.

  • Have appropriate risk management systems to determine whether the customer is a politically-exposed person; obtain senior management approval for establishing business relationships with such customers; take reasonable measures to establish the source of wealth and source of funds; and conduct enhanced ongoing monitoring of the business relationship.

  • Establish requirements for financial institutions to have measures in place for establishing cross-border correspondent banking and other similar relationships.

  • Require financial institutions to establish measures including policies and procedures designed to prevent and protect the financial institutions from money laundering and terrorist financing threats that may arise from new or developing technologies or specific CDD measures that apply to non-face-to-face business relationships or transactions.

456. It is also recommended that the QFC authorities strengthen the AML Regulation and Rulebook by requiring relevant persons to:

  • Remove the broad exception to customer identification requirements contained in Rule 3.9 of the Rulebook by implementing a process for conducting a risk sensitive assessment of customers and FATF countries where such customers are located to determine compliance with and the level of implementation of Rec. 5.

  • Require institutions to consider making a suspicious transaction report when unable to complete CDD measures, including when the business relationship has already commenced and the institution is not able to conduct required CDD measures.

  • Take reasonable measures to establish the source of funds of customers and beneficial owners identified as PEPs and obtain senior management approval to continue the business relationship where a customer has been accepted and the customer or beneficial owner is subsequently found to be, or subsequently becomes a PEP.

  • Incorporate into the existing requirements the obligation to gather sufficient information about a respondent institution to understand fully the reputation and quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action; and to document the respective AML/CFT responsibilities of each institution.

3.3.3 Compliance with Recommendations 5 to 8

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3.4 Third parties and introduced business (R.9)

457. Domestic sector: There are no requirements (or prohibitions) for banks and financial institutions with respect to reliance on intermediaries or other third parties to perform some of the elements of the CDD process. Also, there is no measure in place that would ensure that the final responsibility for CDD measures remains with the financial institution opening/initiating the relationship. The supervisory authorities indicated that under the current regime, financial institutions are required to conduct their own due diligence. However, the authorities were not able to provide the legal basis for this requirement. Meetings conducted with officials from financial institutions revealed that all due diligence process is performed by the institution establishing the business relationship and that at this time, no intermediaries or other third parties are conducting elements of the CDD process.

458. Requirement to Immediately Obtain Certain CDD elements from Third Parties (c.9.1). QFC: Article 11 of the QFC AML Regulations provides that when a customer is introduced by another member of the relevant person’s group, a relevant person need not re-identify the customer, provided that:

  • A. the identity of the customer has been verified by the other member of the relevant person’s group in a manner consistent with the articles or equivalent international standards applicable to FATF countries;

  • B. no exception from identification obligations has been applied in the original identification process; and

  • C. a statement written in the English language is received from the introducing member of the relevant person’s group confirming that:

    • I. the customer has been identified in accordance with the relevant standards under (A) and (B);

    • II. any identification evidence can be accessed by the relevant person without delay; and

    • III. that the identification evidence is kept for at least six years.

459. Availability of Identification Data from Third Parties (c.9.2) and Ultimate Responsibility for CDD (c.9.5). Article 11 also states that if a relevant person is not satisfied that the customer has been identified in a manner consistent with the articles; the relevant person must perform the verification process itself. Where customer identification records are kept by the relevant person or other persons outside the state, a relevant person must take reasonable steps to ensure that the records are held in a manner consistent with the articles. Also, a relevant person must verify if there are secrecy or data protection legislation that would restrict access without delay to such data by the relevant person, the QFC Authority, the Regulatory Authority, the FIU, or the law enforcement agencies of Qatar. Where such legislation exists, the relevant person must obtain without delay certified copies of the relevant identification evidence and keep these copies in a jurisdiction which allows access by all the persons.

460. Regulation and Supervision of Third Party (applying R. 23, 24 & 29, c.9.3 and c.9.4). Although the QFC AML Regulations permit financial institutions to rely on intermediaries or other third parties to perform elements of the CDD process or to introduce business, there are some inconsistencies with the FATF requirements: no specific measures to evaluate the quality of supervision of the third party; and no indication that in determining which countries the third party that meets the conditions can be based, the competent authorities have taken into account information available on whether those countries adequately apply the FATF Recommendations. Also, the exemption for not re-identifying the customer if the identity of the customer was previously verified by other members of the relevant person’s group in a manner consistent with the QFCRA requirements or equivalent international standards applying in FATF countries is too broad and does not seem adequate given that there is no requirement for relevant persons to evaluate the adequacy of the CDD measures and process conducted and to ensure the quality of supervision of the third party.

3.4.1 Recommendations and Comments

461. The authorities are recommended to:

  • Introduce provisions/measures in the event that financial institutions supervised by the QCB, DSM, and MEC rely on intermediaries or other third parties to perform some of the elements of the CDD process.

  • Specify that the final responsibility for CDD measures remains with the financial institution opening/initiating the relationship.

462. The QFCRA is recommended to:

  • Require a relevant person to evaluate the quality of supervision of the third party;

  • Determine in which countries the third party that meets the conditions can be based;

  • Take into account information available on whether those countries adequately apply the FATF Recommendations; and

  • Abolish or re-evaluate the broad customer identification exemption granted when a customer is a member of the relevant person’s group or equivalent international standards are applied in FATF countries, with a view to establish the risk and the conditions for implementing this waiver.

3.4.2 Compliance with Recommendation 9

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3.5 Financial Institution Secrecy or Confidentiality (R.4)

3.5.1 Description and Analysis

463. Inhibition of Implementation of FATF Recommendations (c. 4.1). Domestic sector: Article 82 of Law No. (33) of 2006 (QCB Law) states that “the member of the board of directors, personnel, auditors and advisers of all financial institutions shall not disclose any information concerning any customer except with his prior written consent, or pursuant to a provision of the Law, or upon an order or decision of the court. This prohibition shall continue even after termination of service of the abovementioned persons. It shall apply to the abovementioned persons whose services have been terminated before the date this Law come into force”. The law does not provide for any exceptions to the confidentiality requirement. According to the authorities, banking secrecy may nevertheless be lifted and access to all information may be granted by the Governor of the QCB. Banking secrecy may also be lifted by the relevant court, on request of the prosecutors. However, given the shortcomings with respect to information sharing identified in cross-border activities, intermediaries/introduced business and wire transfers the Qatari framework falls short in these respects.

464. QFC: Authorized firms in the QFC are subject to various confidentiality requirements under QFC law, including the specific requirements under Rule 2.1.12 of the Principles Rulebook for firms to “ensure that information of a confidential nature received in the course of dealing with its clients is treated in an appropriate manner”. Confidentiality obligations are subject to the following:

  • a) Article 48 of the FSR Regulations that enables the regulatory authority to require the production by a person in the QFC of specified information/documents of a specified description within such timeframe and in such manner as it reasonably requires; and

  • b) Article 8(6)(G) of the QFC AML Regulations which requires relevant person to respond promptly to any request for information made by the FIU, the QFC Authority, the Regulatory Authority, or other competent state authorities.

465. QFC firms are subject to confidentiality requirements pursuant to Rule 2.1.12 mentioned above. The secrecy provisions contained in Article 82 of the Central Bank Law do not apply to QFC firms. Article 18 of the QFC Law (17) of 2005 provides that the civil laws, rules and regulations of the State shall apply in the QFC save to the extent that regulations exclude or conflict with or are inconsistent with them.

466. Article 19 paragraph 1 of the QFC Financial Services Regulations prohibits the QFC Regulatory Authority to disclose any information received in the exercise of its functions. However, several exceptions are listed. Article 19(3) of the FSR specifically provides that the Regulatory Authority may disclose the information ordinarily covered by the confidentiality requirements “to any body, agency or authority performing functions relating to the detection or prevention of money laundering whether in the State or internationally”. It also enables the Regulatory Authority to disclose confidential information in the following circumstances:

  • with the consent of the Person to whom the duty of confidentiality is owed;

  • where such disclosure is permitted or required by or pursuant to the QFC Law, these regulations or any other regulation conferring powers, duties or functions on the Regulatory Authority;

  • in response to a legally enforceable demand;

  • where the disclosure is made in good faith for the purposes of the performance or exercise by the Regulatory Authority of any of its functions, duties, and powers under the QFC Law, this regulation or any related regulations;

  • in the case of persons other than the Regulatory Authority, to the Regulatory Authority;

  • to the Tribunal or Appeals Body in connection with any matter falling within their jurisdiction;

  • to any other civil or criminal enforcement agency or authority, whether in the state or internationally; or

  • to overseas regulators in accordance with Article 20 (International Relations and Cooperation).

467. Further, Article 20 (3) of the FSR also stipulates that the Regulatory Authority shall exercise such of its powers under the QFC Law or Regulations (or any Related Regulations) as it considers appropriate to cooperate with and provide assistance to overseas regulators in the exercise of their functions or in connection with the prevention or detection of financial crime.

468. Rule 3.10.1 of the QFC AML Rulebook also stipulates that a relevant person must maintain records in such a manner that:

  • The Regulatory Authority or another competent third party is able to assess the relevant person’s compliance with legislation or regulation applicable to the QFC;

  • Any transaction which was processed by or through the relevant person on behalf of a customer or any third party can be reconstructed;

  • Any customer or third party can be identified;

  • All internal and external suspicious transaction reports can be identified; and

  • The relevant person can satisfy, within an appropriate time, any regulatory enquiry or court order to disclose information.

469. Article 48 of the FSR allows the QFC Regulatory Authority to require the production by a person in the QFC or outside the QFC (with an order from a judiciary body) of specified information/documents or information/documents of a specified description within such timeframe and in such manner it reasonably requires. This article also allows the Regulatory Authority with power to enter the premises of any person in the QFC at any time for the purposes of inspecting and copying information or documents stored in any form on such premises.

470. Meetings with financial institutions regulated by the QFC Regulatory Authority confirmed that there are no impediments for the supervision and control authorities and the financial intelligence unit to prevent them from obtaining and/or having access to information.

3.5.2 Recommendations and Comments

471. The authorities need to establish measures to enable information sharing between financial institutions.

3.5.3 Compliance with Recommendation 4

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3.6 Record-Keeping and Wire Transfer Rules (R.10 & SR.VII)

3.6.1 Description and Analysis

472. Record-Keeping and Reconstruction of Transaction Records, Identification Data, and Availability of Records to Competent Authorities (c.10.1 & 10.1.1, c.10.2, and c.10.3). Domestic Sector: The requirement for financial institutions under the supervision of the QCB is established by Article 81 of the QCB Law No.(33) of 2006 pursuant to which every financial institution is required to maintain the records and documents concerning its work in a proper way and in a safe place inside the State of Qatar. The article also delegates to the QCB the authority to specify the period for maintaining such records and documents. The record retention period is established by the QCB under Section 1, paragraph 4 of the QCB Instructions (which are considered other enforceable means) where financial institutions are required to keep records of the customers’ identities and their agencies, including copies of official identity cards and files of the accounts and the correspondences of all the customers even of those who closed their accounts. These records have to be kept according to Section 7 of the Instructions and available for review by QCB and the local competent authorities in case of relevant criminal prosecutions and investigations. Under Section 7 of the instructions, the QCB requires the regulated banking and financial institutions to maintain the necessary records on domestic and international financial transactions for a period of not less than 15 years, to enable them to respond swiftly to inquiries from the QCB or the competent authorities. The records retained must be sufficient to permit the retrieval of individual information, including the amount and types of currencies involved if any, the types of transaction and their dates, the transferees and beneficiary, and any other documents such as a copy of the passport or the identification card, and an account statement. Banking and financial institutions are also required to maintain records of the customer’s identities and their agencies, including copies of official identity documents and also files of the accounts and the correspondences of all the customers even of those who closed their accounts. These documents must be available to the QCB and the domestic competent authorities in case of criminal prosecutions and investigations.

473. The retention/recordkeeping obligation is not established by primary or secondary legislation for the DSM financial institutions. The DSM addresses the record retention/recordkeeping obligation under Article 9 of Decision 16/03 (which is also considered other enforceable means). Article 9 states that the registers and records pertaining to the customers, containing their identification and other documents and the documents of their agents, the files of accounts, correspondence of the transactions being executed shall be kept for a period of at least 15 years. It further states that these documents shall be available for the perusal of the Market Committee and the Financial Information Unit (FIU) and the judicial authorities whenever required. Also, under Article 12 of Law 14 of 1995 (DSM Law), the DSM as the competent authority, has access to all data and information requested. This data and information must be made available to the inspection and audit team and treated with high confidentiality and should not be disclosed. In the case where the institution under inspection and/or audit is a licensed bank, the DSM should coordinate with the QCB and allowed to conduct joint examination.

474. Likewise, the retention/recordkeeping obligation for those financial institutions under the supervision of the MEC is not established by primary or secondary legislation. The MEC addresses recordkeeping aspects in its Circular; however, due to the lack of legal basis, the MEC’s Circular is not considered legally binding. The Circular nevertheless provides useful recommendations, as follows: Section 3 of Circular No. 1 of 2007 issued by the MEC requires all insurance companies to maintain for a period of at least five years all the necessary records related to the different insurance transactions executed in favour of the customers, including all files, documents, accounts, correspondences, claims, and other documents.

475. In conclusion, only the QCB has established the legal obligation for retention/recordkeeping under the QCB Law No.(33). The DSM imposes the record-keeping obligations on the financial institutions they supervise under the DSM Decision 16/3. The regulatory record keeping/retention period of 15 years imposed by both the QCB and the DSM, is in line with the standard and even goes beyond the minimum period recommended by FATF. However, in the case of the DSM and MEC, it fails to meet the standard because it is not established through primary or secondary legislation. Furthermore, the QCB and DSM obligation is not sufficiently precise in its wording. Meetings conducted with representatives from financial institutions revealed that it is not clear to them when the current record-keeping requirement starts and for how long they need to maintain the documentation when requested by a competent authority. Further meetings with the authorities revealed that the retention period should start following the termination of the account relationship. The QCB Instructions and DSM Decision should be clarified to explicitly indicate when the record-keeping obligation starts.

476. QFC: The record-keeping requirements are addressed in the QFC AML Regulations which constitute secondary legislation. Article 10 of the QFC AML Regulations provides that all relevant information, correspondence, and documentation used by a relevant person to verify a customer’s identity, pursuant to the customer identification requirements as described in the regulations, must be kept for at least six years from the date on which the business relationship with a customer has ended. If this date is unclear, the business relationship may be taken to have ended on the date of the completion of the last transaction. Article 10 also requires the relevant person to keep all relevant details of any transaction carried out with or for a customer for at least six years from the date on which the transaction was completed. The QFC AML Rulebook further provides that a relevant person must maintain records in such a manner that the Regulatory Authority or another competent third party is able to assess the relevant person’s compliance with legislation or regulations applicable in the QFC; any transaction which was processed by or through the relevant person on behalf of a customer or any third party can be reconstructed; any customer or third party can be identified; all internal and external suspicious transaction reports can be identified; and the relevant person can satisfy, within an appropriate time, any regulatory enquiry or court order to disclose information.

477. Obtaining Original Information for Wire Transfer (applying c.5.2. & 5.3 in R.5, c.VII.1). Domestic sector: In Qatar, funds/wire transfers may only be carried out by banking institutions. Therefore, the criterion does not apply to the DSM and MEC. As far as banking institutions are concerned, the Qatari authorities have not yet implemented specific measures to address the requirements of SR VII with respect to information to be obtained for wire transfers.

478. Section 1 of the QCB Instructions require the banking and financial institutions to ascertain the identity of the customers or those who represent them, on the basis of the official identity documents and register of these identities, when making any deals, or transactions with them, providing services especially when opening account, contracting facilities contracts, financial transfers or managing their funds, whether in portfolios, shares in mutual funds, leasing trusts funds, or any other businesses and banking and financial services.

479. The obligation to obtain and maintain information is set out in Section 2 of the QCB Instructions which requires that in addition to name, nationality, identity, and address, banking and financial institutions should maintain and obtain the confirmation documents and mails used for all the transferred funds, internally and externally. The instructions further indicate that the necessary measures should be taken to control the transfers that lack the related information about the two parties (name, address, account number, etc.) and call on financial institutions to exercise caution on these operations because of the potential money laundering or terrorist financing risk.

480. QFC: Article 16(1) (Transfer of Funds) of the QFC AML Regulations states that where a relevant person is a financial institution and makes a payment on behalf of a customer to another financial institution using an electronic payment and message system, it must include the customer’s name, address and either an account number or a unique reference number in the payment instruction. This applies regardless of whether the transfer is domestic or cross-border. Further guidance in the QFC Rulebook (paragraph 17) conveys that the information about the customer as the originator of the fund transfer should remain with the payment instruction through the payment chain. It also provides that relevant persons should monitor for and conduct enhanced scrutiny of suspicious activities including incoming fund transfers that do not contain complete originator information, including name, address, and account number or unique reference number. There is no de minimis threshold in place under the current QFC framework. The QFCRA officials confirmed that all the necessary information is requested and obtained for all wire transfers regardless of the amount.

481. Inclusion of Originator Information in Cross-Border and Domestic Wire Transfers (c.VII.2 and c.VII.3) and Maintenance of Originator Information (c.VII.4 and VII.4.1). Domestic sector: The current regulatory framework for wire transfers is limited to obtaining basic information on the originator and beneficiary (ies). There is no distinction between domestic and international transfers, nor is there an established threshold for the application of the provisions in the Recommendation. In addition, there is no requirement for beneficiary financial institutions to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information. Also, under the current obligation, financial institutions are not required to ensure that the information obtained from the originator remains with the transfer or related message through the payment chain.

482. Financial institutions visited indicated that all international wire transfers are executed following documentation procedures established by SWIFT and if transfers are received without adequate or proper information, these are returned to the sending institution. SWIFT documentation procedures require all wire transfers to contain the following key information: SWIFT transaction number, transaction date, transaction amount, name, address, beneficiary (ies), details of the payment, intermediary institution, if applicable, receiving institution, and other details or payment instructions.

483. QFC: As indicated above, Article 16(1) (Transfer of Funds) of the QFC AML Regulations states that where a relevant person is a financial institution and makes a payment on behalf of a customer to another financial institution using an electronic payment and message system, it must include the customer’s name, address and either an account number or a unique reference number in the payment instruction. This applies regardless of whether the transfer is domestic or cross-border. Further guidance in the QFC Rulebook 3.17 paragraph 1 conveys that the information about the customer as the originator of the fund transfer should remain with the payment instruction through the payment chain. It also provides that relevant persons should monitor and conduct enhanced scrutiny of suspicious activities including incoming fund transfers that do not contain complete originator information, such as the name, address, and account number or unique reference number.

484. Risk-Based Procedures for Transfers Not-Accompanied by Originator Information (c.VII.5). Domestic sector: There are no measures in place that would require the financial institutions to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information.

485. QFC: Further guidance in the QFC Rulebook 3.17 paragraph 2 conveys that relevant persons should monitor for and conduct enhanced scrutiny of suspicious activities including incoming funds transfers that do not contain complete originator information including name, address and account number or unique reference number in accordance with Appendix 2. Appendix A.2.2 paragraph 8 of the QFC Rulebook provides that with regard to enhanced scrutiny to funds transfers, which do not contain complete originator information including name, address and account number or unique reference number, a relevant person should examine the transaction in more detail in order to determine whether certain aspects related to the transaction might make it suspicious and thus warrant eventual reporting to the FIU and the Regulatory Authority.

486. Monitoring of Implementation of SR VII (c.VII.6). Domestic sector: There are no measures in place that would require financial institutions to effectively monitor the level of compliance with rules and regulations addressing the requirements of this special recommendation.

487. QFC: As of the mission date, two financial institutions were operating within the QFC. The QFCRA officials indicated that as part of the supervisory cycle, the QFCRA will conduct on-site visits to determine the level of compliance with the AML Law, AML Regulations and the AML Rulebook. For the few firms operating, the QFCRA has been monitoring their progress and activities and conducting risk assessments to ensure the firms are conducting their activities in line with the license approved by the QFCRA.

488. Sanctions (applying c. 17.1–17.4, in R. 17, c.VII.7). Domestic sector: Only the courts and the QCB may issue sanctions for noncompliance with, respectively, the prohibition of tipping-off which is set out in the AML Law and the other enforceable AML/CFT measures set out in the QCB AML/CFT instructions and the DSM decisions. This is not appropriate for several reasons: there are no sanctions for the non-banking financial sector other than that for tipping-off and, in the banking sector, the only sanction available to the QCB is one of a last resort (i.e., the revocation of the license under Article 58 of the QCB law. See write-up under Recommendation 17 for more details).

489. QFC: If firms do not comply with the requirements set out in the QFC AML Regulations and the rules contained in the QFC Rulebook, the QFCRA is empowered, under Part 9 of the FSR, to take a range of civil disciplinary and enforcement actions, against natural and legal persons and, where relevant, against the directors and senior management:

  • public censure (Article 58 of Part 9 of the FSR);

  • financial penalties (Article 59 of the FSR);

  • imposition of a number of prohibitions and restrictions including prohibiting an authorized firm or approved individual from entering into certain specified transactions, requiring an authorized firm or approved individual to carry on business or conduct itself or himself in a specified manner, or prohibiting a person from performing a specified function, any function falling within a specified description or any function (Article 62 of Part 9 of the FSR);

  • obtaining injunctions (Article 63 of Part 9 of the FSR);

  • withdrawal of the license of a relevant person.

3.6.2 Recommendations and Comments

490. Domestic sector: The Qatari authorities are recommended to:

  • Set the record retention/recordkeeping requirement in primary or secondary legislation for financial institutions under the DSM and MEC.

  • Provide additional guidance to financial institutions under the QCB and DSM with specific instructions as to when the record retention/keeping requirement starts, that is, following the termination of an account or business relationship or longer if requested by a competent authority.

  • Require banks (i) to ensure that all originator information that accompanies a wire transfer is transmitted with the transfer by each intermediary and beneficiary financial institution in the payment chain; (ii) When technical limitations prevent full originator information accompanying a cross-border wire transfer from being transmitted with a related domestic wire transfer, to keep a record for five years all the information received from the ordering financial information.

  • Require banks to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information. The lack of complete originator information may be considered a factor in assessing whether they are required to be reported to the financial intelligence unit or other competent authorities. In some cases, the beneficiary financial institution should consider restricting or even terminating its business relationship with financial institutions that fail to meet the SR.VII standard.

  • Establish a mechanism to monitor effectively the compliance of financial institutions with rules and regulations implementing SR.VII.

  • Ensure that sanctions (in line with R.17) also apply in relation to the obligations under SR.VII.

491. QFC: Under the QFC regulatory framework, there is no distinction between domestic and cross-border wire transfers; and there is no requirement for financial institutions to ensure that non-routine batched transactions are not batched where this would increase the risk of money laundering or terrorist financing. Although relevant persons within the QFC should monitor for and conduct enhanced scrutiny of suspicious activities including incoming fund transfers that do not contain complete originator information, including name, address, and account number or unique reference number, there are no explicit measures in place for beneficiary financial institutions to adopt effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information. The system is too new to be tested because the QFC was recently established, and most of the firms established within the QFC are subsidiaries of foreign companies where most of the transfers are conducted by/through their respective holding/parent companies.

492. The QFCRA should enhance existing measures to require relevant persons to:

  • ensure that non-routine batched transactions are not batched where this would increase the risk of money laundering or terrorist financing; and

  • establish explicit measures to ensure that beneficiary financial institutions adopt an effective risk-based procedures for identifying and handling wire transfers that are not accompanied by complete originator information.

3.6.3 Compliance with Recommendation 10 and Special Recommendation VII

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3.7 Monitoring of Transactions and Relationships (R.11 & 21)

3.7.1 Description and Analysis

493. Special Attention to Complex, Unusual Large Transactions (c.11.1), Examination of Complex & Unusual Transactions (c.11.2), and Record-Keeping of Findings of Examination (c.11.3). Domestic sector: Paragraph 12 of the QCB Instructions requires the banking and financial institutions to pay special attention to all unusual, complex or large deals and transactions as well as to all kinds of “extraordinary deals”, which have neither visible financial targets nor legal purpose. “Extraordinary banking operations” 15 are defined under the first article of the instructions as major transactions and the banking and financial transactions that do not match the customer’s income, the nature of his activity, the pattern of his previous transactions with the bank or that are suspiciously repeated by the customer and also the transactions that do not have clear financial purposes or legitimate purposes. Paragraph 12 further requires the financial institutions to examine the background and purpose of these deals to record the results of the examination and to notify the FIU.

494. Paragraph 1.3 of the instructions requires banks to check any banking transaction that exceeds 100,000 Qatari Riyals in the various banking activities, whether in assignments of right, currency exchange, opening letters of credit, account deposits, any kind of investment, or other bank activities that can be used in money laundering. Also requires checking any other banking and financial transactions suspected to be used in terrorist financing, regardless of the amount.

495. Pursuant to paragraph 13 of the instructions, special attention must also be given when examining the business relations and transactions with companies and financial institutions from countries that do not or insufficiently restrict these instructions, particularly if no visible financial objectives exist for these transactions. It is also a requirement to examine and report to senior management of the banking and financial institutions the background and purpose of these deals. Paragraph 19.3 provides that banks should implement procedures, through stages, to determine whether financial and banking transactions are suspicious or non suspicious. Such stages are as follows: first stage - ordinary financial and banking transactions daily undertaken for bank’s customers; second stage - extraordinary transactions undertaken for the first time or frequently; and, third stage–when extraordinary operations are turned into suspicious transactions of money laundering or terrorism financing. This is done through gathering information and documents and preliminary analysis of the case by the compliance officer and his team. Paragraph 19.6 provides that banks should keep records for extraordinary transactions made for the first time or frequently and for the suspicious transactions, regardless of the decision taken concerning such operations. Authorities indicated that the records should be maintained at least for 15 years, which is in line with the recordkeeping requirements.

496. Paragraph 8.1 and 8.2 of the QCB Instructions address the detection of extraordinary financial or banking transactions and follow-up actions but in a confusing way: the header for all three sub-sections of Paragraph 8 is drafted in mandatory terms and applies to both banks and other financial institutions under the QCB’s supervision, but the measures listed in 8.1 are drafted in a way that would suggest that they are optional and only seem to apply to banks. More specifically, paragraph 8.1 provides that if extraordinary transactions are detected, the banks “may” ask the customer to complete a document and provide supported justifications for these extraordinary transactions in order to determine whether they may be linked to money laundering operations or terrorist financing. 16 Banks should obtain this information from the customer in the ordinary course of business and without letting the customer know the purpose of their enquiries. Under 8.2, the banks must notify the FIU “in case the customer does not respond to the bank”, but since the banks may choose not to investigate further on an extraordinary transaction, the reporting requirement may be vain.

497. Pursuant to paragraph 8.3, the banking and financial institutions must freeze the funds or other assets belonging to terrorists and to persons who finance terrorism and terrorism organizations in accordance with court judgements or instructions issued by the governor. However, as noted under Special Recommendation III, no further measures have been taken, neither by the courts nor by the QCB Governor, to implement this requirement, and the private sector was not informed of the names of persons whose funds and assets should be frozen in accordance with UNSCR 1267 and 1373.

498. Chapter Two, paragraph 5/1 of the QCB Instructions sets out a requirement to pay special attention to unusual transactions, such as large amount transactions, or regular small amounts of deposits with acceptable or obvious financial reason, or transactions that happen with other parties in countries where no efficient controls on combating money laundering and terrorism financing are in place. The QCB Instructions fall short of requiring financial institutions to keep findings available for competent authorities and auditors.

499. The requirements or measures in place established by the DSM and the MEC to require their respective financial institutions to: (i) pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose; (ii) examine as far as possible the background and purpose of such transactions and to set forth their finding in writing; and (iii) keep such finding available for competent authorities and auditors for at least five years do not clearly and adequately address the recommendation as explained below.

500. There is an obligation under Decision No. 16/3 of the DSM for companies and brokerage firms to verify transactions that exceed QR. 100,000 or the equivalent in foreign currency to ensure that these transactions are not exploited in money laundering or financing of terrorism. Furthermore, it is not clear whether transactions exceeding the mentioned threshold are considered large, unusual large or complex and no guidance has been provided by the DSM as to how the process of verification should be conducted.

501. The MEC, under Circular 1 of 2007, Section 2.4 provides a vague and broad reference to giving special attention to the valuable and common insurance transactions and identifying their purposes. However, the Circular is not legally binding (and there is no further guidance that would clarify the text of the Circular).

502. QFC: Article 15 of the QFCRA AML Regulations provides that relevant persons must have in place policies, procedures, systems and controls that adequately take into account any money laundering risks and vulnerabilities of its products, services, and customers. It also provides that relevant persons must assess risks in relation to money laundering and perform enhanced due diligence investigation for higher-risk products, services, and customers having regard to guidance issued by the QFCRA. The QFCRA in its AML Rulebook Appendix A2.2 requires relevant persons to have effective “Know Your Customer” arrangements to provide the basis for recognizing unusual and suspicious transactions. The Rulebook further states that where there is a customer relationship, a suspicious transaction will often be one that is inconsistent with the customer’s known legitimate transactions, or with the normal business activities for that type of account or customer. Therefore, the key to recognizing “suspicions” is knowing enough about the customer and the customer’s normal expected activities to recognize when a transaction is abnormal.

503. The QFCRA Rulebook provides circumstances, by way of examples, that might give rise to suspicion or reasonable grounds for suspicion including:

  • a) Transactions which have no apparent purpose and which make no obvious economic sense;

  • b) Transactions requested by a customer without reasonable explanation, which are out of the ordinary range of services normally requested or are outside the experience of a relevant person in relation to a particular customer;

  • c) The size or pattern of transactions, without reasonable explanation, is out of line with any pattern that has previously emerged;

  • d) A customer refuses to provide the information requested without reasonable explanation;

  • e) A customer who has just entered into a customer relationship used the relationship for a single transaction or for only a very short period of time;

  • f) An extensive use of offshore accounts, companies or structures in circumstances where the customer’s economic needs do not support such requirements;

  • g) Unnecessary routing of funds through third party accounts; and

    h) Unusual transactions without an apparently profitable motive.

504. Article 13 of the QFCRA AML Regulations establishes the internal and external reporting requirements addressing unusual and suspicious transactions. Particularly, Article 13.7 requires that when the money laundering reporting officer (MLRO) receives an internal report on an unusual or suspicious transaction he/she must investigate the circumstances in relation to which the report was made, including where necessary accessing any relevant “Know Your Client” information; determine whether in accordance with the AML Law No.(28) of 2002 a corresponding external suspicious transaction report must be made to the FIU; if required, to make such report to the FIU. Article 13.8 requires the MLRO to document the steps taken to investigate the circumstance in relation to which an internal suspicious transaction report is made and where no external suspicious transaction report is made to the FIU, the reasons why no such report was made. All relevant details of any internal and external suspicious transaction report must be kept for at least six years from the date on which the report was made.

505. Although there are measures in place for relevant persons to pay attention to complex, unusual large transactions, or unusual patters of transactions with no apparent or visible economic or lawful purpose, there are no specific requirements to make available to the competent authorities and auditors such findings.

506. Special Attention to Countries Not Sufficiently Applying FATF Recommendations (c.21.1 & 21.1.1.) and Examinations of Transactions with no Apparent Economic or Visible Lawful Purpose from Countries Not Sufficiently Applying FATF Recommendations (c.21.2). Domestic sector: Article 13 of the QCB Instructions requires the banking and financial institutions to pay special attention when examining the business relations and transactions with companies and financial institutions from countries that apply no obligation to comply with the Recommendations particularly if no clear financial objectives are shown for these transactions. It also requires that the reasons and purposes of these deals be examined and reported to the senior management of the banking and financial institution. However, the current framework does not require banking and financial institutions to also consider countries that insufficiently apply the FATF Recommendations.

507. As far as advising about concerns with respect to weaknesses in the AML/CFT systems of other countries, Article 19.11 of the QCB Instructions provides that banking and financial institutions should use all possible means for supervising extraordinary transactions and deals, including supervisory reports, list of non-cooperative countries, list of persons and entities pursued internationally, suspect’s investigation programs, etc. Article 19.12 further provides that banking and financial institutions should monitor the international recent developments of the various types of money laundering and terrorism financing and measures of combating, particularly related recommendations and instructions issued by the FATF, the IMF, the IBRD, Basel committee, and other international organizations.

508. The DSM and MEC do not have measures in place to ensure that financial institutions are advised of concerns about weaknesses in the AML/CFT systems of other countries. Although financial institutions are required to examine the background and purpose of the business relations and transactions, there is no explicit requirement to make findings available to competent authorities and auditors. DSM officials indicated that no measures or requirements have been established for brokerage houses because currently all orders/transactions, taking place in the domestic market, with Qatari citizens have to be pre-funded, that is, the funds have to be deposited in a bank for the benefit of the brokerage house. For investors placing orders in the international markets, these orders and payments have to go through another bank, in this case HSBC Global Custodian services. For this reason DSM officials and brokerage houses rely on banks to pay attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF standard.

509. Under Section 6 (Supervisory Measures and Training) of Circular No. 1 of 2007 issued by the MEC, insurance companies are “required” to set policies and plans to combat money laundering and the financing of terrorism including giving particular attention to the insurance transactions concluded with persons or companies in countries that do not apply or insufficiently apply the Recommendations. In such cases, the purpose of those operations should be examined and all necessary measures should be taken to verify the presence of the insurance premises and determine the insurance value. Moreover, the branches of the companies should observe such instructions. The domestic and foreign branches of companies should equally observe those instructions. As mentioned on previous occasions, however, the Circular is not legally binding.

510. There are no legal or regulatory requirements for financial institutions under the supervision of the DSM to give special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations.

511. QFC: Under Article 14 of the QFCRA AML Regulations, a relevant person is required to have arrangements in place to ensure that it obtains and makes proper use of any relevant findings issued by the government (or any governmental departments) of the State of Qatar; the QCB or the National Anti Money Laundering Committee or the FIU; FATF; the QFC Authority; the QFC Regulatory Authority; or the Gulf Co-operation Council. The findings of a body, as previously listed, are “relevant findings” if they include a finding or other conclusion that arrangements for restraining money laundering in a particular country or jurisdiction are materially deficient in comparison with one or more of the relevant internationally accepted standards, including any recommendations published by the FATF, required of or recommended to countries and jurisdictions; or contain a finding or other conclusion concerning named persons, groups, organizations, or entities or any other body where a suspicion of money laundering or terrorist financing exists.

512. Rule 3.15.1 of the QFCRA Rulebook requires relevant persons to pay special attention to any transactions or business relationships with persons, including beneficial owners, located in such countries or jurisdictions. Rule 3.15.2 further states that a relevant person considering transactions or business relationships with persons located in countries or jurisdictions that have been identified as deficient, or against which any authority in the state has outstanding advisory notices, must be aware of the background against which the assessments, or the specific recommendations, have been made. These circumstances should be taken into account with respect to introduced business from such jurisdictions, and when receiving payments from existing customers or with respect to inter-bank transactions from correspondent banking Clients.

513. Further guidance in the QFCRA AML Rulebook provides, under 3.15.3, that transactions with counterparties located in countries or jurisdictions which have been relieved from special scrutiny, for example, taken off the FATF list of NCCTs, may nevertheless require attention which is higher than normal. In order to assist relevant persons, the Regulatory Authority may, from time to time, publish Qatar, FATF or other findings. Given the recent establishment of the QFC, the Regulatory Authority has not yet published any guidance on countries or jurisdictions relieved from special scrutiny. However, the Regulatory Authority expects relevant persons to take their own steps in acquiring relevant information from various available sources.

514. The QFCRA guidance specifically mentions that relevant persons should be proactive in obtaining and appropriately using available national and international information, for example suspect lists or databases from credible public or private sources with regard to money laundering and terrorist financing (QFC Rulebook, paragraph 3.15.3.3). The QFCRA has arrangements with the National Anti Terrorism Committee. In accordance with these arrangements, the QFCRA receives the lists published by the United Nations Security Council pursuant to resolutions and distributes these lists to relevant QFC firms. It also indicates that the QFCRA encourages relevant persons to perform checks against their customer databases and records for any names appearing on such lists and databases as well as to monitor transactions accordingly.

515. The QFCRA encourages under QFC Rulebook, paragraph 3.15.3.4, relevant persons to assess which countries carry the highest risks and conduct an analysis of transactions from countries or jurisdictions known to be a source of terrorist financing.

516. In addition, the QFCRA may require relevant persons to take any special measures it may prescribe with respect to certain types of transactions or accounts where the Regulatory Authority has reasons to believe that any of the above may pose a money laundering risk to the QFC.

517. Although measures are in place to require financial institutions within the QFC to give special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations, there are no measures to explicitly require financial institutions to examine, as far as possible, the background and purpose of transactions with no apparent economic or visible lawful purpose, and to maintain written findings available to the competent authorities.

518. Ability to Apply Counter Measures with Regard to Countries Not Sufficiently Applying FATF Recommendations (c.21.3). There is no indication that the existing AML/CFT framework provide the Qatari supervision and control authorities, i.e., QCB, DSM, MEC, and QFCRA with the authority to apply counter-measures when a country continues not to apply or insufficiently applies the FATF Recommendations.

3.7.2 Recommendations and Comments

519. There are major shortcomings in the existing AML/CFT regulatory framework with respect to requiring financial institutions to pay special attention to all complex, unusual large transactions, and all unusual patterns of transactions which have no apparent economic or visible lawful purpose does not provide for appropriate measures.

520. Domestic sector:

  • The QCB is recommended to establish a clear requirement for banking and financial institutions to make the findings on the examination of complex, unusual large transactions or unusual patterns of transactions also available to auditors.

  • The DSM and the MEC are recommended to establish formal requirements for financial institutions to: (i) pay special attention to all complex, unusual large transactions, or unusual patterns of transactions, that have no apparent or visible economic or lawful purpose; (ii) examine as far as possible the background and purpose of such transactions and to set forth their finding in writing; and (iii) keep such finding available for competent authorities and auditors for at least five years.

  • The DSM is also recommended to provide guidance indicating whether transactions exceeding QR. 100,000 or the equivalent in foreign currency should be considered large, unusual large or complex.

521. QFC: The QFC authorities are recommended to establish a specific requirement for relevant persons to make the findings on the examination of complex, unusual large transactions or unusual patters of transactions available to the competent authorities and auditors.

522. With respect to Recommendation 21, the DSM and the MEC are recommended to establish measures to:

  • ensure that financial institutions are advised of concerns about weaknesses in the AML/CFT systems of other countries; and

  • require them to make findings available to competent authorities and auditors.

523. The DSM should establish a regulatory obligation on financial institutions to give special attention to business relationships and transactions with persons from or in countries which do not or insufficiently apply the FATF Recommendations.

524. The QCB, the DSM, the MEC and the QFCRA should have the authority to apply counter-measures to address instances where a country continues not to apply or insufficiently applies the FATF Recommendations.

3.7.3 Compliance with Recommendations 11 and 21

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3.8 Suspicious transaction reports and other reporting (R.13–14, 19, 25 & SR.IV)

3.8.1 Description and Analysis

525. Requirement to Make STRs on ML and TF to FIU (c.13.1, 13.2, 13.3 & IV.1). Article 6 of the AML Law establishes the obligation for financial institutions to “provide the competent entity with a detailed report on transactions [they carry] out whose nature or purpose is suspicious.[If] the competent entity finds any reason to believe that the transactions (…) constitute a money laundering crime, it shall refer papers and documents related to the transaction to the coordinator [of the NAMLC]”. The law does not address reporting of suspicions of terrorist financing. The deputy Governor of the QCB, acting in his capacity as chairman of the NAMLC established the Qatari FIU as a central independent unit located in the QCB, through Administrative Order No. 1/2004 of August 31, 2004 (See also write-up under Recommendation 26).

526. Domestic sector: In addition to Article 6 of the AML Law, the QCB specifically requires the financial institutions under its supervision to notify the FIU of any suspicious transaction, including attempted, which it defined as “extraordinary banking and financial transactions which the bank suspects or has justified reason to suspect that their money is linked or related to money laundering, financing of terrorism, terrorist actions, or for terrorism organizations” (Article 1 and 10 of the instructions).

527. The instructions define “suspicious transactions” as extraordinary banking and financial transactions, including attempted, which the bank suspects or has justified reason to suspect that their money is linked or related to money laundering, financing of terrorism, terrorist actions, or for terrorism organizations. “Extraordinary banking operations” are defined as major transactions and the banking and financial transactions that do not match the customer’s income, the nature of his activity, the patterns of his previous transactions within the bank or that are suspiciously repeated by the customer and also the transactions that do not have clear financial purposes or legitimate purposes.

528. Sections 10 and 11 of the Instructions provide that if the bank discovers that any suspicious operation has taken place, the compliance office should notify the FIU immediately to take the necessary procedures using a specific form. In any case of failure to report, alert or assist the persons related to money laundering, or terrorism financing transactions, the employee may be subjected to legal and financial consequences.

529. The DSM also addressed the reporting of suspicious transactions in its Decision No. (16/3). Article 9 of the Decision provides that on discovery of any abnormal financial transaction, the company or the brokerage firm may, for the purpose of proving the suspicion that these transactions may relate to money laundering or financing of terrorism, require the customer to complete the documents and submit the justifications for the abnormal transactions provided that these procedures shall be applied within the context of the orderliness and usual procedures without drawing the customer’s attention to the fact that such procedures relate to the combating of money laundering and financing of terrorism. However, Article 9 would be far too vague to be useful in practice.

530. The MEC Circular also calls for some form of reporting, but, it does not rest on a sound legal basis and the measures that it sets out are not enforceable. In short, it provides that the FIU should be notified on an urgent basis of any suspect transaction and the suspicious transaction forms should be delivered to the Unit by hand, or sent by fax or e-mail or any appropriate means and should be deemed confidential. The MEC circular would not be effective in practice because it does not provide sufficient coverage of the reporting system.

531. QFC: Article 13(1) of the QFC AML Regulations requires a relevant person to have appropriate arrangements in place to ensure that whenever any employee, acting in the ordinary course of his employment, either knows or suspects; or has reasonable grounds for knowing or suspecting that a person is engaged in money laundering or conduct relating to the financing of terrorism, that employee must promptly make a internal STR to the relevant person’s Money Laundering Reporting Officer (MLRO).

532. It is interesting to note that the QFC provides, in its Regulations, a definition of money laundering which is more extensive than that provided in the AML Law. The fact that it is set in secondary legislation does not enable it to take precedent on the money laundering offence as set out in the primary legislation, but it nevertheless sets more stringent requirements on the QFC firms as far as the reporting requirements are concerned.

533. Article 19 of the QFC AML Regulations provides the following definition for Money laundering:

  • “The following conduct when committed intentionally:

    • a) any act which constitutes an offence under Article 2 of Law (28) of 2002 on Anti Money Laundering (as amended by virtue of Decree-Law No. (21) of 2003 - O.G. 11/2003);

    • b) any act which involves Criminal Property and which act constitutes an offense under the Articles of Law No. (11) of 2004 (Penal Code);

    • c) any act which finances the commission of an offence under the Articles of Law No. (3) of 2004 (Combating Terrorism);

    • d) the conversion or transfer of Property, knowing that such property is derived from Criminal Conduct or from an act of participation in such conduct, for the purpose of concealing or disguising the illicit origin of the Property or of assisting any person who is involved in the commission of such conduct to evade the legal consequences of his action;

    • e) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of Property, knowing that such Property is derived from Criminal Conduct or from an act of participation in such conduct;

    • f) the acquisition, possession or use of Property, knowing, at the time of receipt, that such Property was derived from Criminal Conduct or from an act of participation in such conduct;

    • g) the provision or collection of lawful Property, by any means, with the intention that it should be used or in the knowledge that it is to be used, in full or in part, for terrorism;

    • h) any act which constitutes participation in, association with or conspiracy to commit, attempts or incitement to commit an offence specified in paragraph (a), (b) or (c) or an act specified in paragraph (d), (e), (f) or (g); or

    • i) any act which constitutes aiding, abetting, facilitating, counselling or procuring the commission of an offence specified in paragraph (a), (b) or (c) or an act specified in paragraph (d), (e), (f) or (g).”

  • Criminal Property is defined as:

    • (1) “Property that constitutes a person’s benefit from criminal conduct or represents such a benefit (in whole or part and whether directly or indirectly) if the alleged offender knows or suspects that it constitutes or represents such a benefit; and

    • (2) for these purposes it is immaterial:

      • (a) who carried out the conduct;

      • (b) who benefited from it; and

      • (c) when the conduct occurred.”

534. Article 13(2) of the QFC AML Regulations requires a relevant person to have policies and procedures in place to ensure that disciplinary action can be taken against any employee who fails to make such a report. Article 13(7) of the QFC AML Regulations provides that when a relevant person’s MLRO receives an internal STR, he must without delay, investigate the circumstances in relation to which the report was made, including where necessary accessing any relevant “Know Your Client” information; determine whether in accordance with the AML Law, a corresponding external STR must be made to the FIU; if required, make such an external report to the FIU; and where an external report is made to the FIU, notify the Regulatory Authority that such a report has been made and include general details of the report.

535. Although there are explicit requirements for reporting suspicious transactions, the DSM and the MEC have not yet established the obligation or requirement for financial institutions to also report attempted transactions to the FIU.

536. STRs Related to Terrorism and its Financing (c.IV.1). As mentioned above, there is no obligation imposed by primary or secondary legislation to report suspicious transactions related or linked to terrorist financing.

537. Domestic sector: QCB nevertheless addressed terrorist financing in its Instructions, notably in the reporting requirements set out under Section 5, 10 and 11 (described above) and in the definition of “suspicious transactions” (also mentioned above). “Terrorism financing” is defined as using any funds or other assets in financing terrorism activities or terrorist organizations.

538. Article 9 of the DSM Decision No. (16/3) of 2005 described above also refers to the financing of terrorism. The comments made under criteria 13.1 above also apply under criteria IV.1.

539. QFC: The reporting requirement set out in Article 13 (1) of the QFC AML Regulations and described above also applies to suspicions of terrorist financing (which remains undefined).

540. STRs Reported Regardless of whether they involve tax matters (c.13.4 & IV.2). There is no indication, neither in the domestic sector nor in the QFC, that would indicate that the reporting requirements are limited when the transactions are also thought to involve tax matters.

541. Additional element (c.13.5). Domestic sector: QCB instructions, DSM decision, MEC circular, and QFC regulations require financial institutions to notify the FIU of any suspicious transaction, including attempted which could be linked or related to money laundering. However, the circular does not rest on a sound legal basis and measures set out are not enforceable. QFC:

542. Protection for Making STRs (c.14.1). Domestic sector: Article 5 of the AML Law No. (28) of 2002 provides that in the enforcement of this Law, provisions related to the secrecy of banking transactions shall not apply to the chairman, members of the board of directors and employees of the financial institution, unless where it is proved that the disclosure was meant to harm the owner of the transaction.

543. Under Section 5/4 of the QCB Instructions banking and financial institutions or a reporting employee shall bear no responsibility after reporting on suspicious transactions, whether the suspicions were confirmed or not, as long as it was a bona fide reporting.

544. Article 9 of the DSM Decision No. (16/3) 2005 provides that the entities subject to this reporting provision of documentation and information related to a suspicious transaction should not be deemed to be contradictory to the confidentiality laws and should not result in any responsibility on the notifying entity or its employees.

545. MEC’s Circular No.1 of 2007, Second Section, paragraph 4 provides, in non-binding terms, that reporting of suspicious transactions is not regarded as a breach of the secrecy of the transactions and it should not entail any kind of liability on the company or its employees.

546. QFC: Article 13(11) of the QFCRA AML Regulations establishes that the MLRO or other employee of a relevant person is not liable to proceedings; subject to liability; nor in breach of any duty merely by reason of the making of an external STR to the FIU if such STR is made in good faith. Authorized firms are also required to ensure that their Employees are aware of and sensitive to these issues when considering the “Know Your Customer” process.

547. Prohibition Against Tipping-Off (c.14.2). Article 4 of the AML Law No. 28 of 2002 establishes the obligation for employees of the financial institution not to inform their customers about the actions taken against them related to combating money laundering. Such employees should not disclose any information with the intention of influencing money laundering investigations. The violation of the prohibition is sanctioned by imprisonment and a fine (see write-up under Rec. 17).

548. Domestic sector: Under Section 6 of the Instructions, the QCB establishes the obligation for all banking and financial institutions, their managers, employees, and staff not to warn their customers when any of their activities raises a suspicion.

549. Article 9 of the DSM Decision No. (16/3) 2005 provides that the entities that are subject to the provisions of this Decision shall not warn their customers on their suspected transactions but, should subject these transactions to more verification and precautionary measures.

550. Paragraph 5 of MEC’s Circular No. 1 of 2007 provides that the company and its employees should not warn the customer about any suspicion on the transactions but, as mentioned above, this decision does not rely on a sound legal basis and is, therefore, neither binding nor enforceable.

551. QFC: Section 3.14 of the QFCRA AML Rulebook provides that where a relevant person reasonably believes that performing the “Know Your Customer” process will tip-off a customer or potential customer, it may choose not to pursue that process and must instead file an STR. Further guidance in the QFCRA AML Rulebook provides that relevant persons are reminded that in accordance with Article 4 of the AML Law, employees at a financial establishment are prohibited from informing their customers of the measures taken against them to combat money laundering. They are also prohibited from disclosing any information with the intention of harming a relevant criminal investigation.

552. Additional element (c.14.3): Measures in place do not address the requirements for ensuring that the names and personal details of staff of financial institutions that make STRs are kept confidential by the FIU.

553. Consideration of Reporting of Currency Transactions Above a Threshold (c.19.1). The Qatari authorities, mainly the FIU, sent a letter (study) to NAMLC, through the Vice Governor of the QCB addressing the issue of considering the establishment of a currency transaction reporting system. The letter (study) presents three issues: 1) the fact that Qatar has a cash-based society which in the views of the FIU establishing such system will be difficult; 2) the additional burden that such system would put on the FIU and its limited resources; and 3) the current measures imposed by the QCB on financial institutions to limit cash transactions. The spirit of the letter (study) considers in a limited way the disadvantages of the cash transaction reporting system and overlooks the advantages. In light of this, the assessors encourage the authorities to perform a more in-depth study as to whether it would be feasible and useful to establish such system.

554. Domestic sector: Instead, the QCB has established internal cash recording requirements under Section 1/3 of the Instructions for banking and financial institutions. The requirements imposed the obligation on banking and financial instructions to only check and record any banking transaction that exceeds QR. 100,000 in the various activities, whether in assignments of right, currency exchange, opening letters of credit, account deposits, any kind of investment, or other bank activities that could be used in money laundering. All institutions are also required to check any other banking and financial transactions, suspected or linked to terrorism financing regardless of the amount. However, the current requirement does not extend to reporting the transaction (s) to the QCB.

555. Meetings with officials from the QCB Supervision Department responsible for banking, exchange houses, investment companies and finance companies revealed that although the internal cash recording requirement imposed by the QCB Instructions is set at QR. 100,000 the internal recording requirement threshold for exchange houses was recently lowered, by way of a Circular issued by the QCB, to currency transactions that exceeds QR. 35,000. A copy of the Circular was requested but the authorities did not provide. Therefore, the mission was not able to determine the reason (s) for reducing the threshold for exchange houses.

556. Further guidelines recommend all banks and financial institutions under the regulation and supervision of the QCB to establish a controlled internal reporting system capable of generating reports on current accounts movements and balances; assignment of right reports; movements and balances reports of the correspondents’ accounts; large transaction reports; and reports of transactions in small amounts. The large transactions report should contain all transactions that exceed QR.100,000. Banks and financial institutions are also recommended to pay special attention to these large transactions. The reports should assist the banks and financial institutions in determining the accounts related to such transactions and the source of the large amounts.

557. The cash recording requirements do not impose an obligation on banking and financial institutions to report these transactions to the QCB but only to maintain the information. The financial institutions and QCB supervision department officials indicated that compliance with the cash recording requirements is verified through periodic on-site inspections.

558. A similar cash reporting requirement is in place under the DSM Decision No. (16/3) of 2005. Article 9 establishes that companies and brokerage firms that receive cash transactions in an amount that does not exceed QR.30,000 or the equivalent in foreign currency need to notify the Market on a prescribed form issued by the DSM. The companies and brokerage firms are also required to verify the identity of the customer by reference to an official document which in most cases is the ID card. However, a separate cash recording requirement in the Decision requires companies and brokerage firms to verify and record in their books and records transactions above QR.100,000. Neither the Market Committee authorities nor the brokerage firms were not able to explain the purpose for having two different threshold requirements.

559. There is no cash recording or reporting requirement in place for insurance companies.

560. Although banks and financial institutions seem to be complying with the recording requirement and in some instances reporting cash transactions to their respective supervision and control authorities, this information is not shared with the FIU to complement the FIU’s financial intelligence analysis, trends, and typologies exercises. In the case of securities firms, DSM officials indicated that the current practice is for institutions to forward these reports directly to the FIU.

561. QFC: QFCRA officials indicated that until a national central agency is created and the obligation to report is established by law or regulation, the firms under its supervision and regulation will not be required to report cash transactions.

562. Additional elements (c.19.2 and c.19.3): The reporting of currency transactions above a threshold is currently under consideration by the Qatari authorities.

563. Guidelines for Financial Institutions with respect to STR and other reporting (c. 25.1). Domestic sector: In Chapter 2 of its Instructions, the QCB provides a list of guidelines designed to assist the banking and financial institutions (exchange houses, investment companies and finance companies) in detecting and monitoring any suspicious behavior of their customers. The QCB also requires that all departments of the banking and financial institutions use the guidelines and any future amendments to enhance their employees’ the knowledge of AML/CFT. The guidelines give an overview of the money laundering stages. They also provide a list of transactions that may be deemed suspicious and that are classified per category ranging from “money laundering using cash”; “money laundering using banking accounts”; “money laundering using financial institutions related to investment activities”; and “money laundering through international activities”.

564. Instruction 19/12 of the QCB requires banking and financial institutions to monitor international recent developments on money laundering and terrorism financing taking place and measures for combating them, particularly those related to recommendations and instructions issued by the FATF, the IMF, the International Bank for Reconstruction and Development (IBRD), the Basel Committee, and other international organizations.

565. No guidelines have been established by the DSM or the MEC for securities and insurance firms, respectively.

566. QFC: The QFCRA has supplemented the AML Regulations with the AML Rulebook. The AML Rulebook is designed to extend and clarify the provisions of the AML Regulations and to provide, where relevant, detailed regulatory guidance to relevant persons to assist them in complying with the AML Law, the AML Regulations, the AML Rulebook and the specific Anti-Money Laundering requirements of the QFCRA.

567. QFCRA Rule A.2.2 provides relevant persons with circumstances that might give rise to suspicion or reasonable grounds, including:

  • Transactions which have no apparent purpose and which make no obvious economic sense;

  • Transactions requested by a customer without reasonable explanation, which are out of the ordinary range of services normally requested or are outside the experience of a relevant person in relation to a particular customer;

  • The size and pattern of transactions, without reasonable explanation, is out of line with any pattern that has previously emerged;

  • A customer refuses to provide the information requested without reasonable explanation;

  • A customer who has just entered into a customer relationship used the relationship for a single transaction or for only a very short period of time;

  • An extensive use of offshore accounts, companies or structures in circumstances where the customer’s economic needs do not support such requirements;

  • Unnecessary routing of funds through third party accounts; or

  • Unusual transactions without an apparent profitable motive.

568. Furthermore, Article 14 of the QFCRA AML Regulations requires relevant persons to have arrangements in place to ensure that they obtain and make proper use of any relevant findings issued by the government of the state or any government departments in the state; the Central Bank of Qatar or the NAMLC or the FIU; the FATF; the QFC Authority; QFC Regulatory Authority; or the Gulf-Cooperation Council.

569. Although the QFCRA provides guidelines to its relevant persons, the guidelines on money laundering and terrorist financing techniques and trends appear to be limited to those listed above.

570. QFCRA officials indicated that since the QFC became operational no suspicious transaction report has been reported to the FIU.

571. Feedback to Financial Institutions with respect to STR and other reporting (c.25.2). With respect to feedback received from the competent authorities (i.e., QCB, DSM, MEC, and QFCRA), private sector stakeholders indicated that the only communication between the FIU and their respective institutions takes place when a STR is submitted to the FIU and receipt of the STR is acknowledged. Feedback also takes place during periodic meetings hosted by the FIU.

3.8.2 Recommendations and Comments

572. The current requirement set out in the AML Law to report transactions that may be linked to money laundering activities is too vague with respect to the DSM and MEC to be effective. The fact that the money laundering offence covers only a few predicate offences further limits the scope of the reporting requirement. The fact that there is no reporting requirement set out in primary or secondary legislation with respect to terrorist financing is a major shortcoming in the Qatari framework.

573. Authorities are recommended to:

  • Establish, in primary or secondary legislation, the requirement for all financial institutions to report to the FIU transactions, including attempted transactions, when a financial institution suspects or has reasonable grounds to suspect that the funds are the proceeds of a criminal activity, or are related or linked to terrorist financing, terrorist acts or terrorist organisations or those who finance terrorism.

  • Ensure the protection of financial institutions under the supervision of the DSM and MEC, and their staff from liability for filing STR and prohibit “tipping off” in the insurance sector.

  • Consider re-assessing the study conducted with respect to Rec. 19 to provide for a more comprehensive analysis and details as to how the decision to establish or not the cash reporting system was achieved.

  • Ensure that competent authorities, and particularly the FIU, provide guidance to assist financial institutions on AML/CFT issues covered under the FATF recommendations, including, at a minimum. a description of ML and FT techniques and methods; and any additional measures that these institutions could take to ensure that their AML/CFT procedures are effective.

  • Establish communication standards and a mechanism for providing feedback to reporting institutions including general and specific or case-by-case feedback.

  • Consider reviewing the guidance provided by the FATF Best Practice Guidelines on Providing Feedback to Reporting Financial Institutions and Other Persons.

3.8.3 Compliance with Recommendations 13, 14, 19 and 25 (criteria 25.2), and Special Recommendation IV

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3.9 Internal controls, compliance, audit and foreign branches (R.15 & 22)

574. Establish and Maintain Internal Controls and Independent Audit to Prevent ML and TF (c.15.1, 15.1.1, 15.1.2 and 15.2) and Ongoing Employee Training on AML/CFT Matters (c.15.3). Domestic sector: Paragraph 5 of the QCB AML/CFT Instructions requires banking and financial institutions to adopt programs to combat money laundering and financing of terrorism including developing and applying internal control policies and systems; appointing qualified employees at the senior management levels; and arranging continuous training programs for the employees and the staff to inform them of the latest issues regarding money laundering and the financing of terrorism and other suspicious operations that will improve their ability to recognize such operations and their types and knowing how to confront them.

575. In addition, Paragraph 19 of the QCB Instructions requires that in completion of the policies and systems for combating money laundering and terrorism financing which should also include measures and supervisory procedures designed to protect against economic crimes and suspicious operations, all banks should comply with the following:

  • Setting general strategy for combating money laundering and terrorism financing, based on the set of policies which must be applied in that field, provided that it is issued in both languages, Arabic and English.

  • Setting a manual for the executive procedures that all the bank’s departments and branches must comply with.

  • Implementing stage procedures to manage financial and banking operations and classifying them into suspicious and non-suspicious ones, this includes the following stages: (i) first stage: includes ordinary financial and banking operations implemented daily for bank’s customers; (ii) second stage: includes extraordinary operations which happen either for the first time or repeatedly (iii) third stage: the stage in which the extraordinary operations are turned into suspicious operations of money laundering or terrorism financing. This is achieved by gathering information and documents and making preliminary analysis for the case by compliance officer and his team.

  • Keeping an integral database of customer accounts and their banking dealings through using computer and through the original documents and papers.

  • Hiring a compliance officer to combat money laundering and financing terrorism together with assigning a specialized team to help the officer in this task.

  • Developing training programs in the field of combating money laundering and terrorism financing, together with extending the scope of participation of bank’s personnel and officials.

  • Setting a program for upgrading customer identities, papers and documents.

  • Setting a quick and direct mechanism for enabling the compliance officer to notify/report suspicious operations.

  • Using all possible means for supervising extraordinary operations and deals (supervisory reports, lists of non cooperative countries, lists of persons and bodies pursued internationally, program for identifying suspects).

  • Keeping records of other suspicious operations (such as forgery, falsification, fraud and others).

  • Implementing measures for combating money laundering and terrorism financing during and after implementing the banking transactions in a manner consistent with the customers’ risk profile.

576. In addition, Chapter 7, Section 10 of the QCB Instructions provides additional guidance to financial institutions when designating the compliance officer position, as well as, the board committee that is responsible for providing oversight of this function. Section 10.2 of this Chapter grants the compliance officer with the necessary independence and access right to all areas of the institution and to the information they may hold. The compliance officer is also required to comply with the laws and instructions, file reports on deficiencies and corrective actions, serve as the point of contact for matters dealing with compliance, and liaise with the QCB supervision department regarding inquiries on compliance issues and supervision requirements.

577. The DSM Decision 16/3 for 2005 also addresses the need for AML/CFT programs. Article 9 calls on all entities to have programs for combating money laundering and the financing of terrorism that include development and application of internal supervisory systems; the appointment of qualified personnel at the administration level; and organization of continuous training programs for updating the staff of the new developments in the field of money laundering and the financing of terrorism including suspect transactions with a view to enhancing their capacity to detect, report, and notify these transactions. The same Article also requires that companies and brokerage firms undertake to appoint liaison officers for the notification of the offences of money laundering and financing of terrorism to the FIU and sending copies of the STR to the liaison officers of the Market. Such liaison officers shall have experience of the national legislation and other rules and directives concerning money laundering.

578. Circular No. (1) of 2007 issued by the MEC is not legally binding but nevertheless provides useful elements as follows: Section 3 calls on all insurance companies operating in the State of Qatar to set policies and plans to combat money laundering and the financing of terrorism, including establishment of internal supervisory measures and controls; organization of training sessions for the employees; appointment of a follow-up officer charged mainly with the verification of the implementation of those policies and plans within the company and its different departments and branches; reporting suspicious transactions and in the event where any suspicious transaction is identified, the follow-up officer at the company should notify the FIU affiliated to the Qatar National Anti Money Laundering Committee at the QCB immediately to take necessary measures.

579. The QCB has issued enforceable measures, through its instructions, to banking and financial institutions under its supervision. The QCB instructions set the general requirements for banking and financial institutions to establish and maintain internal procedures, policies, and controls. However, there are some marked inconsistencies with respect to the content and scope of details that banking and financial institutions must comply including adequate procedures, policies and controls for customer due diligence, record retention, detection of unusual and suspicious transactions and the reporting obligation.

580. Banking and financial institutions under the supervision of the QCB are also required to have an audit function in place and the internal auditor is required to review the activities of the compliance officer. In many instances, the internal audit function has been outsourced to local accounting/auditing firms. There are procedures in place for screening and approving individuals, but these procedures are applied by the QCB, when approving senior management candidates within the institution, but these do not extend to all other employees. In addition, there is no clear requirement for financial institutions to have similar screening procedures for hiring employees. Under Chapter 2, Second General Guidelines section of the QCB Instructions, provides that as part of his job, the banking and financial institutions’ external auditor has to review, audit and implement AML/CFT instructions and to ensure the appropriateness of bank’s policies and efficiency of the internal control system. The results of his auditing must be stated in the management letter presented to the management and to QCB. Within his regular job as an auditor, he has to notify the FIU of any suspicious transactions related to money laundering or financing of terrorism. The auditor should be familiar with the management procedures and whether they are appropriate or not. In such case he has to contact the competent authority immediately. However, the mission was informed that the work currently performed by these auditors/auditing firms does not include an assessment of the banking and financial institutions’ adequacy of internal control systems and policies with respect to AML/CFT. As such, the requirements do not fully address the obligation on banking and financial institutions to maintain an adequately resourced and independent audit function (there requirement for internal audit is lacking) to test compliance with the procedures, policies and controls; and to put in place screening procedures to ensure high standards when hiring employees.

581. The DSM Decision addresses many of the elements of the essential criteria; however, it falls short by not having requirements/measures in place for institutions to: 1) grant timely and unrestricted access, to the compliance officer and his/her staff, to customer identification data and other CDD information; and 2) maintain an adequately resourced and independent audit function to test compliance with the law, decisions, and other enforcement measures.

582. The MEC’s Circular No. 91) of 2007 does not seem to have the legal basis for requiring financial institutions to establish and maintain internal policies and controls to prevent ML and FT. Therefore, the measures listed in the MEC Circular cannot constitute “other enforceable means” for the purposes of this assessment. The only enforceable AML/CFT requirements are set out in the AML Law (as amended in 2003), the QCB 2006 AML/CFT Instructions, and the DMS 2005 Decision (16/3).

583. QFC: Article 6 of the QFCRA AML Regulations requires that a relevant person must: (1) establish and maintain effective anti money laundering policies, procedures, systems and controls to prevent opportunities for money laundering in relation to the relevant person and its activities; (2) set up and operate arrangements, including the appointment of an Money Laundering Reporting Officer (MLRO) in accordance with the responsibilities and duties of the MLRO which are designed to ensure that it is able to comply and does comply with the provisions of the regulations; (3) take reasonable steps to ensure that its employees comply with the relevant requirements of its anti money laundering policies, procedures, systems and controls; (4) review the effectiveness of its anti money laundering policies, procedures, systems and controls at least annually; and (5) ensure that its anti money laundering policies, procedures, systems and controls apply to any branch or subsidiary operating in another jurisdiction. If another jurisdiction’s laws or regulations prevent or inhibit a relevant person from complying with the AML Law or with the regulations, the relevant person must promptly inform the QFCRA in writing. However, as the QFC is still relatively new, the effectiveness of the general AML compliance requirements, including policies and programs are yet to be tested.

584. Article 9 of the QFCRA AML Regulations sets out the customer identification requirements to which a relevant person must adhere. Article 10 of the QFCRA AML Regulations sets out the documents retention and record policy with which a relevant person is expected to comply. Article 13 of the QFC AML Regulations sets out the internal and external reporting requirements for reporting suspicious transactions with which a relevant person must comply. Article 17 of the QFC AML Regulations requires the relevant person to have arrangements to ensure that all employees receive training and are aware of the laws and regulations in addition to other matters like the relevant person’s AML policies, procedures, systems and controls.

585. Article 6(2) of the QFC AML Regulations requires that a relevant person must set up and operate arrangements including the appointment of a MLRO. Article 8 of the QFC AML Regulations further requires that a relevant person must appoint an individual to act as its MLRO and operate arrangements that are designed to ensure that it and the MLRO comply with the relevant obligations of these Regulations. A relevant person must appoint an individual to act as a deputy of the relevant person’s MLRO who must fulfil the role of MLRO in the latter’s absence. If the position of MLRO falls vacant, the relevant person must appoint another individual as its MLRO. A relevant person must ensure that the MLRO is of sufficient seniority within the relevant person to enable him to: act on his own authority; have direct access to the senior management of the relevant person; have sufficient resources including, if necessary, an appropriate number of appropriately trained employees to assist in the performance of his duties in an effective, objective and independent man