AML Compliance Guidelines: Egypt

Egypt is a leading economic player in the African region, with a GDP of $396 billion. As per World Bank data, it was the largest economy in Africa in 2023 before being hit by the economic crisis once again.

It serves as a strategic bridge between North Africa and the Middle East. Egypt is not only famous for its ancient civilization, it is also known for the Suez Canal, a wonder of the modern times. This canal is the shortest maritime route between Asia and Europe and handles 12% of the total global trade. Financial services, agriculture, tourism, trade, and foreign remittances are the key contributors to Egypt’s economy.

Egypt’s economy heavily relies on cash transactions, cross-border trade, foreign remittances, and its geographic location that makes it particularly vulnerable to the risks of terrorism financing, money laundering, and proliferation financing. These illegal activities affect the financial stability of a country as well as shatter investors’ confidence and ultimately hinder sustainable development. Egypt has developed a strong anti-money laundering (AML) and counter-terrorism financing (CFT) framework to fight these emerging money laundering, terrorist financing, and proliferation financing risks.

Egypt’s Membership of MENAFATF’s Task Force

Egypt is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. As of May 2024, 3rd Enhanced Follow Up Report (FUR), Egypt is fully or largely compliant with 36 recommendations, whereas the remaining 4 or partially compliant. In this guide, we’ll explore different aspects of the AML/CFT framework that will enhance your understanding of your role in fighting financial crimes. Whether you’re a bank, real estate, or remittance service provider, understanding your role is critical in ensuring compliance.

Key AML/CFT and Sanctions Laws in Egypt

Law No. 80 of 2002 (AML Law)

This is the primary legislation that governs the AML regulations and establishes an independent Unit for combating money laundering within the Central Bank of Egypt. It is the fundamental law that criminalizes money laundering and sets out penalties for money laundering crimes and violation of any provisions of this law. It also mandates customer identification, reporting and record-keeping requirements for financial institutions and designated non-financial businesses and professions (DNFBPs).

Law No. 8 of 2015 (Terrorist Entities Law)

The Anti-Terrorism Law Organizing the Lists of Terrorist Entities or Law No.8 of 2015 is the primary legislation that establishes a list of individuals and entities designated as terrorists. Designations of individuals and entities are added to the list at the request of the Public Prosecution. Adherence to the list established under the Terrorist Entities Law is part of AML compliance obligations.

Central Bank of Egypt (CBE) Regulations

The CBE issues circulars and directives that assist banks and other financial institutions in complying with AML/CFT requirements in Egypt.

Penalties for Non-Compliance

Criminal Penalties:

Any person convicted of a money laundering offense may face up to seven years imprisonment and a fine that equals twice the benefit obtained from the crime. Moreover, a person who violates any provisions regarding due diligence, record-keeping, and reporting requirements may face imprisonment and fines up to 20,000.

If a legal entity is convicted of any crime under the AML Law, the same penalties will also be applied to the actual management of that entity if the offense that occurred was in their knowledge and in violation of their duties.

Administrative Penalties:

Supervisory authorities are empowered to impose financial penalties if a violation of AML/CFT laws, regulations, or guidelines are committed by the entities supervised by them.

Who Regulates and Governs AML/CFT Laws?

Financial Regulatory Authority (FRA)

While its main mandate is to supervise non-banking financial markets and instruments, the FRA also ensures compliance with AML laws in sectors such as insurance, capital market intermediaries, factoring leasing, financing companies, and other non-banking financial entities.

Central Bank of Egypt (CBE)

As the central bank of the country, the CBE has a primary role in the development, issuance, and regulation of currency, foreign exchange, monetary policy, and the banking system. The CBE also supervises and enforces AML compliance in the banking sector, foreign exchange, and remittance sector, among its other primary functions.

Money Laundering and Terrorist Financing Combating Unit (EMLCU)

The EMLCU is an independent unit within the Central Bank of Egypt responsible for combating money laundering and terrorism financing. As a Financial Intelligence Unit of Egypt, it collects and analyzes data related to suspicious transactions and works in coordination with law enforcement and other relevant entities.

Who is Subject to AML/CFT Laws in Egypt?

The following businesses and professions are obligated to adhere to AML/CFT laws in Egypt:

Financial Institutions

• Banks
• Insurance and reinsurance companies
• Remittance providers
• Foreign exchange dealers
• Brokerage firms
• Financing, leasing, and factoring companies

Designated Non-Financial Businesses and Professions (DNFBPs)

• Real estate brokers
• Lawyers and accountants
• Precious metal and stone dealers
• Casinos and gambling businesses
• Non-profit organizations (NPOs)

Key AML/CFT Compliance Requirements

FIs and DNFBPs subject to Egypt’s AML/CFT legislation have the following key obligations that must be part of the AML compliance program:

Risk Assessment

Risk assessment process is the building block of a risk-based approach. Institutions are required to assess the vulnerability of their operations to risks of money laundering and terrorist financing by considering factors at least linked to customers, products/services, delivery channels, and geographical locations.

Customer Due Diligence (CDD)

FI should have management systems in place to identify and verify the legal status of their customers and beneficial owners, whether they’re natural or legal persons, through legal identification documents. This identification shall be carried out when:

• Establishing a business relationship or opening an account
• There’s a suspicion about the accuracy of previously obtained identification information
• Conducting an occasional (on-off transaction) up to certain limits
• For legal persons, identify and verify their financial structure, nature, origin, legal status, owners, and shareholders with more than 10% stake through legal documents
• Have a system for identification of politically exposed persons (PEPs)

Information about the customer’s identity and legal status shall be periodically updated.

Politically Exposed Persons (PEPs)

Reporting institutions are required to have risk management systems to identify if any of their customers or beneficial owners are a PEP, relative, or a close associate of a PEP. EMLCU guidelines suggest using publicly available information sources or electronic PEP databases for PEP screening, including information directly obtained from the customer.

Reporting institutions are obliged to apply enhanced due diligence measures when dealing with PEPs, including:

• Establishing the source of funds and wealth of the PEP
• Obtaining senior management approval to establish or continue business relationship
• Enhanced ongoing monitoring of the activities and transactions

Suspicious Transaction Reporting (STR)

Obligated institutions must file a report with the EMLCU about any suspicious financial transaction that may involve money laundering or terrorist financing. These reports should include certain information necessary to assist investigating agencies.

Record Keeping

Retain all information and documents of due diligence activities and transactions for at least five years after the business relationship is closed.

Training and Awareness

Regularly train employees on legal requirements, red flags, and regulatory updates. Equip employees with suitable tools to assist them in effectively carrying out their roles and responsibilities.

Internal Controls and Audits

Develop policies, procedures, and controls, like independent audits, assess the effectiveness of AML/CFT compliance, and identify any gaps.

Sanctions Screening Requirements in Egypt

As a member of the United Nations, Egypt adheres to the sanctions implemented by the UN Security Council Resolutions. In addition, Egypt maintains a domestic list of individuals and entities designated as terrorists. Domestic lists are published in the Official Gazette and are also available on the EMLCU website.

FIs and DNFBPs should have risk management systems in place to implement obligations in relation to UN Security Council Resolutions and domestic lists of Terrorist Entities and Terrorists. The risk management system should be capable of referring to the updated UN Sanctions Lists and Domestic Lists to ensure they’re not dealing with any listed individual or entity. The screening must be conducted at least in the following cases depending upon the nature and business of each entity:

• Screening name of new customers when establishing a business relationship with any individual, entity, or beneficial owner
• Screening name of occasional customers
• Screening names of existing customers in case of an update to the lists
• Screening names of external parties and counterparties, including those with whom the institution deals directly or indirectly

These obligations can differ from business to business; for example, institutions involved in letters of guarantee and documentary credits must verify/screen all parties involved in the process, including the name of:

• Shipping company and shipping agents
• Vessels carrying the shipment
• Insurance company
• Any other company mentioned in credit or shipping document

Conclusion:

The recent reforms in institutions and legislations show that Egypt is committed to creating a secure, transparent, and prosperous business environment for all. Professionals and businesses can help achieve this goal by achieving AML/CFT compliance; this will also protect them from financial penalties and reputational losses.

Businesses should keep track of the changing regulatory requirements and apply tech-based AML solutions to improve compliance capability and efficiency. AML compliance isn’t merely preventing financial penalties, it also ensures that the country’s economy is protected from emerging threats.