Egypt’s Latest Developments in Anti-Money Laundry Regulations
Similar to many jurisdictions, Egypt has been proactively taking measures to combat money laundering and terrorist financing. In furtherance of the ongoing efforts to combat money laundering, the Prime Minister has recently issued Decree No. 3331 of 2023 (“Decree”), which has emerged as an important document that introduces crucial amendments to the Executive Regulations of the Anti-Money Laundering Law, initially established by the Prime Minister’s Decree No. 951 of 2003 (“Executive Regulations”).
Main Highlights of the Decree:
1. Expanding the scope of addressees subject to the Decree
A. Financial Institutions
Although the Executive Regulations captured financial institutions and included 10 different types of regulated institutions, in light of the development in the fintech sector, the Decree has also catered for the recent trends, whereby payment services operators are now included among other institutions operating in financial leasing and consumer financing.
B. Professionals and non-financial businesses include:
- Real estate brokers when conducting transactions on behalf of their clients involving the purchase or sale of properties.
- Merchants in precious metals and dealers in gemstones when conducting any cash transactions with their clients that equal or exceed fifteen thousand US dollars or its equivalent in Egyptian pounds or any other foreign currency. This includes related transactions whose total surpasses the mentioned threshold.
- Lawyers and accountants, whether practicing individually or as partners or professionals in a firm dedicated to their respective professions, are included in these provisions when they prepare or execute operations on behalf of their clients related to the following activities:
(1) Buying and selling real estate.
(ii) Managing funds, securities, or other assets.
(iii) Managing bank accounts, savings accounts, or securities accounts.
(iv) Organizing contributions for the purpose of establishing, operating, or managing companies.
(v) Establishing legal entities or arrangements, operating them, managing them, and buying or selling business entities.
- Gambling clubs, including those conducting their activities through the Internet and on-board ships, are subject to these provisions when their clients engage in financial transactions equal to or exceeding three thousand US dollars or its equivalent in Egyptian pounds or any other foreign currency. This includes related transactions whose total surpasses the mentioned threshold.
- Providers of corporate and trust services, when engaging in the following services for their clients on a professional basis:
(i) Acting as a founder agent for legal entities.
(ii) Acting or arranging for another person to act as a managing director or partner in a joint-stock company or a similar entity related to other legal entities.
(iii) Providing a registered office, place of business, mailing address, or administrative address for a company or any legal entity or arrangement.
(iv) Acting or arranging for another person to act as a trustee for a trust or performing similar work on behalf of another legal arrangement.
2. Ultimate Beneficial Owner Register and Appointment of a Representative
In addition to the obligation to maintain an ultimate beneficial owners register stipulated by the Commercial Register Law, the Decree has also mandated that each entity registered in the commercial register should maintain a register containing information and data related to the beneficial owners, ensuring that such information and data are as accurate and up-to-date as possible.
Furthermore, they shall appoint one or more representatives responsible for providing all essential information and available information about the beneficial owners, whether during the validity of the registration or for a period of five years from the dissolution or removal from the commercial register. Additionally, they shall provide further assistance to the relevant authorities in the fight against money laundering, predicate crimes, or terrorism financing upon request.
3. CDD Requirements
The client due diligence (“CDD”) procedures shall be applied, whether the client is a natural person, a legal entity, or a legal arrangement, in the following cases:
(i) Establishing a business relationship with the client.
(ii) Executing a conflicting transaction on behalf of a client with a value exceeding fifteen thousand US dollars or its equivalent in Egyptian pounds or any other foreign currency. This threshold may be adjusted according to the client due diligence procedures issued by the Anti-Money Laundering and Terrorism Financing Unit, established by Presidential Decree No. 164 of 2002 (“Unit”), considering cases where multiple transactions appear to be related to each other. Financial institutions, professionals, and non-financial businesses must obtain any information or documents deemed necessary for compliance with client due diligence procedures, even if the transaction does not exceed the specified amount.
(iii) Conducting a conflicting transfer transaction, regardless of its value.
(iv) If there is suspicion of money laundering or predicate crimes related to it or terrorism financing, even if the client’s transaction is below the threshold specified in item (ii) above. It should be noted that in cases where financial institutions or professionals and non-financial businesses have reasonable indicators that lead them to believe that applying client due diligence procedures would disclose this suspicion, they shall refrain from applying these procedures and shall send a suspicious transaction report to the Unit.
(v) If there is doubt about the accuracy of the data previously obtained during the application of client due diligence procedures or if there is a judgment of inadequacy of this data and a need for supplementation.
It is also noteworthy that the CDD requirements also include the identification of the beneficial owner.
4. AML Policies
Financial institutions, professionals, and non-financial businesses are required to put in place internal regulations and policies which govern the risk management process arising out of the money laundry and terrorism financing and taking the necessary measures to avoid benefiting from the technological developments in the field of money laundry and terrorism financing.
5. Bookkeeping Requirements
Financial institutions, professionals, and non-financial businesses are required to keep records and documents of their local or international financial transactions. These transaction records should be sufficient to allow for the reconstruction of individual transactions, if necessary, to provide evidence against criminal activity. These records, customer data, and the beneficial owners’ information must be retained for at least five years, unless the Unit or investigative authorities require their retention for a longer period.
6. Judicial Cooperation
The amendment to Article 43 expands on the judicial cooperation between the Egyptian judicial authorities and the foreign judicial authorities to capture the predicate offenses associated with the crimes connected to money laundering and terrorism financing.
Additionally, the amendment to Article 47 mentions that the judicial authorities and the Unit are working to conclude international treaties concerning the management of frozen or seized funds or assets and the disposing of the proceeds of such funds or assets.
While there are not any explicit penalties in case of failure to abide by the Executive Regulations, there are a wide range of applicable penalties which could be imposed on entities which fail to abide by the applicable law and regulations, including, inter alia, suspension of business license, payment of fines and imprisonment.
The amendments introduced by virtue of the Decree underscore Egypt’s strong commitment to international cooperation in combating financial crimes and terrorism financing. By actively engaging in cooperation with foreign counterparts, Egypt not only aligns itself with global efforts to combat these threats but also emphasizes the importance of a collaborative approach.