Anti-Money Laundering/Combating Terrorist Financing Standard

Intent Declared Summary

The United Nations Office of Drugs and Crimes (UNODC) in its 2005 country profile report states that the Financial Action Task Force (FATF) removed Egypt from its non-cooperating countries or territories list in 2004 owing to Egypt's continued efforts toward developing an effective anti-money laundering (AML) and terrorist financing regime which the authorities indicated will incorporate the FATF recommendations. In 2005, a World Bank report found that, subsequent to the International Monetary Fund's 2002 Financial Sector Assessment Program of Egypt (the report remains unpublished), the country implemented several reform measures that included the incorporation of legal and institutional measures required under the Financial Action Task Force's (FATF) recommendations. Further, Egypt is in the process of replacing its old counterterrorism law with a new one with more specific and comprehensive measures against terrorist financing, per information in a 2008 U.S. Department of State report. The report also notes that Egypt is a founding member of the Middle East and North Africa Financial Action Task Force (MENAFATF) and follows that organization's recommendations on AML and counterterrorism financing measures. However, the MENAFATF has not conducted a mutual evaluation of Egypt.

General Overview
The United Nations Office of Drugs and Crimes (UNODC), in its 2005 country profile report, noted that in June 2001 the Financial Action Task Force (FATF) included Egypt in its noncooperating countries or territories (NCCT) list. However, in February 2004, owing to Egypt's continued efforts toward developing an effective anti-money laundering (AML) and combating the financing of terrorism (CFT) regime which will incorporate the Financial Action Task Force (FATF) recommendations, the FATF removed Egypt from its NCCT list. According to information provided in a 2005 World Bank report, subsequent to the International Monetary Fund's (IMF) 2002 Financial Sector Assessment Program (FSAP, which was never published) of Egypt, the authorities implemented several reform measures which included the "fulfillment of all legal and institutional requirements in accordance with the FATF recommendations and measures" (p. 17). However, apart from this statement there is no further information in the World Bank report as to Egypt's compliance with the FATF recommendations. The 2005 UNODC report describes Egypt as not being a regional financial center or an offshore financial center. The report states that the laws governing AML in Egypt are the AML Law (No. 80, 2002), which was amended in 2003, and the Central Bank Law (No. 88. 2003). According to a 2008 U.S. Department of State (DoS) report, the AML Law clearly defines the predicate crimes associated with money laundering. However, it does not specifically address the rules on confiscation and seizure of assets derived from money laundering. Confiscation rules are addressed in the Penal Code, which allows for seizure of assets related to predicate crimes, including terrorism (U.S. DoS 2008). The U.S. DoS report indicates that Article 86 of the Penal Code criminalizes the financing of terrorism; however, the authorities' are in the process of

replacing its old counterterrorism law with a new one which would include more specific measures against terrorist financing. The AML law also established Egypt's Financial Intelligence Unit (FIU), known as the Money Laundering Combating Unit, or MLCU, which came into operation in 2003. The 2008 U.S. DoS report states that the MLCU is an independent body functioning within the Central Bank of Egypt (CBE), possessing its own budget and staff. Per the report, other bodies responsible for regulating money laundering activity include the Ministry of Interior, the National Security Agency, and the Administrative Control Authority. According to information provided in the 2008 U.S. DoS report, banks, securities markets, independent brokers, and insurance companies are regulated by the AML Law. The 2005 UNODC report notes that the CBE and other financial regulatory bodies have been actively involved in issuing regulations related to Know Your Customer and Suspicious Transaction Reporting requirements. However, in 2008, the U.S. DoS reported that other professions, such as lawyers, accountants, and cash couriers were not as yet subject to AML controls. According to the 2008 U.S. DoS report, Egypt has entered into a Mutual Legal Assistance Treaty with the United States, and has similar agreements with the UK, Romania, Zimbabwe, and Peru. The report adds that the CBE circulates the names of suspected terrorists and terrorist organizations on the United Nations Security Council Resolution (UNSCR) 1267 Sanctions Committee's consolidated list to all financial institutions. The report also indicates that Egypt follows the Middle East and North Africa Financial Action Task Force (MENAFATF) recommendations on anti-money laundering and counterterrorist financing, is a party to the United Nations Drug Convention, and has ratified both the UN Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism. By way of recommendation, the 2008 U.S. DoS report advises Egypt to strengthen its AML/CFT regime through more effective and successful prosecutions and convictions; better investigative practices and capacity; improved feedback to financial and non-financial institutions from the MLCU regarding their suspicious transaction reports (STRs); better enforcement of cross-border currency controls; stricter monitoring of trade based money laundering, informal financial transfers, and customs fraud; and lastly a specific law against terrorism and terrorism financing.

The Principles
II1. Legal Systems and Related Institutional Measures
The 2005 UNODC report states that the laws governing AML in Egypt are AML Law No. 80 of 2002, as amended in 2003, and the Central Bank Law No. 88 of 2003. According to the 2008 U.S. DoS report, the Egyptian Penal Code has provisions criminalizing the financing of terrorism in Egypt. Further, the authorities are in the process of replacing its old counterterrorism law - a 1981 emergency law - with a new one which would include more specific and comprehensive measures against terrorist financing. Furthermore, according to information provided in a 2005 World Bank report, subsequent to the IMF's 2002 FSAP of Egypt, the authorities implemented several reform measures which included the "fulfillment of all legal and institutional requirements in accordance with the FATF recommendations and measures" (p. 17). However

apart from this statement there is no further information in the World Bank report as to Egypt's compliance with this principle. The 2008 U.S. DoS report states that the AML law clearly defines the predicate crimes associated with money laundering. However, it does not specifically address the rules on confiscation and seizure of assets derived from money laundering. Confiscation rules are addressed in the Penal Code, which allows for seizure of assets related to predicate crimes, including terrorism. Seizure can only be effected by an order from the Public Prosecutor. All assets, movable or immovable, rights, and businesses, are subject to seizure; however, seized cash goes to the CBE, real assets go to the Ministry of Justice. Further, the Ministry of Finance receives all confiscated assets, and under the AML Law, the agency can share such assets with foreign governments. Negotiations with other governments on cooperation with respect to asset seizure and confiscation are underway under the aegis of the Public Prosecutor's Office, the report adds. Per information provided in the 2008 U.S. DoS report, the AML law also established Egypt's Financial Intelligence Unit, the MLCU, which came into operation in 2003. The report indicates that the MLCU is an independent body, functioning within the CBE and possessing its own budget and staff. Its legality and executive authority is also derived from the administrative regulations/directives of the AML Law. These regulations also "spelled out the predicate crimes associated with money laundering, established a Council of Trustees to govern the MLCU, defined the role of supervisory authorities and financial institutions, and allowed for the exchange of information with foreign competent authorities," the report adds. The MLCU examines and evaluates all STRs, and sends pertinent STRs for investigation to the Ministry of Interior, the National Security Agency, and the Administrative Control Authority. According to the 2007 U.S. DoS report, the AML law clearly defines the role of these supervisory authorities and establishes the authority of the MLCU. The report also indicates that the MLCU, since its inception, has received over one thousand STRs and has brought several cases to court. Per the 2008 U.S. DoS report, the MLCU is a member of the Egmont Group of FIUs since June 2004. The Government of Egypt established a national committee for coordinating issues regarding anti-money laundering in late 2005. The 2008 U.S. DoS report identifies this as the National Committee for Combating Money Laundering and Terrorist Financing, which includes representatives from the MLCU, the Ministries of Interior, Foreign Affairs, Social Affairs, Justice, and the National Security Agency. The 2008 U.S. DoS also mentions the National Committee for International Cooperation in Combating Terrorism (established in 1998) which includes the same agencies and performs the same function as the National Committee for Combating Money Laundering and Terrorist Financing. Finally, the report notes that Egypt is a party to the United Nations (UN) Drug Convention and has ratified both the UN Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism.

II2. Preventive Measures - Financial Institutions

According to information provided in the 2008 U.S. DoS report, the AML law mandates that banks: (1) maintain records of customers for 5 years; (2) maintain internal systems ensuring

compliance with the AML law; (3) voluntarily report suspicious transactions; (4) examine large transactions; and (5) produce quarterly compliance reports. The report also notes that the AML law prohibits anonymous financial accounts. As for the banking secrecy law, the AML Law did not repeal it, but according to the 2008 U.S. DoS report "did provide the legal justification for providing account information to responsible civil and criminal authorities." Also, the AML Law protects natural and legal persons cooperating with law enforcement authorities in AML/CFT investigations. Moreover, the 2005 UNODC report states that the CBE and other financial regulatory bodies have been actively involved in issuing regulations related to Know Your Customer and Suspicious Transaction Reporting requirements. However there is insufficient information publicly available as to Egypt's compliance with the FATF recommendations relating to this principle. As the 2008 U.S. DoS report elaborates, the Supervision Unit of the CBE shares regulatory authority over banks and other financial institutions with the MLCU, especially with respect to the former's compliance with the AML Law. Both bodies conduct frequent joint compliance assessments of banks through questionnaires and on-site inspections. Deficiencies identified are communicated to banks with corresponding corrective measures and the deadlines to implement them. Non-compliance invites sanctions ranging from warning letters, financial penalties, prohibition to undertake certain activities; replacement of the board of directors; and revocation of the bank's license. The CBE also monitors the bureaux de change and money transmission companies for foreign exchange control purposes, according to the report, and pays special attention to accounts that cross certain thresholds. According to the 2007 U.S. DoS report, the CBE jointly with the MLCU undertook a self assessment in 2006 of the banking sector's AML systems and found that only one bank was noncompliant, and that, in the case of deficiencies, the CBE notified the banks as to the course of corrective measures to be undertaken. The 2007 U.S. DoS report also indicates that the CBE and the MLCU plan to continue to undertake comprehensive periodic assessments and follow-up visits and that the MLCU, since its inception, has received over thousand STRs and has brought several cases to court. Securities markets, firms, and independent brokers and dealers are regulated by the Capital Market Authority, and insurance companies are regulated by an independent insurance regulatory authority, according to the 2008 U.S. DoS report. The report further mentions that the General Authority for Free Zones and Investment (GAFI) regulates activity in free zones and Special Economic Zones (SEZ), and all banks and non-financial institutions operating in these zones are subject to the AML Law and other AML/CFT regulations. The Postal Authority's financial services are regulated by the Ministry of Communication and Information Technology. According to the 2008 U.S. DoS report, the executive regulations of the AML Law require that foreign currency equivalent to $10,000 or more that enters the country be declared at the borders. However, the report finds that enforcement of this provision is not consistent. Nevertheless, the Customs Authority has signed an agreement with the MLCU to share information about currency declarations, passes on all pertinent information to the MLCU as well as the European Union border guards, and thoroughly scrutinizes all currency imports and exports. As for offshore banks, international business companies, and shell companies, the report notes that they are not permitted in Egypt.

II3. Preventive Measures - Designated non-Financial Business and Professions

According to the 2008 U.S. DoS report, casino gambling is permitted only in international hotels and only by foreign nationals. Further, all cash transactions at casinos are performed by licensed banks subject to AML controls, although other professions such as lawyers, accountants, and cash couriers, are not currently subject to AML requirements. Nevertheless, the DoS report mentions that MLCU officials have indicated that the law will soon be amended to cover the activities of these individuals. However, there is insufficient information publicly available as to Egypt's compliance with the FATF recommendations relating to this principle.

II4. Legal Person and Arrangements & Non-Profit Organizations

There is insufficient information publicly available as to Egypt's compliance with the FATF recommendations relating to this principle. However, in its 2008 report, the U.S. DoS notes that, in 2002, "the GoE [Government of Egypt] passed the Law on Civil Associations and Establishments (Law No. 84 of 2002), which governs the procedures for establishing nongovernmental organizations (NGOs), including their internal regulations, activities, and financial records." The report further notes that this law restricts the acceptance of foreign donations without prior permission and the "Ministry of Social Solidarity and the CBE continually monitor the operations of domestic NGOs and charities to prevent the funding of domestic and foreign terrorist groups."

II5. National and International Co-operation

There is insufficient information publicly available as to Egypt's compliance with the FATF recommendations relating to this Principle. However, the U.S. DoS report of 2008 notes that the National Committee for Combating Money Laundering and Terrorist Financing, which includes representatives from the MLCU, the Ministries of Interior, Foreign Affairs, Social Affairs, Justice, and the National Security Agency, was formed in 2005 and is responsible for coordinating policy between these agencies. Further, the GoE, owing to its own problems with terrorism, is keen on international cooperation on issues of terrorism and has cooperated with foreign authorities in this regard. The National Committee for International Cooperation in Combating Terrorism (established in 1998) coordinates policy on antiterrorism between the same national agencies. Egypt has also entered into a Mutual Legal Assistance Treaty with the United States, and has similar agreements with the UK, Romania, Zimbabwe, and Peru per the 2008 U.S. DoS report. According to the report, the CBE circulates names of suspected terrorist and terrorist organizations on the UNSCR 1267 Sanctions Committee's consolidated list and the U.S. list of Specially Designated Global Terrorists to all financial institutions. The report also indicates that Egypt is a founding member of the MENAFATF and follows its AML/CFT recommendations. Egypt is also a party to the UN Drug Convention, and has ratified both the UN Convention against Transnational Organized Crime and the UN International Convention for the Suppression of the Financing of Terrorism, the report adds.