Chapter Fourteen: Supervisory Controls Regarding the Combat of Money Laundering and Terrorist Financing

Part One:

A. Supervisory Controls for Banks Regarding the Combat of Money Laundering and Terrorist Financing

Introduction

These controls were prepared in accordance with the recommendations of the Forty Recommendations of the Financial Action Task Force (FATF), as amended in 2012, which superseded the previous nine recommendations issued in 2003, to add to the powers of the Central Bank of Egypt under Article 194 of Law No. 88 of 2003 regarding the organization of banking operations and the exercise of its powers. This also includes amending the declarations of the competent authorities regarding the combat of money laundering and terrorist financing in February 2020. These controls come to organize the banking sector's compliance with the international standards in the field of combating money laundering and terrorist financing, in addition to enhancing the international standing of the Egyptian banking sector and keeping pace with the latest developments in this field. Furthermore, these controls aim to facilitate the declarations of the competent authorities regarding the combat of money laundering, taking into account the nature of the payment systems and the continuous development of the financial sector, and the need to combat money laundering that occurs through the banking sector, as it is necessary for the banking sector to implement additional controls that reflect the risks faced by the banking sector.

These controls were issued on December 24, 2023.

Definitions

Term	Definition
These Controls	The controls issued by the Central Bank of Egypt regarding the prevention of money laundering and terrorist financing, and any amendments thereto.
Money Laundering	The process by which criminals disguise the illegal origin of their proceeds. It is a crime committed with the aim of concealing or disguising the illicit origin of the proceeds of crime, or concealing or disguising the true nature, source, location, disposition, movement, rights with respect to, or amount of the proceeds.
Terrorist Financing	The act of providing or collecting funds, by any means, directly or indirectly, with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out terrorist acts.
Trusts	A relationship in which a person (the settlor) transfers assets to another person (the trustee) who holds the assets for the benefit of a third party (the beneficiary).
Legal Arrangements	Any formal or informal arrangement, including trusts, that involves the transfer of assets to a trustee for the benefit of beneficiaries or for a specified purpose.
Designated Non-Financial Businesses and Professions (DNFBPs)	Casinos; Real Estate Agents; Dealers in precious metals and dealers in precious stones; Lawyers, Notaries, Independent Legal Professionals, and Accountants; and Trust and Company Service Providers.
Inherent Risks	The level of risk before any controls are applied.
Residual Risk	The level of risk remaining after controls have been applied.

Scope of Application

These controls apply to all local banks, including branches of foreign banks operating in Egypt.

With regard to the United Arab Emirates, if its branches have implemented controls for the prevention of money laundering and terrorist financing that are consistent with the standards of the Central Bank of Egypt, and if these controls are more comprehensive and stricter than the standards of the Central Bank of Egypt, the branches of the United Arab Emirates banks may apply their own internal controls for the prevention of money laundering and terrorist financing, provided that they are consistent with the standards of the Central Bank of Egypt, unless the Central Bank of Egypt requires additional controls.

If the home country's controls do not meet the standards for the prevention of money laundering and terrorist financing in accordance with the standards of the Central Bank of Egypt, the branches of the United Arab Emirates banks must implement additional internal controls for the prevention of money laundering and terrorist financing, consistent with the standards of the Central Bank of Egypt, unless the Central Bank of Egypt requires additional controls.

1. Governance

1-1 Banks must have a clear governance structure for the prevention of money laundering and terrorist financing, including the roles and responsibilities of the Board of Directors. The Board of Directors must ensure the adequacy and effectiveness of the risk management and internal control systems, and have a clear understanding of the bank's risk profile, the organizational structure, and the roles and responsibilities of the three lines of defense. The branch of the bank in the United Arab Emirates must comply with the instructions issued by the Central Bank of Egypt, which are more comprehensive and stricter than the standards of the Central Bank of Egypt, unless the Central Bank of Egypt requires additional controls.

1-2 The Board of Directors of the bank must be responsible for ensuring compliance with the standards for the prevention of money laundering and terrorist financing, and must regularly review the effectiveness of the bank's anti-money laundering and counter-terrorist financing controls. This includes:

1-2-1 Approving the bank's policy for the prevention of money laundering and terrorist financing.

2-2-1 Approving the annual budget for the prevention of money laundering and terrorist financing, including the resources required.

3-2-1 Ensuring that the risk of money laundering and terrorist financing is identified and assessed in a timely manner, and that appropriate controls are implemented to mitigate these risks.

4-2-1 Ensuring that the bank's risk management system for the prevention of money laundering and terrorist financing is integrated into the bank's overall risk management system, and that it is subject to regular review and update by the Board of Directors.

5-2-1 Providing adequate support and resources to ensure compliance, including the provision of adequate training, IT systems, and qualified personnel, as well as ensuring the independence and authority of the compliance function, and ensuring that the compliance function has access to all necessary information and documents, and that it can communicate directly with the Board of Directors and senior management. This includes ensuring that the controls implemented are effective in preventing money laundering and terrorist financing.

1-2 Appointment of the Compliance Officer and Deputy

Banks must comply with the following:

1-2-1 The bank must have a Compliance Officer responsible for the implementation of the bank's anti-money laundering and counter-terrorist financing controls, who is appointed by the Board of Directors.

2-2-1 The Compliance Officer must have sufficient authority and independence.

3-2-1 The Central Bank of Egypt must be notified of any changes in the Compliance Officer or their deputy, within one month of the change, or upon their resignation, dismissal, or termination of employment.

2-2 Criteria for Appointing the Compliance Officer for the Prevention of Money Laundering and Terrorist Financing and Their Deputy

1-2-2 Must have a university degree.

2-2-2 Must have the necessary preventive experience in the field of anti-money laundering and counter-terrorist financing, or have sufficient knowledge.

3-2-2 Must have knowledge of the local and international laws and regulations governing the prevention of money laundering and terrorist financing.

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