Dear Mr./ Chairman of the Board of Directors

Bank Misr,

Greetings,

In line with the state's and the Central Bank of Egypt's and the Anti-Money Laundering and Combating the Financing of Terrorism Unit's efforts to enhance financial inclusion and work to raise its rates, many initiatives, regulatory rules, and instructions have been issued to facilitate citizens' dealings with banks and prepare the regulatory environment. Among these are the rules regulating the classification of financial inclusion products and services issued in July 2019 and its latest amendment issued on October 5, 2020, as well as the due diligence procedures for customers of financial inclusion products and services issued by the Anti-Money Laundering and Combating the Financing of Terrorism Unit in November 2018 and its amendment in March 2020.

It is worth noting that banks have begun taking serious steps regarding financial inclusion, which is reflected in the growth and diversification of their customer base. However, in the context of monitoring and evaluating the actual implementation of the aforementioned rules and procedures, it was found that there are still large unexploited opportunities to increase financial inclusion rates and add more segments of citizens and economic activities to the customer base of the banking sector by utilizing the facilitations provided by the Central Bank of Egypt and the Anti-Money Laundering and Combating the Financing of Terrorism Unit. Banks must work to ensure that internal procedures in each bank include as many facilitations as possible to reflect these rules and procedures.

In light of the above, the Central Bank of Egypt identified the main obstacles preventing citizens from opening bank accounts at a rate that enhances financial inclusion, which are as follows:

• The failure to place financial inclusion among the priorities of some banks.
• Some banks' excessive demand for documents and statements to open accounts, especially from ordinary citizens – who are the targeted class – as they constitute the vast majority of the Egyptian people. This causes them to refrain from dealing with the banking sector.
• The strict application of customer identification procedures, which leads to citizens avoiding dealing with banks, as requests to open their accounts are sometimes rejected.
• Low financial awareness and literacy in dealing with financial and banking services among many segments of society.

Based on the above, the Central Bank of Egypt and the Anti-Money Laundering and Combating the Financing of Terrorism Unit have agreed on the importance of coordinated joint issuance of the attached memorandum, which addresses the main aspects of facilitation mentioned in the aforementioned rules and procedures, along with clarifying some of the provisions contained therein. This is to enable banks to benefit from these aspects and clarifications in their application, thereby supporting and enhancing financial inclusion.

Please be advised to take the necessary action in this regard effective from its date.

Explanatory Memorandum Regarding the Application of Due Diligence Procedures for Customers of Financial Inclusion Products and Services and the Rules Governing Them

1. Rules regulating payment services using mobile phones.
2. Rules regulating payment services using prepaid cards.
3. Rules regulating the classification of financial inclusion products and services.

Coordination was also carried out between the Central Bank of Egypt and the Anti-Money Laundering and Combating the Financing of Terrorism Unit simultaneously to issue the aforementioned rules and a number of due diligence procedures, which included:

1. Due diligence procedures for customers of mobile payment services.
2. Due diligence procedures for customers of prepaid card services.
3. Due diligence procedures for customers of financial inclusion products and services.

In 2021, the Central Bank of Egypt issued rules regulating a number of banking services capable of attracting all segments of society to deal with the banking sector, which included:

And this is with the aim of keeping pace with all developments related to financial inclusion requirements and working to ensure that anti-money laundering requirements do not hinder its objectives. These procedures were prepared in light of the risk-based approach adopted by the Financial Action Task Force (FATF), which allows for the application of simplified procedures in cases where the risks of money laundering and terrorist financing are low.

This memorandum refers to the rules regulating the classification of financial inclusion products and services as "the Rules," and to the due diligence procedures for customers of financial inclusion products and services as "the Simplified Procedures." Based on the above, we outline below the main aspects of facilitation regarding the simplified procedures as well as some relevant clarifications:

First: Main aspects of facilitation in the simplified procedures for identifying and verifying the identity of natural persons:

With reference to item (2-2-5) of the Simplified Procedures, the following points need clarification:

• Affirming the instructions issued on October 5, 2020, regarding the application of the rules and simplified procedures to new customers when opening traditional bank accounts, whether current or savings accounts (including savings accounts and deposits) and savings certificates and others, which do not rely on the use of modern financial technology. This is meant in this context as accounts that do not relate to the use of a new product launched for the first time at the bank level, or the use of a new technological means for the first time to provide new or existing products. This is done without the need to obtain approval from both the Central Bank of Egypt and the Anti-Money Laundering and Combating the Financing of Terrorism Unit, provided that the customer is classified as low risk.

1. Banks may rely on service providers in applying the simplified procedures to identify and verify customer identity, in compliance with the conditions stipulated in the procedures, which facilitates access to the largest possible segment of customers. This is done according to the procedures applied by the bank with them acting as agents for the banks – identifying customers and verifying their identity according to the services.

2. The simplified procedures for identifying and verifying customer identity may be applied at the customer's location through one of the specialized employees, including bank employees and service providers.

3. Banks may update the data, information, and documents obtained using electronic means, provided that the risks related to the customer are low.

4. When applying the simplified procedures for identifying and verifying customer identity, banks may rely on obtaining the information and documents stipulated therein without requesting any additional information or documents not included in these procedures. This includes not overburdening the customer with requests for documents to verify the source of funds or proof of income.

Second: Clarifications on some provisions contained in the Simplified Procedures

1. If the profession stated on the customer's identity verification document matches the information in the account opening request form, the bank should rely on the identity verification document to verify this information without requiring the customer to provide any additional documents, information, or statements.

2. For a customer who does not have an identity verification document specifying a specific profession or job (for example, a housewife, or someone with a qualification but unemployed, or jobless), consistent with the information in the account opening request form, this should not be an obstacle for the bank in opening the account, nor should the bank require the customer to provide any additional documents, information, or statements.

3. In case the profession stated on the customer's identity verification document differs from what is written in the account opening request form, the bank can verify the accuracy of this information according to the internal procedures of each bank, while facilitating these procedures using any of the following: a. Documents specifying the customer's employer, for example: a letter issued by the employer, or a document issued by one of the government entities specifying the employer (e.g., documents issued by the General Authority for Social Insurance, or employment offices), or a card specifying the employer, or a license to practice the profession or the tax card for self-employed individuals (if available). b. Information or statements that the bank can obtain through various means (itself or through a service provider). For example, without limitation, reliance on:

   • Especially for customers with pages and blogs that provide services or products to the public.
   • Field inquiries, especially for categories of self-employed individuals who do not have a license to practice the profession or a tax card, and customers with crafts and jobs that are difficult to license or prove (e.g., construction worker, carpenter, electrician, plumber, property guard, caregivers, and workers in service activities in homes, and other crafts and jobs). Field inquiries can rely on the customer's surroundings or those dealing with him.
   • Social media.

4. In case the place of residence stated on the customer's identity verification document differs from what is written in the account opening request form, the bank can verify the accuracy of this information according to the internal procedures of each bank, while facilitating these procedures using any of the following: a. Documents specifying the place of residence, for example: one of the public utility bills (electricity, water, gas, phone) or a property deed (including preliminary contracts) or a rental contract. b. Information or statements that the bank can obtain through various means, including field inquiries, for example, without limitation.

2 Identifying and verifying the identity of customers from micro-enterprises and companies:

With reference to item (2-2-3-5) of the Simplified Procedures, the following points need clarification:

• In case a commercial register or activity license is available: The bank may rely on obtaining an official extract from the register or a certified copy of the license without requiring the customer to provide any additional documents, information, or statements.

In case a commercial register or activity license is not available:

2-2 a. When the enterprise or company has a headquarters for conducting its activity: The bank can verify the customer's activity according to the internal procedures of each bank, while facilitating these procedures using documents such as: a property deed (including preliminary contracts), or a rental contract, or using information or statements from other sources that the bank can obtain through various means (itself or through a service provider). This may include conducting a field inquiry or relying on social media.

b. In case the enterprise or company does not have a headquarters for conducting its activity: The bank can verify the customer's activity using information or statements from other sources that the bank can obtain through various means (itself or through a service provider). This may include conducting a field inquiry or relying on social media.

c. For micro-enterprises and companies or self-employed individuals who do not have a commercial register or a license to practice the profession, and customers with crafts and jobs (for example: artisan, electrician, plumber, carpenter, etc.), which are difficult to license or prove, when opening an account for their specific activities without having a headquarters to conduct the activity, these accounts can be opened under the name "Economic Activity Account." The activity of the economic activity owner is verified through an identity verification document as explained in item 1 above, depending on the case, without requiring the customer to provide any additional information or documents. The customer must enjoy the transaction limits applicable to natural persons according to the following rules:

• Maximum account balance: To be determined by the bank.
• Maximum daily limit: 30,000 EGP
• Maximum monthly limit: 100,000 EGP

3 Transaction limits stipulated in the Rules:

1. The Rules included in item (Third) and its amendment the maximum limits for transactions and account balances for natural persons and micro-enterprises and companies, which must be applied as a condition for the application of simplified procedures. In this regard, the following needs clarification:

4 Transition from applying simplified procedures to applying due diligence procedures for bank customers:

With reference to item (5-1-1) of the Simplified Procedures and item (Third) of the Rules, it needs to be clarified that updating customer data and documents, and transitioning from applying simplified procedures to applying due diligence procedures for bank customers issued by the Anti-Money Laundering and Combating the Financing of Terrorism Unit in February 2020, occurs in the following cases:

1. The maximum daily and monthly limits mentioned in the referenced item apply to the total of withdrawal or transfer operations issued or any deduction operations.

2. Any changes that may lead the bank to change the customer's classification regarding the degree of money laundering and terrorist financing risk to a "medium" or "high" degree.

3. The customer's account balance must not exceed the maximum limit set by the bank at any time.

4. Executing an operation that leads to exceeding the prescribed maximum limits for transactions on the account.

For customers classified by the bank regarding the degree of money laundering and terrorist financing risk as "low," the simplified procedures and the procedures applied by the bank on its customers are applied, unless the inspection of the referenced operation results in raising the customer's classification degree to a "medium" or "high" degree. In this case, the customer's data and documents are updated, in addition to applying all due diligence procedures for bank customers on him according to the new classification category of the customer.

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