Controls on direct transfers on import operations

Greetings and further,

I would like to point out that in the recent period, there has been an increase in customer tendency to execute their import operations through direct transfers to their foreign suppliers (which represent either the value of payments made for the import operation or the value of the operation in full), and this is done upon the request of suppliers to ensure execution. And more often than not, the original documents related to the import operation are returned directly to the customer, who may direct them to another bank to enable him to release the goods, which makes it difficult for the executing bank to verify the seriousness and completeness of the import operation.

In this regard, and in order to tighten supervision over this type of operations, I would like to state that this topic was discussed through a meeting of the Banks Union on 27 December 2011, where the meeting resulted in determining the following controls that banks must comply with at the current time when executing direct transfers on import operations:

1 - Verifying the validity of the import operation when executing the direct transfer on it according to the methods followed by the executing bank.

2 - The execution of this type of requests is limited to:

• Credit clients, while observing the credit granting controls issued by the Central Bank in this regard.

• Commercial operations clients, who have a good history of dealing with the bank.

• Trusted bank clients, either through previous dealing or through Know Your Customer (KYC) procedures to verify the seriousness of these clients and the authenticity of their transactions.

3 - Adding a condition within the outgoing direct transfer stating that the documents related to the import operation subject to the transfer will be routed through the executing bank (with mentioning the name of the bank).

4 - Commitment from the Commercial Operations Department to execute direct transfers related to import operations to enable following up the arrival of their documents, and in case this is not possible, coordination will be done with the department responsible for executing direct transfers through periodic reports to enable following up the arrival of documents to the Commercial Operations Department, such that transfers whose documents have not arrived remain pending with the Commercial Operations Department.

5 - Obtaining a written undertaking - drafted by the Legal Affairs department of each bank - which includes that the documents related to the direct transfer will be routed through the same executing bank.

6 - In case the documents do not arrive within two months from the date of transfer or the customer proves a shipping date and period contrary to that, and after following up with the customer in this regard without success and considered as a failure on his part to prove the seriousness of the import operation, the executing bank must notify the Central Bank of Egypt of the customer's name and group under the concept of the single customer and the related parties issued by the Central Bank, so that the Central Bank, in turn, circulates to the banking system not to execute any similar instructions for the customer and the group in the future.

7 - Under no circumstances shall banks accept Form (4) for documents received on the strength of direct transfers (Release for purpose) for goods that were executed by another bank, with the necessity of directing the customer in this case to the executing bank to complete the import operation at its end.

And please accept my highest regards,

Gamal Najm