Region

Jurisdiction

Regulator

2019-01-01

Circular Letter No. (2) of 2019 Regarding the Regulation of the Use of Non-Cash Payment Means in Completing Financial Transactions for Non-Banking Financial Institutions

The Financial Regulatory Authority (FRA) of Egypt issued Circular Letter No. 2 of 2019 to mandate non-banking financial institutions and their counterparties to transition to non-cash payment methods for specified financial transactions in compliance with Law No. 18 of 2019. The directive defines non-cash payment means and bank accounts, explicitly requiring the non-cash settlement of financing grants, supplier payables, dividends, insurance payouts, and real estate transactions, while mandating the non-cash collection of installments, insurance premiums, and fines. To ensure regulatory compliance and avoid penalties, the FRA outlines a six-phase implementation roadmap for affected entities to contract with payment service providers, conduct pilot testing, and fully operationalize non-cash transactions within six months of the law's executive regulations taking effect.

Egypt

Financial Regulatory Authority Egypt

Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Circular Letter No. (2) of 2019 dated 2019/5/26
Regarding the Regulation of the Use of Non-Cash Payment Means
in Completing Financial Transactions for Non-Banking Financial Institutions

In line with the Authority's commitment to raising awareness of the most important regulatory developments in the Egyptian financial sector, and following the issuance of Law No. (18) of 2019 regarding the regulation of the use of non-cash payment means on April 16, 2019, and given that the law requires its addressees to regularize their status in accordance with its provisions within six months from the date of implementation of its executive regulations, and in compliance with the requirements of the aforementioned law, the Financial Regulatory Authority has deemed it appropriate, to facilitate matters for the entities under its supervision in providing non-banking financial services across various markets, to issue this Circular Letter clarifying the requirements for applying the law to all parties transacting in these markets and the obligations arising therefrom, as follows:

Categories Addressed by the Law and Treated in Non-Banking Financial Activities:

All companies and entities subject to the supervision and oversight of the Financial Regulatory Authority.
All counterparties dealing with companies and entities subject to the Authority's supervision, whether legal or natural persons.

Concept of Non-Cash Payment Means:

They refer to every payment method that results in a credit to one of the beneficiary's bank accounts, such as deposit, transfer, and debit orders, credit and debit cards, mobile phone payments, or any other means approved by the Governor of the Central Bank of Egypt. Direct cash deposits made at the bank holding the account of the company or non-banking financial entity to be dealt with are not considered among them.

Bank Account:

An agreement between a natural or legal person and a bank registered with the Central Bank or an authorized entity permitted to initiate deposit or credit activities in the Arab Republic of Egypt to open an account used to record all transactions for settling, receiving, and clearing payments made in cash or through electronic monetary units, such as: current accounts, savings accounts, fixed deposit accounts, mobile payment accounts, accounts linked to credit cards, and prepaid cards.

Smart Village, Building no. B-136, Giza
Postal Code: 12577
Tel.: (00202) 35345350 - Fax.: (00202) 35370036
www.FRA.gov.eg
Al-Smart Village, Building No. 136, B, Giza, Egypt
Postal Code: 12577
Telephone: +202 35345350 - Fax: +202 35370036
info@fra.gov.eg

Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Scope of Compliance with Non-Cash Payment Means in Financial Transactions:

The companies and entities under the supervision and oversight of the Authority, regardless of their type, are committed to the following:

First: Settling the following payments via non-cash payment means, even if their value exceeds the limits specified in the executive regulations of this law:

Granting cash financing, which is financing provided by real estate financing companies, financial leasing companies, factoring companies, or microfinance companies and associations, or any other non-banking financial entity.
Payables to suppliers, contractors, service providers, and other contractors.
Distribution of dividends resulting from participation in company capital or investment funds.
Disbursement of dues for syndicate members, payables to buyers in special insurance funds, and insurance compensation.
Disbursement of grants and pensions by associations and institutions working in the field of civil society work, or other private legal persons and establishments of all types.
Settling the consideration in cases of purchase, lease, exploitation, or usufruct of land, real estate, or rapid transit vehicles.
Payables to employees, experts, heads and members of boards of directors and committees, and social insurance contributions, provided that the number of employees or the total value of their monthly salaries exceeds the limits specified in the executive regulations of this law.

Second: Collecting the following payments via non-cash payment means, even if their value exceeds the limits specified in the executive regulations of this law:

Installments for cash financing, insurance policy premiums, syndicate dues, and special insurance fund contributions.
Receiving grants and pensions by associations and institutions working in the field of civil society work, or other private legal persons and establishments of all types.
Collecting the consideration in cases of sale, lease, exploitation, or usufruct of land, real estate, or rapid transit vehicles.
Fines. And other payables for companies and entities operating in non-banking financial activities.

Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Furthermore, to avoid exposing any entity under the supervision and oversight of the Authority or its responsible natural persons to the penalties stipulated in Articles 7 and 8 of the Law, the Authority emphasizes that all entities conducting their financial transactions using cash payment means must promptly work to activate their regularization plan with the law according to the following guidelines:

Phase One:

The entity initiates negotiation processes and selects non-cash payment service providers with whom it will contract to execute the aforementioned settlement and collection payments through them, in cases where counterparties of the entity do not have existing bank accounts or other non-cash payment means such as credit and debit cards, mobile payments, and prepaid cards.

Phase Two:

The entity signs a contract with non-cash payment service providers, and obtains the Authority's prior approval, which is only required for entities licensed to engage in microfinance activities, regarding the activation of non-cash payment transactions for their clients.

Phase Three:

A pilot operation of all non-cash payment services and the launch of an awareness plan for clients and stakeholders.

Phase Four:

Commencing the execution of non-cash collection operations for the entity's payments.

Phase Five:

Commencing the execution of non-cash settlement/disbursement operations for the entity's payments.

Phase Six:

Full compliance to complete all payments (settlement and collection) via non-cash payment means and addressing all obstacles.

And the regularization plan must be completed by no later than the date specified for the implementation of the executive regulations of Law No. 18 of 2019 on Non-Cash Payment Means.

Chairman of the Board of Directors
Financial Regulatory Authority
Dr. Mohamed Omran