Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

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Chairman of the Authority

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Board of Directors Decision No. (120) of 2019 dated 28/8/2019

Regarding the Regulatory Controls in the Field of Combating Money Laundering and Terrorist Financing for Entities Operating in the Field of Non-Banking Financial Activities

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The Board of Directors of the Financial Regulatory Authority

Having reviewed Law No. (10) of 1981 concerning supervision and control of insurance in Egypt and its executive regulations; and Law No. (159) of 1981 concerning joint stock companies, partnerships, limited liability companies, and single-owner companies and its executive regulations; and Law No. (146) of 1988 concerning companies operating in the field of receiving funds for investment and its executive regulations; and the Capital Market Law issued by Law No. (95) of 1992 and its executive regulations; and the Central Depository and Registration of Securities Law issued by Law No. (93) of 2000 and its executive regulations; and the Real Estate Financing Law issued by Law No. (148) of 2001 and its executive regulations; and the Anti-Money Laundering Law issued by Law No. (80) of 2002 and its executive regulations; and Law No. (10) of 2009 concerning the regulation of supervision on non-banking markets and financial instruments; and Law No. (141) of 2014 concerning the regulation of microfinance activities and the decisions issued in implementation thereof; and Law No. (8) of 2015 concerning the regulation of terrorist entities and terrorists lists; and the Anti-Terrorism Law issued by Law No. (94) of 2015; and the Law regulating the activity of financial leasing and factoring issued by Law No. (176) of 2018; and Presidential Decree No. (191) of 2009 concerning the rules governing the management and financial affairs of the Egyptian Exchange; and the Statute of the Financial Regulatory Authority issued by Presidential Decree No. (192) of 2009; and Board Decision No. (11) of 2014 concerning the rules for listing and delisting securities on the Egyptian Exchange and its amendments; and Board Decision No. (107) of 2016 concerning corporate governance rules for companies operating in the securities field; and Board Decision No. (53) of 2018 concerning licensing issuance and renewal controls and share ownership rules for companies operating in non-banking financial activities;

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and Board Decision No. (94) of 2018 concerning rules and procedures for trading non-listed securities on the Egyptian Exchange and transfer of ownership procedures;

and Capital Market Authority Board Decision No. (87) of 2008 concerning regulatory controls for combating money laundering and terrorist financing for companies operating in the securities field, investment fund companies, and securitization companies; and the Minister of Investment's approval of the Egyptian Insurance Regulatory Authority Board Decision No. (189) dated 28/9/2008 concerning approval of regulatory controls for combating money laundering and terrorist financing; and the Chairman of the General Authority for Credit and Free Zones Decision No. (2774) of 2003 concerning regulatory controls for combating money laundering and terrorist financing for financial leasing and factoring companies; and Capital Market Authority Decision No. (24) of 2007 concerning licensing controls for employees of securities brokerage companies; and after coordination with the Anti-Money Laundering and Terrorist Financing Unit; and upon approval by the Authority's Board of Directors in its meeting held on 28/8/2019;

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Decided

(Article One)

The anti-money laundering and terrorist financing controls contained in this Decision shall apply to the Egyptian Exchange, financial institutions, and natural persons licensed by the Authority to engage in any non-banking financial activity. The provisions of the Anti-Money Laundering Law, its executive regulations, and decisions issued thereunder shall also apply to matters not specifically addressed in these controls.

(Article Two)

Definitions

For the purpose of applying the provisions of this Decision, the following terms shall have the meanings indicated alongside each:

Authority: The Financial Regulatory Authority.

Unit: The Anti-Money Laundering and Terrorist Financing Unit established pursuant to Law No. (80) of 2002.

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Law and its Executive Regulations:

The Anti-Money Laundering Law issued by Law No. (80) of 2002, its amendments, and its executive regulations and amendments thereto.

Financial Institutions:

Legal persons licensed by the Authority to engage in non-banking financial activities.

Money Laundering:

Any act stipulated in Article (2) of the Anti-Money Laundering Law issued by Law No. (80) of 2002.

Terrorist Financing:

Any act stipulated in Article (3) of the Anti-Terrorism Law No. (94) of 2015.

Terrorist Entities:

Associations, organizations, groups, funds, cells, or other gatherings, regardless of their legal or factual form, whenever they commit any act stipulated in Article (1) of the Law regulating terrorist entities and terrorists lists No. (8) of 2015.

Negative Lists:

The lists of terrorist entities and terrorists organized pursuant to Law No. 8 of 2015, and the lists issued by the United Nations Security Council related to terrorist financing and financing of weapons of mass destruction proliferation, as well as any other lists prepared by financial institutions or deemed necessary to consult.

Unusual Transactions:

Transactions that appear exceptional compared to the usual pattern of customer transactions, identified through reports and internal systems of financial institutions.

Suspicious Transactions:

Transactions whose examination reveals objective grounds for suspicion that they constitute proceeds of any crime or involve money laundering or terrorist financing.

Proceeds:

Funds resulting or traceable, directly or indirectly, from the commission of any predicate offense.

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Predicate Offense:

Any act constituting a felony or misdemeanor under Egyptian law, whether committed inside or outside the country, provided it is punishable in both jurisdictions.

Customer:

A natural person, legal person, or legal arrangement for which a financial institution opens an account, executes a transaction on its behalf, or provides a service.

Beneficial Owner:

The natural person who ultimately owns or controls the customer, or the natural person on whose behalf a transaction is executed, including persons who effectively exercise control over the customer, whether the customer is a legal person or a legal arrangement.

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(Article Three)

Basic Principles

Legal persons subject to the provisions of this Decision shall adhere to the following principles:

Principle One: Responsibility

Establishing a clear policy on combating money laundering and terrorist financing, and formulating internal rules, procedures, and systems to facilitate this, taking into account the nature, size, and type of activity, customers, and products or services provided, and continuously ensuring full compliance with legal requirements and regulatory procedures in accordance with the Law, its executive regulations, these controls, and other related rules.

Principle Two: Risk-Based Approach

Adopting a risk-based approach in accordance with the requirements of the Law, its executive regulations, and these controls, including identifying, presenting, and understanding potential money laundering and terrorist financing risks, documenting them in writing and electronically, and periodically updating this assessment along with related information, while considering any risks identified at the local level and any variables that may alter money laundering and terrorist financing risk levels.

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Furthermore, persons subject to this Decision must identify and present money laundering and terrorist financing risks that may arise from their use of modern technological systems while providing services and products, or from offering any new services or products relying on these systems, and take appropriate measures to manage those risks. When identifying and presenting such risks, they shall consider, at a minimum, the following elements:

• Types of current and prospective customers.
• Products and services offered or planned to be offered.
• Technologies used or planned to be used.
• Risks of relying on third parties, and geographical risks.

They must also take necessary measures and procedures to address identified risks.

Principle Three: Due Selection and Continuous Training

Adopting comprehensive policies and procedures for selecting and appointing competent and professionally skilled personnel, ensuring their integrity, and subjecting current and new employees to continuous training in combating money laundering and terrorist financing as outlined in this Decision.

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(Article Four)

Customer Due Diligence Procedures

Persons subject to this Decision must comply with customer due diligence procedures and other related rules, controls, and procedures issued by the Unit for combating money laundering and terrorist financing, pursuant to Item (13) of Article (3) of the Executive Regulations of the Law issued by Prime Ministerial Decree No. (951) of 2003, immediately upon establishing internal rules for identifying the identities of customers (natural or legal persons) and beneficial owners.

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(Article Five)

Internal Control System

Legal persons subject to this Decision must adopt an internal operations manual approved by their Board of Directors and submit it to the Authority immediately upon approval. It must include systems and procedures to ensure proper implementation of rules, controls, and procedures related to combating money laundering and terrorist financing, while observing the Law and its executive regulations. This manual must be reviewed periodically to assess its updates and development, and necessary measures must be taken accordingly. It must include at least the following:

1. Establishing clear detailed procedures for combating money laundering and terrorist financing, and written detailed procedures that precisely define duties and responsibilities.
2. Mechanisms for verifying compliance with internal systems established to combat money laundering and terrorist financing.
3. Requirements necessary for effectively managing money laundering and terrorist financing risks, including human expertise capable of handling these risks and the required technological infrastructure.
4. The internal control system used to identify unusual or suspicious transactions and bring them to the attention of the Anti-Money Laundering and Terrorist Financing Manager.
5. Procedures to detect whether transactions are listed on negative lists and the procedures required to verify customer identities.
6. Procedures to be followed when opening an account or initiating a contract, and re-matching procedures to be followed when updating those lists.
7. Procedures to ensure no collusion exists between employees of the legal person subject to this Decision and their customers.
8. Systems ensuring that internal audit or audit committees, as applicable, in coordination with the manager responsible for combating money laundering and terrorist financing, review the established systems to verify their adequacy and effectiveness in combating money laundering and terrorist financing, and propose necessary preventive measures or updates/developments.
9. Rules for retaining documents and records that legal persons subject to this Decision must maintain, and specifying retention methods.

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10. Developing training plans and programs for employees to raise awareness and enhance their competence regarding the rules and systems established for combating money laundering and terrorist financing.
11. Financial institutions with subsidiaries or branches outside the Arab Republic of Egypt must implement anti-money laundering and terrorist financing programs according to the risks and business volume there, which shall include the policies, procedures, and internal controls listed below, in addition to the following:
    • Establishing an independent audit unit to evaluate the anti-money laundering and terrorist financing system.
    • Establishing policies and procedures for exchanging necessary information for identification, customer due diligence, and managing money laundering and terrorist financing risks between financial institutions and their subsidiaries or branches, as applicable.
    • Establishing a mechanism to obtain information related to customers, accounts, and transactions from branches or subsidiaries through internal auditors, external auditors, and/or the anti-money laundering and terrorist financing manager when necessary for compliance purposes. This mechanism must include analyzing all information, reports, or transactions that appear unusual. Compliance must also be ensured in reporting such information to the manager responsible for combating money laundering and terrorist financing in the parent company.

In all cases, those institutions must ensure that their subsidiaries or branches comply with anti-money laundering and terrorist financing rules in accordance with the Law, its executive regulations, and this Decision.

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(Article Six)

Reporting Procedures for Suspicious Transactions

Persons subject to this Decision must immediately notify the Unit of all suspicious transactions that appear to constitute money laundering or terrorist financing crimes, including attempts to conduct such transactions, regardless of the transaction size, within a period not exceeding two working days from the date the Anti-Money Laundering and Terrorist Financing Manager has grounds for suspicion.

The notification shall be on the form prepared by the Unit for this purpose. The notification form shall specifically include the following regarding transactions suspected of constituting money laundering or terrorist financing crimes or attempts thereof:

1. Details of the suspicious transaction, its parties, circumstances of discovery, and current status.
2. Identification of the amounts involved in the suspicious transaction.
3. Reasons and grounds for suspicion relied upon.
4. Signature of the Anti-Money Laundering and Terrorist Financing Manager at the reporting financial institution.

A copy of all supporting documents for the suspicious transactions shall be attached to the notification form, while adhering to the methods required to preserve the data and information contained therein.

Notifications may also be submitted via electronic means in accordance with the system approved by the Unit and the controls established by the Authority in this regard.

Furthermore, persons subject to this Decision must submit a quarterly statistical report to the Authority detailing the number of suspicion cases referred to the Unit as stipulated in this Article, within one week from the end of the reporting period.

This shall be without prejudice to the laws governing non-banking financial activities.

In all cases, disclosing, directly or indirectly, to the beneficiary, counterparty, or non-competent authorities and bodies, regarding any transactions suspected of constituting money laundering or terrorist financing crimes, or related data, information, documents, or any measures taken regarding them, is prohibited within the scope of legally stipulated competencies.

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(Article Seven)

Manager Responsible for Combating Money Laundering and Terrorist Financing

Legal persons subject to this Decision must appoint a manager responsible for combating money laundering and terrorist financing, and designate a substitute in their absence. Their selection must consider that they belong to senior management, possess appropriate academic qualifications, and have sufficient practical experience, in accordance with controls issued by the Authority's Board of Directors.

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Smart Village, Building 137, Giza, Egypt Postal Code: 110 Telephone: +202 3034530 Fax: +202 35370036 WWW.FRA.GOV.EG

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