Circular dated August 7, 2019 regarding the standards for practicing the activity of exporting and importing surplus foreign currency notes

Cairo on: 7 August 2019

Dear Mr. /

Chairman of the Board of Directors of Bank

Greetings,

In the context of the Central Bank of Egypt's continuous efforts to preserve the integrity of the performance of the banking system, and with reference to the periodic letters that specified certain rules regarding the export of surplus foreign currency notes abroad and their import and the latest of which was the circular letter issued on 15 March 2018, and with the aim of setting standards to regulate this activity in the market the Egyptian banking sector, the Board of Directors of the Central Bank of Egypt decided in its meeting held on August 5, 2019 to issue standards for practicing the activity of exporting surplus foreign currency notes and importing them as follows:

.1 Banks wishing to practice the activity of exporting surplus foreign currency notes and importing them must submit an application to the Banking Affairs Department of the Supervision and Oversight Sector at the Central Bank of Egypt to issue a license to practice this activity within January of each year, provided that the following conditions are met: - A- The bank must have policies and procedures approved and documented by the Board of Directors covering all operations related to the export and import of foreign currency notes (banknotes), as well as systems and procedures related to anti-money laundering and counter-terrorism financing operations.

B- Availability of good internal control systems for operations related to the activities of exporting and importing banknotes. C- The bank must have contracts approved by the Legal Department, Risk Management Department, and Compliance Department before signing them with parties associated with the export and import of banknotes, ensuring they include all details and responsibilities of each party, as well as controls related to anti-money laundering and counter-terrorism financing.

D- Employees concerned with this activity must undergo courses related to dealing with counterfeit foreign currency notes and other related matters, and introductory courses on instructions related to anti-money laundering and counter-terrorism financing, especially regarding operations associated with the activity of exporting and importing foreign currency notes.

.2 Banks are not allowed to outsource/contract the process of exporting surplus foreign currency to any company for the export of funds within the Arab Republic of Egypt except with prior approval from the Central Bank.

.3 Banks are allowed to contract with financial institutions (banks / exchange companies) abroad to complete the process of exporting foreign currency, provided that they conduct a thorough due diligence and credit study for those institutions before contracting with them to assess the feasibility of contracting and determine a credit limit for each institution renewed annually and an internal ceiling for the size of a single transaction, in order to cover risks of non-payment, while emphasizing the availability of the following minimum standards at those institutions:
A- The institution must be subject to one of the regulatory authorities and must have approval from the regulatory authority to practice this activity.

B- At least five years must have passed since its establishment and practice of this activity. C- It must not have been subject to penalties or fines by the regulatory authority in the country where it operates, or penalties related to money laundering operations from external parties.

D- It must have procedures related to anti-money laundering and counter-terrorism financing approved and documented by the institution's Board of Directors regarding the activity of shipping/exporting and importing foreign currency notes, as well as the necessary systems to implement them.

This is while ensuring that banks expand the network of financial institutions they can contract with to ensure the continuity of the export activity and avoid concentration with a limited number of institutions.

.4 Banks must continuously evaluate all entities they deal with regarding activities of exporting and importing banknotes (examples: insurance companies, transportation companies, etc.).

.5 Banks must carry out the following procedures when conducting any process for exporting surplus foreign currency notes: Confirming that the export will be carried out by the licensed bank or through one of the licensed A- banks to practice the activity of exporting surplus foreign currency notes by the Central Bank of Egypt.

B- The size of the export transaction in a single instance must not exceed 100 million US dollars and its equivalent for all currencies in circulation.

C- Submitting a declaration stating that there is a balance sufficient for operational needs in addition to the amounts required for export. D- Submitting a declaration stating that the foreign currency notes required for export are insured and fully present in the bank's vault. E- Publishing the currencies required for export on the bank's page on Reuters screen including the components of this surplus in terms of currency types - without quantities - for the entire day preceding the submission of the request to the Central Bank for approval on the export, and a copy of it must be attached with the request for obtaining export approval.

F- The bank must notify the Banking Operations Sector of the Central Bank of the export transaction request at least one day prior to the export date to obtain approval for it.

G- The exporting bank's declaration of its full commitment to the entire export process from the connection until adding the value to its accounts with its correspondents abroad on the due date.

H- The bank must insure the banknotes required for export with one of the insurance companies. I- The necessity of adhering to the instructions issued by the Central Bank of Egypt regarding security policies and insurance procedures, specifically Circular No. 7 issued in May 2018 which included the insurance of money transfer operations between the banking system and various cash centers when transferring cash notes internally up to the airport. J- The bank must notify the General Administration of External Operations of the Banking Operations Sector at the Central Bank of the approval for the export, indicating the specialist's signature on the quantity exported, as well as a copy of the documents stamped by the Customs showing that the bank has received the actual value of the foreign currency notes in the ledgers at the correspondents previously exported at the exchange rate and due date, with a deadline of ten days from the date of export.Indicating

.6 The Central Bank of Egypt has the right to revoke the license to practice the activity of exporting foreign currency notes at any time and without giving any reasons.

.7 Regarding foreign currency notes not included in the Central Bank of Egypt's list of foreign currency exchange rates, banks are allowed to use companies abroad in the field of shipping/exporting and importing foreign currency notes, provided that the size of the shipping transaction in a single instance does not exceed the equivalent of 10 million US dollars and does not fall below the equivalent of 2 million US dollars, and each transaction is presented separately to the Central Bank - Banking Operations Sector - for study and obtaining approval.

.8 In case the bank wishes to import foreign currency notes, an application must be submitted explaining the bank's reasons to the Banking Operations Sector at the Central Bank of Egypt for study and approval.

Banks are granted a compliance period of six months from the date of issuance of these instructions.

Please be kind enough to alert regarding taking the necessary action to implement the aforementioned decision.

Accept our highest regards,

Gamal Naguib