FRA Board of Directors Decision No. 22 of 2020 Regarding Supervisory Controls for Targeted Financial Sanctions Lists for Non-Banking Financial Entities

Egyptian Financial Regulatory Authority (FRA)
FRA Board of Directors Decision No. 22 of 2020 Date: 2020/2/16 Regarding Supervisory Controls for Targeted Financial Sanctions Lists in Counter-Terrorism and Proliferation of Weapons of Mass Destruction for Entities Operating in Non-Banking Financial Activities

The Board of Directors of the Egyptian Financial Regulatory Authority, Having reviewed Law No. 10 of 1981 concerning supervision and oversight of insurance in Egypt and its executive regulations; And Law No. 159 of 1981 concerning joint stock companies, limited partnerships by shares, limited liability companies, and single-shareholder companies and its executive regulations; And Law No. 95 of 1992 concerning the capital market and its executive regulations; And the decisions issued to implement them; And Law No. 93 of 2000 concerning central depository and registration of securities and its executive regulations; And Law No. 148 of 2001 concerning real estate financing and its executive regulations and implementing decisions; And Law No. 80 of 2002 concerning combating money laundering and its executive regulations and implementing decisions; And Law No. 10 of 2009 concerning regulation of supervision on non-banking markets and financial instruments; And Law No. 141 of 2014 concerning regulation of micro-trading registration activities and its implementing decisions; And Law No. 8 of 2015 concerning regulation of terrorist entities and terrorists lists; And Law No. 94 of 2015 concerning combating terrorism; And Law No. 176 of 2018 concerning regulation of financial leasing and privatization activities and its implementing decisions; And Prime Minister's Decision No. 2910 of 2019 concerning amendment of certain provisions of the executive regulations of the law on combating money laundering and financing of terrorism; And FRA Board Decision No. 120 of 2019 concerning anti-money laundering and counter-terrorism financing controls for entities operating in non-banking financial activities; And FRA Board Decision No. 121 of 2019 concerning controls for registering AML/CTF investors with entities operating in non-banking financial activities at the Authority; And the National Strategy for Combating Money Laundering and Financing of Terrorism; Having reviewed previous decisions and instructions issued regarding targeted financial sanctions lists; Having coordinated with the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Unit regarding the mechanism for implementing UN Security Council resolutions on targeted financial sanctions related to terrorism and its financing and proliferation financing of weapons of mass destruction; And after approval by the Board of Directors in its session held on 2020/2/16,

Decided:
(Article One)
Definition of Targeted Financial Sanctions Lists (Negative Lists)

1. The UN Security Council has specified the names of persons and entities subject to targeted financial sanctions and organized them into Targeted Financial Sanctions (TFS) lists. These are sanctions lists related to terrorism and its financing, and sanctions lists related to the proliferation of weapons of mass destruction, in accordance with a set of standards under Security Council resolutions, through independent committees monitoring requests for new names submitted by various states, as well as requests for delisting and exemption from freezing.

2. The Financial Action Task Force (FATF) issued its Recommendation 6, calling on states to implement targeted financial sanction systems issued under Chapter VII of the UN Charter in accordance with Security Council resolutions, specifically those concerning the prevention and suppression of terrorism and its financing. Among the most important of these resolutions are: Resolution (1267/1989/2753) and its subsequent resolutions regarding sanctions related to persons and entities affiliated with Al-Qaeda and ISIS, and Resolution (1988) regarding persons and entities related to the Taliban. These resolutions oblige states to freeze without delay (within hours) funds or other assets or economic resources of any person or entity listed under these resolutions.

3. The FATF issued its Recommendation 7 to oblige states to implement targeted financial sanction systems in accordance with Security Council resolutions concerning the prevention and suppression of proliferation of weapons of mass destruction and its financing, particularly Resolution (1718) and its subsequent resolutions regarding arms embargoes, asset freezes, and travel bans on persons involved in the nuclear program of the Democratic People's Republic of Korea, and Resolution (2231) regarding the Iranian file and its preceding resolutions. These resolutions oblige states to freeze without delay funds and other assets of any person or entity designated by the Security Council and ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of such persons or entities.

4. UN Security Council Resolution (1373) emphasized the necessity for states to combat terrorist acts and terrorists within and outside their borders, noting that this requires measures to prevent and criminalize terrorist acts, and freeze funds and other assets of terrorists and terrorist entities. Accordingly, several laws were issued to activate effective implementation of this resolution, the most important being the law regulating terrorist entities and terrorists lists, under which two lists of terrorist entities and terrorists were prepared, and the consequences of listing persons or entities on either list were determined, including freezing funds and other assets.

5. The Anti-Money Laundering and Combating the Financing of Terrorism Unit - referred to in this decision as "the Unit" - has established obligations regarding names listed on the Negative Lists (UN Security Council sanctions lists and the two lists of terrorist entities and terrorists), which can be referenced on the Unit's website via the Negative Lists link (https://mlcu.org.eg/ar). This includes the following:
   (a) Relevant UN Security Council lists.
   (b) Amendments to UN Security Council sanctions.
   (c) Mechanism for implementing UN Security Council resolutions on applying targeted financial sanctions related to terrorism and its financing and proliferation financing of weapons of mass destruction.
   (d) Detailed guidelines on applying targeted financial sanctions related to terrorism and its financing and proliferation financing of weapons of mass destruction, which include: (Definitions - how to access UN Security Council lists and their updates - entity obligations regarding relevant UN Security Council lists on terrorism and its financing and proliferation financing of weapons of mass destruction).
   (e) Local lists of terrorist entities and terrorists.
   (f) Obligations of implementing parties regarding the two lists of terrorist entities and terrorists.

(Article Two)
Obligations of Egyptian Exchanges and Entities Operating in Non-Banking Financial Activities To Egyptian Exchanges and entities operating in non-banking financial activities, compliance with the detailed guidelines issued by the Anti-Money Laundering and Combating the Financing of Terrorism Unit regarding implementation of UN Security Council resolutions on targeted financial sanctions related to terrorism and its financing and proliferation financing of weapons of mass destruction, specifically regarding UN Security Council sanctions lists related to terrorism and its financing and proliferation financing of weapons of mass destruction, and the two lists of terrorist entities and terrorists, is required as follows:

1. Add a paragraph to the internal policy or work procedures of entities subject to this decision regarding the importance of applying targeted financial sanctions in listing names, in decisions or removing them from them (i.e., within hours of the listing decision issuance, and notifying the Unit and the Authority thereof. It is immediate renewal or immediate delisting, and ensure that the risk management and customer acceptance policy applied by entities subject to this decision covers risks related to persons and entities listed on the lists and determines appropriate procedures to deal with them.

2. Disseminate the guidelines issued by the Unit to entities subject to this decision and ensure employee awareness and proper comprehension by their staff.

3. Disseminate customer due diligence procedures to all entities subject to this decision and ensure employee awareness, and commit to implementing what is stipulated in the Unit's controls regarding due diligence procedures concerning Negative Lists.

4. Ensure that the systems, programs, and internal procedures of entities subject to this decision include an effective system enabling them to detect names of persons listed on UN Security Council lists and the two lists of terrorist entities and terrorists, and lists issued under final judgments or by the Public Prosecutor or the Illicit Gain Administration or the Committee for Procedures of Preservation, Seizure, Management, and Disbursement of funds of terrorist groups and terrorists, or any decisions issued by regulatory authorities in the state. These entities must verify the capability of such applied systems to detect matching cases such as: name, ID number, nationality, date of birth, and other information. The following should be considered regarding this system:
   (a) Identify persons and entities whose names are listed on relevant UN Security Council lists and the two lists of terrorist entities and terrorists by the Public Prosecutor.
   (b) Immediate freezing, without prior notice, of all funds, securities, financial instruments, or other assets owned by these persons and entities.
   (c) Mandatory reference to Negative Lists when entering into a new business relationship with any natural or legal person and following due diligence procedures issued by the Unit, and therefore, upon their listing on these lists, as well as comparing all parties to any transaction with these lists. Furthermore, opening an account, concluding a contract for a product, obtaining financing or insurance documents, or concluding any contracts for products or any non-banking financial services, and others according to the nature of the entity's work, must be done before executing these transactions. (d) Immediate update of information related to relevant UN Security Council lists and the two lists of terrorist entities and terrorists and any amendments thereto upon receipt.

5. Monitor any changes that may occur on Negative Lists on a daily basis, and immediately update the systems and internal procedures of entities subject to this decision according to such changes, in addition to updates sent by the Authority on this matter.

6. Refrain from dealing directly or indirectly with any natural or legal person from the names listed on Negative Lists. Furthermore, employees, new applicants, beneficiaries, and investigators, and all parties related to any transaction.

7. Commit to freezing funds, securities, financial instruments, or other assets if they are in the form of (accounts, deposits, insurance policies, etc.) belonging to persons and entities listed on the lists immediately without delay. The freeze shall include the following:
   (a) All funds, securities, financial instruments, or other assets controlled by the named person or entity, not only those that can be specifically used for a particular terrorist act, money laundering, or threat.
   (b) Funds, securities, financial instruments, or other assets owned by named persons or entities, wholly or jointly with others, or controlled by them directly or indirectly.
   (c) Funds, securities, financial instruments, or other assets acquired from or derived from funds or other assets owned by named persons or entities or controlled by them directly or indirectly.
   (d) Funds, securities, financial instruments, or other assets belonging to persons or entities that are owned by or controlled by named persons or entities.

8. Refrain from making any funds, securities, financial instruments, or other assets or economic resources or financial services or any other related services available, directly or indirectly, for the benefit of persons and entities listed on Negative Lists and for the benefit of entities owned by these persons or entities listed or controlled by them directly or indirectly, as well as for the benefit of persons and entities that are owned by or controlled by listed entities.

9. Continue to add any dividends or other profits, earnings, or payments due to frozen accounts, provided they remain frozen.

10. Immediately implement notifications received by entities subject to this decision from state regulatory authorities regarding frozen funds and other assets concerning exemptions without delay. Furthermore, decisions regarding requests for basic expenses disbursement or exceptional expenses disbursement.

11. Notify the Unit of any funds or other assets that have been frozen or unfrozen, as well as immediately upon taking such action, and any measures taken to comply with freezing or unfreezing requirements, including attempted transactions. Send an email to (Emlcu@mlcu.org.eg) and notify the Authority by sending an email to AMLCD@fra.gov.eg.

12. Prepare records detailing freezing or unfreezing operations conducted by entities subject to this decision, which must include (transaction parties, date of freeze, value of frozen amounts, date of unfreeze). These records must be maintained in a manner that allows them to be referenced at any time when requested, to enable supervision of the number of natural or legal persons whose names matched those on Negative Lists and the total amounts frozen.

13. Monitor daily what is published by the Unit on its website (https://mlcu.org.eg/ar) regarding instructions and guidance data concerning Negative Lists, which is considered a daily obligation for them, to fulfill the obligations of the Arab Republic of Egypt in this regard.

14. Prepare a periodic letter or work manual to be disseminated to all employees of the entity and ensure employee awareness, outlining employee obligations of entities subject to this decision according to the nature of their work and their internal systems regarding names listed on Negative Lists.

(Article Three)
Obligations of Anti-Money Laundering Officers
Without prejudice to the obligations of Anti-Money Laundering Officers under the legislations governing them, these officers in entities subject to this decision must do the following:

1. Monitor the Anti-Money Laundering and Combating the Financing of Terrorism Unit website daily to update any changes that may occur to all sanctions lists or any guidelines or procedures issued by the Unit, without waiting for any notification or circular from the Authority on this matter.
2. Monitor the compliance of the entity subject to this decision and its branches with referencing Negative Lists when conducting any transaction or entering into a new business relationship with a person or entity to verify listing on those lists or not.