General Authority for Financial Supervision

FINANCIAL REGULATORY AUTHORITY

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Chairman of the Authority

Resolution No. (23) of 2020 of the Board of Directors dated 16/02/2020

Regarding the Regulatory Controls Concerning Targeted Financial Sanctions and Restriction Lists in the Field of Combating Terrorism

and the Proliferation of Weapons of Mass Destruction for Entities Operating in Non-Banking Financial Activities

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Board of Directors of the General Authority for Financial Supervision

Having reviewed Law No. (10) of 1981 concerning supervision and control of insurance in Egypt and its executive regulations and the decisions issued to implement it;

And Law No. (159) of 1981 concerning Joint Stock Companies, Limited Partnerships by Shares, Limited Liability Companies, and Single-Person 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 it;

And Law No. (93) of 2000 concerning Deposit and Registration of Securities and its executive regulations;

And Law No. (148) of 2001 concerning Real Estate Financing and its executive regulations and the decisions issued to implement it;

And Law No. (80) of 2002 concerning Combating Money Laundering and its executive regulations and the decisions issued to implement it;

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 to implement it;

And Law No. (8) of 2015 concerning the regulation of terrorist entities and terrorists lists;

And Law No. (94) of 2015 concerning Combating Terrorism;

And Law No. (176) of 2018 concerning the regulation of financial leasing and installment activities and the decisions issued to implement it;

And Prime Minister's Resolution No. (2910) of 2019 concerning the amendment of certain provisions of the executive regulations of the law on combating money laundering and financing of terrorism;

And FRA Board of Directors Resolution No. (120) of 2019 concerning anti-money laundering and counter-terrorist financing controls for entities operating in non-banking financial activities;

And FRA Board of Directors Resolution No. (121) of 2019 concerning the registration of AML and CTF officers at entities operating in non-banking financial activities with the Authority;

And the National Strategy for Combating Money Laundering and Financing of Terrorism;

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And having re-reviewed the previous decisions and directives issued regarding targeted financial sanctions and restriction lists;

And having re-coordinated with the Anti-Money Laundering and Counter-Terrorist Financing Unit regarding the mechanism for implementing UN Security Council resolutions concerning targeted financial sanctions related to terrorism and its financing and the financing of proliferation of weapons of mass destruction;

And having re-approved by the Board of Directors in its session held on 16/02/2020;

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Article One

Definition of Targeted Financial Sanctions and Restriction Lists (Negative Lists)

1- The UN Security Council has specified the names of persons and entities subject to targeted financial restrictions (sanctions) and organized them into lists of sanctions (Financial Sanctions). These are sanctions lists related to terrorism and its financing, and sanctions lists related to the financing of proliferation of weapons of mass destruction, in accordance with a set of standards under UN Security Council resolutions. This is done through independent committees that receive requests to propose new names for listing submitted by various countries, as well as requests for delisting and requests for exemption from renewal.

2- The Financial Action Task Force (FATF) issued its Recommendation 6 regarding countries applying targeted financial sanctions systems issued under Chapter VII of the UN Charter in accordance with UN Security Council resolutions, specifically those concerning the prevention and suppression of terrorism and its financing. Among the most important of these resolutions are: Resolution (1267/1989/2253) and its subsequent resolutions concerning sanctions related to persons and entities affiliated with Al-Qaeda and ISIS, and Resolution (1988) concerning persons and entities related to the Taliban. These resolutions oblige countries to freeze without delay (within hours) the economic resources of any person or entity listed under these resolutions.

3- The FATF issued its Recommendation 7 to oblige countries to apply targeted financial sanctions systems in accordance with UN Security Council resolutions concerning the prevention and suppression of the proliferation of weapons of mass destruction and its financing. This includes Resolution (1718) and its subsequent resolutions concerning 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) concerning the aforementioned measures. These resolutions oblige countries to freeze without delay the funds and other assets of any person or entity specifically designated by the UN Security Council, and to 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) affirmed the necessity for countries to combat terrorist acts and terrorists within and outside their borders. It indicated that this requires implementing measures to prevent and criminalize terrorist acts, and to freeze the funds and other assets of terrorists and terrorist entities. Accordingly, a number of laws were issued to effectively implement this resolution, the most important of which is the law regulating terrorist entities and terrorists lists. Under this law, two lists of terrorist entities and terrorists were prepared, and the consequences of listing persons or entities on either list were determined, including the freezing of funds and other assets.

5- The Anti-Money Laundering and Counter-Terrorist Financing Unit – referred to in this resolution 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). These can be accessed on the Unit's website under the Negative Lists section: (https://mlcu.org.eg/ar). This section includes the following:

(a) Relevant UN Security Council lists.

(b) Updates on UN Security Council sanctions lists.

(c) Mechanism for implementing UN Security Council resolutions to apply targeted financial sanctions related to terrorism and its financing and the financing of weapons of mass destruction.

(d) Detailed guidelines related to how to apply targeted financial sanctions related to terrorism and its financing and the 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 related to terrorism and its financing and the financing of proliferation 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.

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Article Two

Obligations of Egyptian Exchanges and Entities Operating in Non-Banking Financial Activities

Egyptian exchanges and entities operating in non-banking financial activities must comply with the detailed guidelines issued by the Anti-Money Laundering and Counter-Terrorist Financing Unit regarding the implementation of UN Security Council resolutions concerning targeted financial sanctions related to terrorism and its financing and the financing of proliferation of weapons of mass destruction. This specifically pertains to UN Security Council sanctions lists related to terrorism and its financing and the financing of weapons of mass destruction, and the two lists of terrorist entities and terrorists, as follows:

1- Add a paragraph to the internal policies or work procedures of the entities subject to this resolution regarding the importance of applying targeted financial sanctions without delay (i.e., within hours of the listing or delisting decision) and the subsequent procedures, including immediate freezing or delisting, as well as notifying the Unit and the Authority thereof.

2- The risk management and customer acceptance policies applied by entities subject to this resolution must include requirements for persons and entities listed on the lists to determine appropriate procedures for dealing with them.

3- Disseminate the guidelines issued by the Unit to the entities subject to this resolution and their branches, and ensure thorough understanding of these guidelines by their employees.

4- Disseminate due diligence procedures to all entities subject to this resolution and their branches, and commit to implementing the Unit's controls regarding due diligence procedures concerning the Negative Lists.

5- The systems, records, and internal programs of entities subject to this resolution must include an effective system enabling them to detect names of persons listed on UN Security Council sanctions lists, the two lists of terrorist entities and terrorists, and lists issued under final judgments or decisions issued by the Public Prosecutor or the Illicit Gain Administration or the Committee for Procedures of Preservation, Seizure, Management, and Disposal of Funds of Terrorist Groups and Terrorists, or any decisions issued by state regulatory authorities. These entities must verify the capability of these applied systems to detect matching cases such as: name, ID number, nationality, date of birth, and other information. The following must be considered regarding this system:

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(a) Identify persons and entities listed on UN Security Council lists related to terrorism and the two lists of terrorist entities and terrorists.

(b) Immediate freezing, without prior notice, of all funds, papers, financial instruments, or other assets owned by these persons and entities.

(c) Mandatory reference to the Negative Lists when entering into a new business relationship with any natural or legal person, and following the due diligence procedures issued by the Unit, to verify whether they are listed on these lists. This also includes comparing all parties to any transaction with these lists, which includes: opening an account, concluding a contract for financing or insurance policies, or concluding any contracts to obtain any non-banking financial services, etc., according to the nature of each entity's work, before executing these transactions.

(d) Immediate updating of information related to UN Security Council lists concerning terrorism and the two lists of terrorist entities and terrorists, reflecting any amendments upon receipt.

6- Monitor any changes to the Negative Lists on a daily basis, and immediately update the systems and programs of entities subject to this resolution, in addition to any updates sent by the Authority on this matter.

7- Refrain from dealing, directly or indirectly, with any natural or legal person whose name appears on the Negative Lists. This includes: existing customers, new customers, occasional customers, beneficial owners, and all parties related to any transaction.

8- Commit to freezing funds, papers, financial instruments, or other assets (accounts, deposits, policies, insurance, etc.) belonging to persons and entities listed on the Negative Lists without delay. The freezing must include the following:

(a) All funds, papers, financial instruments, or other assets owned or controlled by the named person or entity, not just those that can be identified as used for a specific terrorist act, conspiracy, or threat.

(b) Funds, papers, financial instruments, or other assets owned or controlled by the person or entity jointly with others, or controlled directly or indirectly, in full.

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(c) Funds, papers, financial instruments, or other assets acquired from or derived from funds or other assets owned by or controlled directly or indirectly by the named persons or entities.

(d) Funds, papers, financial instruments, or other assets belonging to persons and entities acting on behalf of or under the direction of the named persons or entities.

9- Refrain from making available any funds, papers, financial instruments, or other assets, or financial services, economic resources, or other services, directly or indirectly, for the benefit of persons and entities listed on the Negative Lists, and for the benefit of entities owned by or controlled directly or indirectly by these listed persons or entities, as well as for the benefit of persons and entities acting on behalf of or under the direction of the listed persons or entities.

10- Continue to add any interest or other profits, revenues, or payments due to frozen accounts, provided they remain frozen.

11- Immediately execute notifications received by entities subject to this resolution from state regulatory authorities regarding the supervision of frozen funds and other assets concerning exemptions, without delay. This includes decisions regarding requests for basic expenditure disbursements or exceptional expenditure disbursements.

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

13- Prepare records detailing the freezing or delisting operations conducted by entities subject to this resolution. These records must include (transaction parties, freezing date, frozen amount value, delisting date). These records must be kept in a manner that allows the entity to access them at any time when requested, to enable determination of the number of natural or legal persons whose names matched those on the Negative Lists and the total amounts frozen.

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14- Monitor daily what the Unit publishes on its website regarding instructions and guidance data concerning the Negative Lists. This is considered a daily obligation for them, to fulfill the obligations of the Arab Republic of Egypt in this regard.

15- Prepare a periodic letter or manual to be disseminated to all employees of the entity and its branches, outlining the obligations of employees of entities subject to this resolution according to the nature of their work and their internal systems regarding names appearing on the Negative Lists.

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Article Three

Obligations of AML Officers

Without prejudice to the obligations of AML officers under the governing legislation, these officers at entities subject to this resolution must do the following:

1- Monitor the Anti-Money Laundering and Counter-Terrorist Financing Unit's website daily to extend any updates that may occur to all sanctions lists or updated guidelines or procedures issued by the Unit, without waiting for any notification or directive from the Authority on this matter.

2- Monitor compliance by the entity subject to this resolution and its branches with the Negative Lists when referring to the lists during any transaction or entering into a new business relationship with a person or entity to verify whether they are listed on these lists.

3- Immediately update information related to sanctions lists and any amendments upon receipt.

4- Screen and match all current customers of the entity upon each update of the Negative Lists to ensure they are not among the entity's customers and to prohibit dealing with them.

5- Ensure no dealing with any natural or legal person whose name appears on the Negative Lists. Verification is required in the following cases:

(a) Review new customer names and identify the beneficial owner when starting a business relationship with the customer before carrying out account opening, financing, or insurance policy procedures, as applicable. All parties related to the account must be reviewed, including (customer, shareholder, guarantor, authorized signatory, partner, agent, trustee, guardian, etc.) or other parties transacting on the customer's account.

(b) When existing customers update their data.

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(c) Occasional customers who request the execution of a transaction without intending to establish a continuous relationship with the entity. The requested transaction in this case is considered an occasional transaction.

(d) Periodic screening of the entity's current customers upon each list update to ensure they are not listed on these lists.

6- Monitor the implementation of targeted financial sanctions without delay (within hours of the decision issuance) and the subsequent immediate freezing procedures, and notify the Unit and the Authority thereof.

7- Review the applied systems for list screening according to the system in force at the entity, and verify the periodicity of updates to these lists.

8- Ensure that customer due diligence procedures are disseminated to all branches of the entity.

9- Retain documents proving that the entity has screened its customers against the Negative Lists, whether UN Security Council sanctions lists related to terrorism and its financing and the financing of proliferation of weapons of mass destruction, or the two lists of terrorist entities and terrorists.

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Article Four

Obligations of Internal Audit Officer

Without prejudice to decisions issued by the Authority, the Internal Audit Officer (or the regulatory unit entrusted with internal audit work) at entities subject to this resolution must prepare a periodic report at least every three months for presentation to the entity's Board of Directors, regarding the results of the AML and CTF officer's work. This report should take into account the nature, size, and type of the activity conducted, as well as the customers and products or services provided. It must continuously ensure full compliance with legal requirements and decisions issued in this regard, including these controls. In all cases, the Authority must be provided with this report immediately upon its approval by the Board of Directors.

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Article Five

Obligations of External Auditor

Without prejudice to the provisions of prevailing legislation concerning external auditors, the external auditor of entities subject to this resolution must review the entity's internal control environment during their audit, and verify its compliance with the rules