Egypt is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Egypt was undertaken by the Financial Action Task Force (FATF) in 2009. According to that Evaluation, Egypt was deemed Compliant for 5 and Largely Compliant for 20 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 3 of the 6 Core Recommendations.
Key Findings from latest Mutual Evaluation Report (2009):
The Government of Egypt has taken significant steps to set up an AML/CFT regime, compared to 2002, when none existed. The AML/CFT Law criminalizes money laundering in Egypt, the material elements are broadly in line with the Palermo and Vienna Conventions, but participation in some forms of organized crime and adult human trafficking are not crim inalized. Terrorism financi ng is criminalized in the Penal code, but its provisions capture neither the financing of an individual terrorist, nor the collection of funds with the unlawful intention that they should be used or in the knowledge that they are to be used to carry out a terrorist act or acts. With regard to implementation of United Nations Security Council Resolutions, information provided to support the authorities’ claim of implementing the Resolutions did not fully meet the requirements set out by the methodology.
The legal and regulatory framework that has been established for the EMLCU, the Egyptian financial intelligence unit, is sound and comprehensive. A strong effort has been made to put in place key customer due diligence (CDD) requirements for financial institutions but significant gaps remain (especially on beneficial ownership, on unusual transactions as defined by Recommendation 11 and for three institutions including a large bank, Arab International Bank). Significant efforts have been made to supervise banks and, more recently, brokers, efforts that need to be sustained and extended to other institutions, where AML /CFT supervision still appears weak. The outcomes, in terms of numbers of suspicious transaction reporting, are low, and even lower for cases that are referred to prosecution.
During the past four years, only four money laundering cases were taken to trial, and only one conviction was achieved. 6. Egypt has issued AML/CFT regulations for some sectors of the Designated Non Financial Businesses and Professions, DNFBPs (casinos are cov ered for some activities; real estate brokers and dealer of precious metals and stones were brought under coverage during the on-site mission,). Lawyers and accountants are not subject to AML /CFT regulations.
The Egyptian system is structured to ensure that legal entities are not used for unlawful purposes and legal provisions on the establishment, registra tion and monitoring of non-governmental organizations are strictly enforced. Egypt’s domestic cooperation and coordination has been fairly robust and Egypt has a strong legislative framework for the provision of mutual legal assistance and extradition.
The assessors have identified the following recommendations as short term priorities to improve the effectiveness of the AML/CFT regime and help address the very low numbers of suspicious transactions reporting, ML and TF prosecutions and convictions: (i) develop a comprehensive data base on AML/CFT issues, and a set of indicators to assess the effectiveness of the AML/CFT regime, (ii) promulgate clear processes and procedures for implementing the UN Security Council Resolutions 1267 and 1373, (iii) criminalize participation in organized criminal groups and human trafficking, (iv) strengthen the AML /CFT supervisory regime for the three banks not supervised by the CBE and intensify their on-site supervision, (v) include the remaining DNFBPs in the AML /CFT framework, or develop safeguards so that their continued exclusion does not impair the effectiveness of the AML /CFT regime.
US Department of State Money Laundering assessment (INCSR)
Egypt was deemed a Jurisdiction of Concern by the US Department of State 2013 International Narcotics Control Strategy Report (INCSR).
Key Findings from the report are as follows: -
Egypt is not considered a regional financial centre or a major hub for money laundering. In the past year, the Government of Egypt (GOE) has shown increased willingness to tackle the issue of money laundering, especially with regard to investigating allegations of illicit gains or corruption under the Mubarak regime. The European Union and Canada have taken action to freeze the assets of Mubarak and several members of his regime based on their apparent misappropriation from the Egyptian state. However, while anti-money laundering resources remain focused on corruption by former members of the Mubarak regime, Egypt remains vulnerable to money laundering by virtue of its large informal, cash-based economy. There are estimates that as much as 80 percent of the small and medium enterprise sector is unregistered and reliant on the informal economy. Thus, despite having a large, well developed and well-respected formal financial sector, many smaller-scale financial transactions are undocumented or do not enter the banking system. Consequently, money laundering, such as for the purpose of avoiding taxes and fees, is common. In addition, sources of illegal proceeds reportedly include the smuggling of antiquities and trafficking in narcotics and/or arms. Authorities note increased interception of illicit cross-border fund transfers by customs agents over the past few years.
Do financial Institutions engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or that otherwise significantly affect the U.S.: No
Criminalization of Money Laundering:
“All serious crimes” approach or “list” approach to predicate crimes: List approach
Are legal persons covered: criminally: YES civilly: YES
Know-Your-Customer (KYC) Rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, foreign exchange and money transfer companies, the post office, insurance companies, securities firms, leasing and factoring companies, mortgage financing companies, real estate brokers, dealers in precious metals and stones, and casinos
Number of STRs received and time frame: 1,199: June 2011 – June 2012
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, foreign exchange and money transfer companies, the post office, insurance companies, securities firms, leasing and factoring companies, and mortgage financing companies
Money Laundering Criminal Prosecutions/Convictions:
Prosecutions: Not available
Convictions: Not available
Records Exchange Mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Egypt is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force- style regional body.
Enforcement And Implementation Issues And Comments:
The GOE appears to be more actively engaged on money laundering issues. The GOE is currently working to incorporate technical and analytical training on the investigation and prosecution of money laundering and related crimes into its judicial curriculum. Law enforcement authorities have shown improvements in identifying and seizing illicit cross-border shipments and currency transfers, while the courts continue to vigorously pursue corrupt members of the previous regime. There is reason to believe that statistical data regarding money laundering prosecutions and convictions may understate the number of money laundering investigations. Egyptian prosecutors are obliged to charge the most serious, readily provable offense. Because many public corruption and similar offenses carry higher penalties than money laundering, money laundering may not be charged even though the offense conduct included such activity.
The GOE should continue to build its capacity to successfully investigate and prosecute money laundering offenses. In particular, the judicial system should continue to increase the number of judges trained in financial analysis related to money laundering offenses. The GOE also should work to more effectively manage its asset forfeiture regime, including the identification, seizure and forfeiture of assets.
US State Dept Narcotics Report 2014:
While Egypt is not a major producer or supplier of narcotics or precursor chemicals, there is significant consumption of hashish and the opioid painkiller tramadol in the country. It also serves as a transit point for transnational shipments of narcotics from Africa to Europe due to its sparsely guarded borders with Libya and Sudan, and the high quantity of shipping through the Suez Canal. It is also considered a destination market for hashish, primarily from Morocco and Afghanistan.
The Anti-Narcotics General Administration (ANGA), an agency within the Ministry of the Interior, oversees national counternarcotics operations and cooperates with the U.S. Drug Enforcement Administration (DEA) to identify, detect, disrupt and dismantle national and international drug trafficking organizations operating in Egypt. ANGA works on a limited budget but updates its operating equipment on a systematic basis. ANGA’s communication system is capable and is routinely enhanced and serviced. Cooperation between ANGA and the Egyptian Armed Forces’ Special Forces and Border Guard units is good.
Prior to the 2011 revolution, ANGA conducted scheduled and routine eradication campaigns targeting cannabis and poppy cultivation sites; however, since then, it has not conducted any enforcement efforts other than vehicle inspections at Suez Canal crossings from the Sinai peninsula. Large-scale seizures and arrests related to cocaine, heroin and methamphetamine are rare, but in 2013, there were large seizures of marijuana and psychotropic pills. These include a March 2013 seizure of approximately 27 million tablets of tramadol at the Port of Alexandria; an April 2013 seizure of approximately four metric tons of marijuana from a truck transiting the Suez Canal; and an August 2013 seizure of 99,000 tablets of tramadol from a vehicle in a Cairo suburb, 6th October City.
Egypt oversees the import and export of all internationally-recognized precursor chemicals through a committee composed of the Ministry of Interior (ANGA), Ministry of Finance (Customs) and Ministry of Health (Pharmaceutical). This committee approves and denies requests to import/export chemicals. Over the past few years, there has been a spike in the importation of ephedrine, a precursor for methamphetamine, for use in the legitimate production of cold and flu medicine, a domestic industry developed since 2010. The Egyptian government claims that there is no evidence indicating large scale diversions of ephedrine or other precursor chemicals and it has not made any seizures.
The Government of Egypt does not encourage or facilitate illicit production or distribution of narcotic or psychotropic drugs or other controlled substances, or the laundering of proceeds from illegal transactions. Egypt has strict laws and penalties for officials convicted of involvement in narcotics trafficking activities.
US State Dept Trafficking in Persons Report 2013 (introduction):
Egypt is classified a Tier 2 country - a country whose government does not fully comply with the Trafficking Victims Protection Act’s minimum standards, but is making significant efforts to bring themselves into compliance with those standards.
Egypt is a source, transit, and destination country for women and children who are subjected to conditions of forced labor and sex trafficking. Men and women from Egypt, South and Southeast Asia, and Africa may be subjected to forced labor in Egypt. Some workers in domestic service in Egypt have been held in conditions of forced labor, including foreign women from Indonesia, the Philippines, Sudan, Eritrea, Ethiopia, and possibly Sri Lanka. Indonesians make up the largest number of foreign domestic servants, including those who are held in conditions of forced labor. Some of these conditions include: lack of time off; sexual, physical, and emotional abuse; withholding of wages and documents; and restrictions on movement. Employers may use some domestic workers’ lack of legal status and lack of employment contracts as coercive tools.
Instances of human trafficking, smuggling, abduction, torture, and extortion of migrants, including asylum seekers, and refugees—particularly from Eritrea, Sudan, and to a lesser extent Ethiopia—continue to occur in the Sinai Peninsula at the hands of criminal groups. Many of these migrants are reportedly held for ransom and forced into sexual servitude or forced labor during their captivity in the Sinai, based on documented victim testimonies. Reports of physical and sexual abuse continue to increase. While the flow of these migrants into Israel slowly decreased by mid-2012, likely in part because of the construction of Israel’s border fence, there has not been a documented decrease in the number of migrants entering the Sinai. Whereas criminals previously abandoned the migrants at the Israeli border after collecting ransom payments, perpetrators now sometimes abandon migrants—some of whom are trafficking victims—at police stations and medical facilities in Cairo and in remote areas of the Sinai. There continue to be infrequent reports that Egyptian border patrols shoot and sometimes kill these migrants, refugees, asylum seekers, and trafficking victims in the Sinai as they attempt to cross the Israeli border; many are also arrested and detained in Egyptian prisons in the Sinai.
Some of Egypt’s estimated 200,000 to one million street children—both boys and girls—are subjected to sex trafficking and forced begging. Informal criminal groups are sometimes involved in this exploitation. Egyptian children are recruited for domestic service and agricultural labor; some of these children face conditions indicative of forced labor, such as restrictions on movement, nonpayment of wages, threats, and physical or sexual abuse. In addition, wealthy men from the Gulf, including Saudi Arabia, the United Arab Emirates, and Kuwait reportedly continue to travel to Egypt to purchase “temporary” or “summer marriages” with Egyptian women and girls; these arrangements are often facilitated by the women and girls’ parents and marriage brokers who profit from the transaction. Children involved in these temporary marriages are subjected to both sexual servitude and forced labor at the hands of their “husbands.” Child sex tourism—the commercial sexual exploitation of children by foreign tourists—occurs in Egypt, particularly in Cairo, Alexandria, and Luxor. Egypt is a destination country for women and girls forced into prostitution, including refugees and migrants, from Asia and sub-Saharan Africa and to a lesser extent the Middle East. Egypt also is a source country for workers subjected to conditions of forced labor in neighboring countries. Young and middle-aged Egyptian men filled construction, agriculture, and low-paying service jobs in Jordan. NGO and media reports indicate some Egyptians are forced to work in Jordan and experience conditions of forced labor, namely the withholding of passports, forced overtime, nonpayment of wages, and restrictions on their movements.
The Government of Egypt does not fully comply with the minimum standards for the elimination of trafficking, but it is making efforts to do so. The government reported prosecuting and convicting trafficking offenders, though it failed to investigate and prosecute government officials allegedly complicit in trafficking offenses, particularly the forced labor of domestic workers in their private residences. By some accounts, police ignored potential trafficking-related offenses in the Sinai. Egypt began to implement its national referral mechanism, identifying an increased number of trafficking victims. NGOs, international organizations, and foreign diplomats also noted increased capacity, sensitivity, and awareness of some government officials in identifying and providing services to trafficking victims. Despite this success, there were reports that many government officials failed to employ the referral mechanism systematically to identify victims among vulnerable groups, including foreign migrants abused in the Sinai, people in prostitution, and women in domestic servitude, and as a result victims were often treated as criminals.
US State Dept Terrorism Report 2012
Overview: Egyptian security services faced an evolving political, legal, and security environment in which they continued to combat terrorism and violent extremism. In June, Egypt elected a President, replacing the military council that had ruled the country since February 2011. In August, an attack on an Egyptian military installation near Rafah resulted in the deaths of 16 Egyptian soldiers and the hijacking of military vehicles, which were then used in an attempt to attack targets in Israel. This attack brought the problem of lawlessness in the Sinai to the forefront of President Morsy’s security agenda. While the National Security Sector, which replaced the State Security Investigations Service in 2011, has struggled to fully understand and effectively combat terrorist threats, it has had some successes, such as the October raid and arrest of al-Qa’ida (AQ) aspirants in Cairo’s Nasr City neighborhood. In addition, following the September 11 breach of the U.S. Embassy compound in Cairo, the Ministry of Interior ordered improvements to security measures around the Embassy.
Egypt's Northern Sinai region remained a transit route for smuggling arms and explosives into Gaza, as well as a base and transit point for Palestinian violent extremists. The smuggling of humans, weapons, cash, and other contraband through the Sinai into Israel and Gaza supported criminal networks with possible ties to terrorist groups in the region, although media accounts of Egyptian action to collapse smuggling tunnels increased later in the year. The smuggling of weapons from Libya to and through Egypt has increased since the overthrow of the Qadhafi regime. The security forces interdicted some of these arms. While it remained opposed to violent extremism, the Egyptian government largely focused its efforts on protecting official installations, restoring basic security, and ensuring a peaceful political transition.
Legislation, Law Enforcement, and Border Security: Egypt’s Emergency Law, in effect since 1981, expired on May 31, 2012. State emergency courts continued to adjudicate those arrested for Emergency Law violations that occurred prior to its annulment. Officially, after that date, terrorism suspects were supposed to be investigated by civilian prosecutors for trial in regular civilian courts. In some cases, involving attacks on military personnel and facilities, however, military prosecutors and courts continued to function and assert jurisdiction.
Egypt continued its incremental efforts to improve border security with U.S. assistance and maintained its strengthened airport and port security measures and security for the Suez Canal, though the country’s political transition and change in government delayed further progress. Egyptian border officials maintained a watch list for suspected violent extremists.
The United States provided technical assistance to Egypt to ensure the peaceful and legal movement of people and goods through the Rafah border crossing with Israel. To combat Sinai- Gaza frontier smuggling, installation was completed for Omniview scanners at the Peace Bridge on the Suez Canal at El Qantara. In addition, five Egyptian officers travelled to the United States in September to visit U.S. Customs and Border Protection (CBP), the Department of Homeland Security (DHS) headquarters, and the U. S. Port of Entry along the U.S.-Mexico border in California. CBP worked with Egyptian Customs Authority in Alexandria, Egypt to identify its customs-specific training needs.
On October 24, Egyptian security services raided a Cairo apartment in the Nasr City neighborhood and arrested a number of Egyptians, Libyans, and Tunisians associated with AQ aspirants in Egypt. On October 30, they arrested Sheikh Adel Shehato, an Egyptian Islamic Jihad official who is accused of founding and financing the Nasr City cell. The Egyptian security services subsequently arrested group leader Muhammad Jamal al Kashef. Authorities seized weapons, some of which may have been smuggled from Libya, and claimed that the cell planned attacks on Egyptian and international targets in the country. These actions appeared to indicate an increase in security officials’ willingness to enforce existing laws.
The Department of State’s Antiterrorism Assistance program provided training and equipment grants designed to meet needs and objectives specific to Egypt amid the country’s evolving political landscape.
Countering Terrorist Finance: Egypt is a member of the Middle East and North Africa Financial Action Task Force, a Financial Action Task Force (FATF)-style regional body. Egypt's terrorist finance regulations were in line with relevant UNSCRs, though compliance with FATF international standards remained lacking. Egypt regularly informed its own financial institutions of any individuals or entities that are designated by the UN 1267/1989 and 1988 sanctions committees. Egypt’s Code of Criminal Procedures and Penal Code adequately provides for the freezing, seizure, and confiscation of terrorism-related assets. With regard to implementation of UNSCRs 1267/1989 and 1988, however, the Egyptian notification process falls short of the requirements of FATF standards, particularly the use of measures and procedures for competent authorities to be able to freeze or seize terrorist- identified assets without delay. In Egypt, implementation requires a series of steps for actions by the relevant agencies and entities throughout the Egyptian government. Authorities have explained that according to current procedures, the Ministry of Foreign Affairs receives the UN lists and sends such lists to the Egyptian Money Laundering Combating Unit, which then directs concerned agencies to take the required actions. There are no specific procedures related to the un-freezing of assets. Moreover, delays in Egypt’s judicial process could cause unnecessary delays and defeat the rationale for taking expedited freezing action in relation to individuals and legal persons designated on the UN lists.
Regional and International Cooperation: Egypt is a founding member of the Global Counterterrorism Forum and, together with the United States, co-chaired its Rule of Law and Justice Committee. Egypt participated in the Arab League's Counterterrorism Committee, and the Egyptian Customs Authority’ s Alexandria training centre served as the location for counterterrorism capacity building for other regional governments.
Countering Radicalization and Violent Extremism: The Ministry of Awqaf (Endowments) is legally responsible for issuing guidance to imams throughout Egypt, including how to avoid extremism in sermons. Al-Azhar University maintained a program to train imams who promote moderate Islam, interfaith cooperation, and human rights.
Current Weaknesses in Government Legislation (2013 INCRS Comparative Tables):
According to the US State Department, Egypt does not conform with regard to the following government legislation: -
Record Large Transactions - By law or regulation, banks are required to maintain records of large transactions in currency or other monetary instruments.
EU White list of Equivalent Jurisdictions
Egypt is not currently on the EU White list of Equivalent Jurisdictions