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EGYPT
ANTI-MONEY LAUNDERING
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FATF status

 

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 2014 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Egypt is not considered a regional financial center or a major hub for money laundering. In the past two years, the Government of Egypt has shown increased willingness to tackle the issue of money laundering, especially with regard to investigating allegations of illicit gains or corruption of public figures and organizations. The EU, Switzerland, UK, and Canada have taken action to freeze the assets of former president Mubarak and several members of his regime based on their apparent misappropriation from the Egyptian state. While countering corruption remains a focus, cases involving public figures and entities are long-term projects and do not detract from AML work overall. 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, extensive use of cash 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.

 

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/

 

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 ILLEGAL DRUG SALES 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

 

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 1,549: July 2012 – June 2013

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, mortgage financing companies, real estate brokers, dealers in precious metals and stones, and casinos

 

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 FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.menafatf.org/images/UploadFiles/MER_Egypt_ForPublication.pdf

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

 

Egypt appears to be more actively engaged on money laundering issues. The government 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 pursue corrupt members of the previous regime. In the past, a provision of the penal code had obliged prosecutors to press charges on the most serious, readily provable offense, and because other offenses carried higher penalties than money laundering, the prosecutors did not pursue money laundering. Now, judges are required to issue rulings on two punishments, one for money laundering and another for the predicate offense.

 

The government 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. Egypt 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 2013

 

Overview: During 2013, Egypt witnessed an increase in terrorism and violent extremism following the July 3 removal of the elected government. Although the majority of attacks were concentrated in northern Sinai, some significant incidents occurred in the eastern Nile Delta between Cairo and the Suez Canal city of Ismailiya. This violence was primarily directed against Egyptian government security forces and rarely targeted Egyptian civilians, foreigners, or foreign economic interests, although there were several bombings or attempted bombings of public buses in Cairo in late December. The Sinai-based terrorist organization Ansar Bayt al-Maqdis (ABM) claimed responsibility for the majority of the more complex attacks on the security services.

While Egyptian security services struggled in July and August to contain the wave of violent extremist attacks, close coordination between the National Security Sector (NSS), the Egyptian General Intelligence Service (EGIS), and the Egyptian Armed Forces (EAF) ultimately led to a reduction in the number of terrorist attacks in the Sinai. By the end of 2013, the EAF were continuing an aggressive military campaign in northern Sinai in an effort to disrupt the smuggling of arms and explosives between Gaza and Egypt, as well as to kill suspected militants and deny extremist groups a place from which to plan attacks. In an effort to restore internal security and combat violent extremism, the interim Egyptian government focused its 2013 efforts on protecting critical infrastructure and restoring basic security.

The Egyptian government also cracked down on those opposed to the interim government throughout the country. This crackdown targeted the Muslim Brotherhood and non-violent secular political opponents, as well as violent Islamist extremist elements. On December 25, the Government of Egypt designated the Muslim Brotherhood (MB) as a terrorist organization, but did not provide any substantiating evidence that the MB was directly involved in the terrorist attacks that followed President Mohamed Morsy’s removal.

2013 Terrorist Incidents: Egypt witnessed hundreds of terrorist attacks in 2013, the vast majority occurring after the July 3 removal of the elected government, within the north Sinai and the eastern Nile Delta region. The Egyptian military and police forces were the primary targets of these attacks. A majority of the attacks in July through September employed rudimentary tactics, such as drive-by shootings and crude explosives, but since September, an increasing number have used more lethal and sophisticated tactics, including rocket-propelled grenades (RPGs) and suicide vehicular-borne improvised explosive devices (VBIEDs) attacks.

Legislation, Law Enforcement, and Border Security: Egypt’s most recent State of Emergency (SoE) declaration expired on November 14, 2013, ending implementation of the Emergency Law that had been reinstated since August 14, 2013. On June 2, the Supreme Constitutional Court declared warrantless searches and arrests, even under the Emergency Law, unconstitutional.

Interim government officials insisted that all arrests since July 3, when the 2012 constitution was suspended, were made in accordance with the Penal Code and denied any warrantless arrests, although these were reported by human rights groups. Warrantless searches and arrests did occur under an SoE in early 2013, following a January 27 decision by then-President Morsy to declare a 30-day SoE in Port Said, Suez, and Ismailiya after violent clashes on the anniversary of the January 25, 2011 revolution, left more than 50 people dead in those governorates.

Egyptian law enforcement entities continued to take proactive measures against identified terrorist cells. While Egypt appeared to have limited its counterterrorism exchanges with some foreign partners, it continued to participate – with periodic interruptions due to security concerns and instability – in the Department of State's Antiterrorism Assistance (ATA) program in 2013. ATA training and equipment deliveries for Egypt were shaped to try to meet objectives and needs specific to Egypt amid the country's evolving political landscape, specifically in the areas of leadership and management, border security, and building investigative capacity.

Egypt continued its efforts to improve border security. This included achieving significant control over the illicit border trade, including weapons, through tunnels beneath northeastern Sinai and Gaza. In response to unrest through the year, Egypt reinforced its security and protection measures at airports, ports, and the Suez Canal. While Egyptian border officials maintain a watchlist for suspected violent extremists, it is not shared with the relevant agencies involved in the processing of people and goods. The United States provided some technical assistance at the Rafah border crossing with Gaza; however, the Egyptian Customs Authority lacks a central database to track the movement of cargo and passengers and to establish patterns and trends across all of Egypt. The Egyptian Ministry of Defense continues to coordinate with the U.S. Department of Defense for the procurement of border security items such as ground monitoring sensors and cameras.

To combat weapons and explosives smuggling, the Egyptian government completed installation of nonintrusive inspection equipment at the Ahmed Hamdi tunnel site near Suez; additional sites on the Suez Canal, the Sinai, and in western Egypt were under development. Due to the July change of government, there has been little progress to enhance the capabilities and modernize the Border Guard Forces. The Ministries of Defense, Finance, and Interior, who all contribute to border security, share border-related information minimally.

Countering the Financing of Terrorism: Egypt is a member of the Middle East North Africa Financial Action Task Force, a Financial Action Task Force (FATF)-style regional body. The country has a well-developed financial sector, but a significant amount of funds moves through the informal sector, raising the risks for abuse by terrorist groups. Egyptian authorities have accused its main political opposition, the MB, of funding al-Qa'ida, although they have not provided substantiating evidence. Egypt’s terrorist finance regulations are broadly in line with relevant UNSCRs regarding terrorist financing. Egypt regularly informed its own financial institutions of any individuals or entities that are listed by UNSCRs 1267/1989 and 1988 sanctions committees, and its Code of Criminal Procedures and Penal Code adequately provides for the freezing, seizure, and confiscation of assets related to terrorism.

With regard to implementation of the UNSC 1267/1989 (al-Qa’ida) sanction regime, the Egyptian notification process falls short of FATF standards, particularly with respect to authorities to freeze or seize assets without delay. 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.

 

 

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