New amendments to the Banking Law:

A recent amendment (“Amendment”) to the Banking Law has imposed harsher penalties on violations of foreign exchange related provisions.[1] The Amendment increased the penalty imposed by the Banking Law on anyone who deals in foreign currency through venues other than banks, currency exchange bureaus, or other entities authorized to perform such transaction by the Central Bank of Egypt (“CBE”). While the penalty was originally set to a fine ranging between ten thousand and five-hundred thousand EGP, the new penalty imposes a prison sentence of three months to ten years, and a fine ranging between one million and five million EGP (or the equivalent of the proceeds of crime, whichever greater). The same penalty applies to those purchasing or selling goods and services in Egypt in currencies other than the EGP, unless explicitly permitted to do so by an international convention or another law. The same penalty also applies to a person who is legally responsible for currency exchange bureaus that violate CBE instructions or “adopt a policy detrimental to the public economic interest”. Furthermore, the Amendment imposed stricter penalties on banks that violate CBE regulations concerning the export of foreign currency. A person legally responsible for the bank, or an unauthorized entity performing the same transaction, is now liable to a prison sentence ranging from six months to three years, and a fine ranging from one million to five million EGP. This stands in contrast to the original penalty, which was set at a fine ranging from ten to twenty-thousand EGP. The new penalty also applies to banks and currency exchange bureaus that do not adhere to CBE regulations regarding statements on their foreign exchange transactions, whether taking place for their own account or for the account of other parties. Penalties related to exiting the country with foreign currency exceeding the equivalent of ten thousand US dollars without declaring it, or leaving with an amount exceeding five-thousand EGP or sending EGP via postal consignments and parcels have also been increased. While, originally, such penalties were set at a maximum prison sentence of three months and/or a fine ranging from five-thousand to twenty-thousand EGP, they have now been increased to a maximum prison sentence of three months and/or a fine ranging between the specific amount in question (the proceeds of crime), and the equivalent of four times the amount of such proceeds. In all cases, the amounts and articles of the legal action shall be seized and confiscated by a court ruling. The Amendment becomes effective as of the date following publication, which means that it entered into force on the 18^th of August 2016. It had been expected for a while that the House of Representatives would issue an amendment increasing penalties for violations of foreign currency rules, especially given the foreign exchange market’s current vulnerability. However, the application of the recent Amendment may present several problems, since the crimes that have now become attached to severe penalties are not sufficiently precise and specific. Since some of these crimes are dependent on rules and regulations issued by the CBE, it has become imperative for the CBE to issue comprehensive and detailed instructions and executive decisions that leave no room for doubt as to whether a particular action constitutes a crime. [1] Law No. 66/2016 Amending the Banking Law No.88/2003, Official Gazette, Issue 32 (bis) (b), 17 August, 2016.