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Amendment to the Money Laundering P

Amendment to the Money Laundering Prevention Law
On 15 May 2014, the President issued Decree-Law No. 36 of 2014 amending certain provisions of the Money Laundering Prevention Law No. 80 of 2002 (the “Amendment”),[1] and thereby imposing further restrictions on the movement of funds in order to combat crimes of money laundering and terrorist financing.
The Law
Since it was enacted in 2002, the Money Laundering Prevention Law (the “Law”) was meant to apply to some “financial institutions”. It imposed obligations on these financial institutions to cooperate with the authorities in the field of money laundering prevention. Financial institutions were also bound, by virtue of the Law, to apply certain rules and procedures to assist the authorities in detecting money laundering crimes. For instance, these institutions had to prepare specific forms to be filled out by clients, with the purpose of detecting the sources of the money that constituted the object of the transaction. Furthermore, the financial institutions, since the promulgation of the above-mentioned Law, have been obliged to notify the competent authority in the event that there are suspicions that a transaction may involve money laundering. The “Financial Institutions” outlined in the Law are as follows:
  1. Banks, their branches, and branches of foreign banks in Egypt;
  2. Currency exchange companies, and other entities licensed to work in foreign currency;
  3. Entities working in the transfer of funds;
  4. Stock brokers;
  5. Entities working in the field of receipt of funds;
  6. Post Saving Funds;
  7. Mortgage finance companies;
  8. Financial leasing companies;
  9. Entities working in factoring;
  10. Insurance companies;
  11. Other entities determined by the Prime Minister.
This shall apply whether the practitioner of the activities mentioned in this article is a juristic or a natural person. The scope of the newly promulgated Amendment is much wider than before and includes entities involved in Central Depository activities as well as any entity carrying out any activity or activities that financial institutions are licensed to engage in. The new Amendment also sets out those who are “self-employed or engaged in non-financial business” as follows:
  1. Real estate brokers, when carrying out operations for the benefit of their clients to buy or sell real estate;
  1. Dealers in precious metals and dealers in precious stones when carrying out any operations with their customers’ monies up to or exceeding the limit set by the Executive Regulations;
  1. Lawyers and accountants, whether practising individually or as partners in their respective companies, when carrying out operations for the benefit of their clients in relation to the following activities: buying and selling real estate, management of funds, securities or other assets, managing bank accounts, savings accounts or securities accounts, organising contributions for the purpose of the establishment or operation or management of companies, the establishment of legal persons or legal arrangements, operation or management of, or the purchase or sale of commercial entities;
  1. Casinos, including activities that proceed through the Internet and on-board ships.
The Amendment provides that a bylaw shall contain all the aforementioned details and necessary regulations to carry the provisions of the Law into effect vis-a-vis the aforementioned institutions and persons. It should also be noted that the above entities and persons, by virtue of the Amendment, are now subject to and committed to the provisions of the Law, in addition to the obligations imposed by virtue of the Amendment itself. Those obligations are summarised in the text of Articles 8, 9, 11. Article 8 stipulates that financial institutions and the self-employed and non-financial businesses must “promptly” notify the Central Bank’s Unit for Money Laundering Prevention of any operations suspected to involve one of the offences established in accordance with Egyptian law or involving money laundering or terrorist financing; these institutions shall be committed to report all such suspected attempts regardless of their value or significance, as well as committing to “develop systems that ensure the application of due diligence to customers” and all the rules for combating money laundering and the financing of terrorism, and all of the above shall be in accordance with the Rules and Guidelines set forth by the Central Bank’s Unit for Money Laundering Prevention. Article 9 of the Law requires of financial institutions, non-financial organisations, and business professionals to maintain all “records and documents concerned with financial operations, local or international, which contain sufficient data to identify those operations”, as well as containing obligations to update those records and documents on a regular basis, and to save all records and all data from customers and beneficiaries until five years from the conclusion of business. The new Amendment provides that entities referred to in the Law must also commit to allowing the investigating authorities of the Unit for Money Laundering Prevention the right to seize such data, records, and documents, in addition to the obligation underlined by virtue of the Law to present them before the judicial authorities if necessary. In addition, the Law prohibits financial institutions, non-financial organisations, and business professionals from disclosing such records and information to any persons except the Unit for Money Laundering Prevention or Judicial authorities, following which procedures for notification or investigation or examination may be taken regarding the financial transactions suspected of containing of either money laundering or the financing of terrorism. The new Amendment imposes stricter punishments in the event of a violation of the provisions set forth in Articles 8, 9, and 11. It stipulates that in the event of a violation, punishment shall be imprisonment and a fine of not less than one hundred thousand pounds and not more than five hundred thousand pounds, or one of these two penalties. Article 7 of the Law ensures that the Authorities responsible for the supervision of financial institutions, non-financial organisations, and business professionals have the means necessary to verify compliance with the rules and regulations mentioned above. Moreover, Article 7 mandates the Central Bank’s Unit for Money Laundering Prevention with the task of supervising those financial institutions, non-financial organisations and business professionals who/which do not fall under the scope of supervision of any supervisory bodies. In cases where there is a breach by financial institutions or self-employed persons engaged in non-financial business of the rules and procedures designed to combat money laundering and the financing of terrorism, the Amendment confers new powers upon the Unit for Money Laundering Prevention. According to the Amendment, the Unit has the right to send a notification to the person acting in breach of its obligation. It can also prevent some transactions, and it can request that the competent Authority prevent the person acting in breach of its obligations from executing certain activities or alternatively can request the termination of the license to pursue such activity. Article 10 of the Law is meant to encourage the reporting of violations and potential instances of money laundering and terrorist financing, by removing all civil and criminal liability for anyone who – in good faith – notifies the Unit for Money Laundering Prevention and/or provides information on illicit activity. On a different note, with regards to monies obtained via actions stipulated by the former Law (including, for example, the import of drugs, theft, and prostitution), these funds were referred to as ‘proceeds’. The new Law aims to implement a much wider scope than the previous Law, deeming any funds resulting from an act punishable by Egyptian law - whether felony or misdemeanour - as “proceeds” and thus taking a much harsher stance towards money laundering. In addition to these provisions, the Amendment provides a new financial penalty of not less than one hundred pounds and not more than five million pounds to be levied on the juristic person if the money laundering or the financing of terrorism crimes were found to be committed through that entity. The former Law that was enforceable before the promulgation of this Amendment only provided a penalty against the de-facto administrator. The final Article requires publication of the Amendment in the Official Gazette and implementation by the next working day; in this case the 16 May 2014.   [1] Presidential Decree-Law No. 36/2014 amending certain provisions of the Money Laundering Prevention Law No. 80/2002, Official Gazette, Issue No. 20 (cont.) (a), 15 May 2014.
On 15 May 2014, the President issued Decree-Law No. 36 of 2014 amending certain provisions of the Money Laundering Prevention Law No. 80 of 2002 (the “Amendment”),[1] and thereby imposing further restrictions on the movement of funds in order to combat crimes of money laundering and terrorist financing.
The Law
Since it was enacted in 2002, the Money Laundering Prevention Law (the “Law”) was meant to apply to some “financial institutions”. It imposed obligations on these financial institutions to cooperate with the authorities in the field of money laundering prevention. Financial institutions were also bound, by virtue of the Law, to apply certain rules and procedures to assist the authorities in detecting money laundering crimes. For instance, these institutions had to prepare specific forms to be filled out by clients, with the purpose of detecting the sources of the money that constituted the object of the transaction. Furthermore, the financial institutions, since the promulgation of the above-mentioned Law, have been obliged to notify the competent authority in the event that there are suspicions that a transaction may involve money laundering. The “Financial Institutions” outlined in the Law are as follows:
  1. Banks, their branches, and branches of foreign banks in Egypt;
  2. Currency exchange companies, and other entities licensed to work in foreign currency;
  3. Entities working in the transfer of funds;
  4. Stock brokers;
  5. Entities working in the field of receipt of funds;
  6. Post Saving Funds;
  7. Mortgage finance companies;
  8. Financial leasing companies;
  9. Entities working in factoring;
  10. Insurance companies;
  11. Other entities determined by the Prime Minister.
This shall apply whether the practitioner of the activities mentioned in this article is a juristic or a natural person. The scope of the newly promulgated Amendment is much wider than before and includes entities involved in Central Depository activities as well as any entity carrying out any activity or activities that financial institutions are licensed to engage in. The new Amendment also sets out those who are “self-employed or engaged in non-financial business” as follows:
  1. Real estate brokers, when carrying out operations for the benefit of their clients to buy or sell real estate;
  1. Dealers in precious metals and dealers in precious stones when carrying out any operations with their customers’ monies up to or exceeding the limit set by the Executive Regulations;
  1. Lawyers and accountants, whether practising individually or as partners in their respective companies, when carrying out operations for the benefit of their clients in relation to the following activities: buying and selling real estate, management of funds, securities or other assets, managing bank accounts, savings accounts or securities accounts, organising contributions for the purpose of the establishment or operation or management of companies, the establishment of legal persons or legal arrangements, operation or management of, or the purchase or sale of commercial entities;
  1. Casinos, including activities that proceed through the Internet and on-board ships.
The Amendment provides that a bylaw shall contain all the aforementioned details and necessary regulations to carry the provisions of the Law into effect vis-a-vis the aforementioned institutions and persons. It should also be noted that the above entities and persons, by virtue of the Amendment, are now subject to and committed to the provisions of the Law, in addition to the obligations imposed by virtue of the Amendment itself. Those obligations are summarised in the text of Articles 8, 9, 11. Article 8 stipulates that financial institutions and the self-employed and non-financial businesses must “promptly” notify the Central Bank’s Unit for Money Laundering Prevention of any operations suspected to involve one of the offences established in accordance with Egyptian law or involving money laundering or terrorist financing; these institutions shall be committed to report all such suspected attempts regardless of their value or significance, as well as committing to “develop systems that ensure the application of due diligence to customers” and all the rules for combating money laundering and the financing of terrorism, and all of the above shall be in accordance with the Rules and Guidelines set forth by the Central Bank’s Unit for Money Laundering Prevention. Article 9 of the Law requires of financial institutions, non-financial organisations, and business professionals to maintain all “records and documents concerned with financial operations, local or international, which contain sufficient data to identify those operations”, as well as containing obligations to update those records and documents on a regular basis, and to save all records and all data from customers and beneficiaries until five years from the conclusion of business. The new Amendment provides that entities referred to in the Law must also commit to allowing the investigating authorities of the Unit for Money Laundering Prevention the right to seize such data, records, and documents, in addition to the obligation underlined by virtue of the Law to present them before the judicial authorities if necessary. In addition, the Law prohibits financial institutions, non-financial organisations, and business professionals from disclosing such records and information to any persons except the Unit for Money Laundering Prevention or Judicial authorities, following which procedures for notification or investigation or examination may be taken regarding the financial transactions suspected of containing of either money laundering or the financing of terrorism. The new Amendment imposes stricter punishments in the event of a violation of the provisions set forth in Articles 8, 9, and 11. It stipulates that in the event of a violation, punishment shall be imprisonment and a fine of not less than one hundred thousand pounds and not more than five hundred thousand pounds, or one of these two penalties. Article 7 of the Law ensures that the Authorities responsible for the supervision of financial institutions, non-financial organisations, and business professionals have the means necessary to verify compliance with the rules and regulations mentioned above. Moreover, Article 7 mandates the Central Bank’s Unit for Money Laundering Prevention with the task of supervising those financial institutions, non-financial organisations and business professionals who/which do not fall under the scope of supervision of any supervisory bodies. In cases where there is a breach by financial institutions or self-employed persons engaged in non-financial business of the rules and procedures designed to combat money laundering and the financing of terrorism, the Amendment confers new powers upon the Unit for Money Laundering Prevention. According to the Amendment, the Unit has the right to send a notification to the person acting in breach of its obligation. It can also prevent some transactions, and it can request that the competent Authority prevent the person acting in breach of its obligations from executing certain activities or alternatively can request the termination of the license to pursue such activity. Article 10 of the Law is meant to encourage the reporting of violations and potential instances of money laundering and terrorist financing, by removing all civil and criminal liability for anyone who – in good faith – notifies the Unit for Money Laundering Prevention and/or provides information on illicit activity. On a different note, with regards to monies obtained via actions stipulated by the former Law (including, for example, the import of drugs, theft, and prostitution), these funds were referred to as ‘proceeds’. The new Law aims to implement a much wider scope than the previous Law, deeming any funds resulting from an act punishable by Egyptian law - whether felony or misdemeanour - as “proceeds” and thus taking a much harsher stance towards money laundering. In addition to these provisions, the Amendment provides a new financial penalty of not less than one hundred pounds and not more than five million pounds to be levied on the juristic person if the money laundering or the financing of terrorism crimes were found to be committed through that entity. The former Law that was enforceable before the promulgation of this Amendment only provided a penalty against the de-facto administrator. The final Article requires publication of the Amendment in the Official Gazette and implementation by the next working day; in this case the 16 May 2014.   [1] Presidential Decree-Law No. 36/2014 amending certain provisions of the Money Laundering Prevention Law No. 80/2002, Official Gazette, Issue No. 20 (cont.) (a), 15 May 2014.