Dr. Bahaa Helmy Writes: Combating Money Laundering and Terrorist Financing, a Challenge That Threatens the State

Friday, 27 May 2016

Combating Money Laundering and Terrorist Financing, a Challenge That Threatens the State

Combating money laundering and terrorist financing is one of the major challenges threatening Egypt. Practical experience has shown that money laundering and terrorist financing operations take changing and evolving forms in light of globalization and of the perpetrators' efficient and clever use of technology, techniques and innovative methods. Add to that the many channels exploited for money laundering and terrorist financing, such as banks, non-bank financial institutions, multinational companies known as offshore companies, and the parallel economy in the local market.

It is true that we have Law No. «80» of 2002 regulating the procedures for combating money laundering, which established the Money Laundering and Terrorist Financing Combating Unit at the Central Bank, and Presidential Decree No. 164 of 2002 regulates the formation of the Unit's board of trustees, consisting of «the Assistant Minister of Justice, the most senior Deputy Governor of the Central Bank, the Chairman of the Capital Market Authority, a representative of the Federation of Egyptian Banks, and an expert in financial and banking affairs chosen by the Prime Minister». Among the Unit's competences are proposing systems and procedures for combating terrorist financing; setting rules and procedures for identifying bank customers in the banking system and correspondent banks; updating customer data and monitoring high-risk transactions and electronic transfers; and appointing a manager in each bank responsible for combating money laundering and terrorist financing. The Unit must also take the initiative to carry out the necessary inquiries into any suspicious transactions. Here the question arises: how, and through what mechanisms, can this Unit carry out inquiries into suspicious transactions in the banking sector without mechanisms and capabilities that enable it to do so? And what measures and procedures must the government take to implement the Constitution, which obliges the State to confront terrorism in all its forms and manifestations and to trace its sources of funding as a threat to the nation and its citizens? We believe that combating money laundering and terrorist financing from abroad and at home is one of the main pillars of the strategy to combat terrorism, and it is therefore necessary to take many measures and steps to ensure that both crimes are combated at every level, such as:

1- We propose amending the composition of the board of trustees of the Money Laundering and Terrorist Financing Combating Unit at the Central Bank of Egypt by adding two new members:

- The Director of the General Directorate for Public Funds Investigations «at the Ministry of Interior».

- A representative of the Ministry of Finance «Customs, Taxes»

in order to strengthen its role so that it can also carry out the necessary inquiries, instead of relying only on receiving notifications.

2- Encouraging the conclusion of multilateral and bilateral agreements between countries to transfer expertise and exchange information, particularly regarding the means and methods of combating money laundering and terrorist financing electronically, and monitoring money transfers made by mobile phone and over the internet.

3 - Encouraging small businesses and traders in the local market to regularize their situation and establish companies, with the possibility of a temporary tax exemption to encourage them to join the formal economy and contribute to economic development; this measure also helps combat money laundering and terrorist financing.

4- Putting in place mechanisms to ensure that diplomatic immunity is not abused, so as to prevent money laundering or terrorist financing, particularly with regard to the countries involved in such activities.

5 - The government taking on plans to trace the sources of terrorist financing as part of the national program to confront terrorism.

6- We call on the Egyptian legislator to pay attention to codifying and regulating the money transfers or contributions made by offshore companies and banks established in certain well-known statelets, which contribute to or participate in national companies and financial institutions as legal persons, including in the free zones, by setting rules governing these companies' dealings with national companies in accordance with Joint Stock Companies Law No. 159 of 1981.