The Central Bank of Egypt (CBE) issued new standards for import and export of foreign currency surplus during its board of directors meeting on 5 August.
The CBE affirmed that these standards comes in the framework of the CBE’s continuous endeavour to maintain the sound performance of the banking system.
Gamal Negm, deputy governor of the CBE, said in a letter to the banks operating in Egypt that those banks wishing to engage in export and import of foreign currency surplus should apply for licenses to practice this activity from the banking affairs department of the CBE every January.
The CBE stipulated that banks engaged in this activity must have policies and procedures approved by the its Board of Directors covering all operations related to the export and import of foreign banknotes, as well as systems and procedures for anti-money laundering and terrorist financing operations.
The CBE also stipulated that there should be good internal control systems on the operations related to the export and import activities of banknotes. The legal, risk management, and commitment departments of each banks should also review such contracts before signing with the concerned parties, including all details and responsibilities of each party, and the anti-money laundering and terrorist financing activities.
According to the CBE, it is also required for workers involved in this activity to receive courses related to dealing with foreign exchange notes, including counterfeit, and introductory courses about combating money laundering and terrorist financing, especially in relation to operations related to the export and import of foreign currency notes.
The CBE confirmed that banks are not allowed to outsource the process of exporting foreign currency surplus to any company inside Egypt except with a prior approval of the CBE.
It added that banks are allowed to contract with financial institutions (banks / exchange companies) abroad to complete the process of exporting foreign exchange. They should carry out due diligence and credit study for these institutions before contracting with them to assess the contracts and set a credit limit for each institution subject to annual approval to cover risks of non-payment.
It stressed the necessity that these institutions have the minimum set of standards, namely that the institution should be subject to one of the regulatory authorities and have this authority’s approval to practice this activity.
The institution must also have at least five-year experience in this activity and has not been subjected to penalties or fines by the supervisory authority in the country in which it operates, or sanctions related to money laundering operations from third parties.
The standards also include measures to combat money laundering and terrorist financing approved and documented by the board of directors of the institution with regard to the activity of exporting and importing foreign currency notes, as well as the systems necessary to apply them. Moreover, banks should expand the network of financial institutions that can be contracted to ensure the continuity of export activity and not be concentrated with a limited number of institutions.
The CBE stressed that banks should continuously evaluate all their clients regarding bank export and import activities, such as insurance and transport companies, among others.
The CBE asserted that banks, when carrying out any operation to export surplus foreign currency notes, they should ensure that the exporting operation is done by a licensed bank by the CBE, and for exporting to not exceed $100m or its equivalent in all currencies traded, per transaction.
The exporting bank must submit a declaration stating that it has sufficient balance for local operations other than the amounts to be exported, and another declaration stating that the foreign currency notes to be exported are set aside in full in the bank’s treasury, as well as announcing the currencies to be exported on the bank’s page on Reuters screener including the components of this surplus, excluding the quantities, throughout the previous day to applying the request to CBE for approval. A photocopy of the announcement must be attached with the request.
The CBE called on banks to inform the banking operations sector at the CBE with the exportation request at least one day prior to the date of export for approval.
The CBE also obliged the exporting bank to declare its full responsibility for the whole export operation, starting from making the obligation to adding the exported money to the correspondents’ accounts abroad at the maturity date. In addition, the exporting bank should insure the banknotes to be exported with an insurance company.
The CBE also asked banks to inform the general directorate of foreign operations in the banking operations sector in the CBE with the export approval indicating the quantity to be exported, as well as a photocopy of the documents indicating that the other party has received the actual value of foreign currency notes, provided that the exchange rate and the maturity date shall be no later than 10 days from the date of export.
Negm pointed out that the CBE has the right to revoke the license to practice the activity of exporting and importing foreign currency notes at any time without giving any reasons.
For foreign exchange notes not listed in the CBE, banks are allowed to contract abroad companies which are concerned in the field of transfer, exporting, and importing of foreign currency notes. Each transaction is presented separately to the CBE, equivalent to $10m and higher than $2m.
The CBE said that in case the bank wants to import foreign currency notes, a request is made to clarify the bank’s justifications and submitted to the banking operations sector at the CBE for study and approval.
