Financial Crime World

Here is the converted article in markdown format:

EGYPT: FINANCIAL INSTITUTION SECURITY MEASURES COME UNDER SCRUTINY

======================================================

In recent years, Egypt has taken significant steps to strengthen its financial sector by introducing various regulations and guidelines aimed at enhancing security measures for financial institutions. The country’s regulatory framework has undergone substantial changes, with the introduction of new laws and decrees aimed at promoting fintech innovation while ensuring the stability of the financial system.

LEGISLATIVE FRAMEWORK

The primary laws governing banking and non-banking financial services in Egypt include:

  • Financial Regulatory Authority (FRA) Decree on the Conditions and Procedures Required for the Incorporation, Licensing and Approval of Financial Technology Institutions No. 58 of 2022
  • Fintech Law No. 5 of 2022
  • Banking Law No. 194 of 2020
  • Capital Market Law No. 95 of 1992
  • FRA’s Decree on the Non-Banking Financial Services Regulations No. 53 of 2018
  • FRA’s Decree No. 176 of 2018, adopting the Microfinance and Factoring Legal Framework

REGULATORY CONSENTS AND FILINGS

For banking services:

  • Prior approval from the Central Bank of Egypt (CBE) is required for holding more than 10% in any bank registered in Egypt or holding any percentage that leads to actual control.

For non-banking financial services:

  • No natural or juristic person may acquire a non-banking financial institution representing 10% or more of its relevant market without obtaining the prior approval of the FRA’s board of directors.

OWNERSHIP RESTRICTIONS

There are restrictions on the types of entities and individuals that can wholly or partly own financial institutions in Egypt:

  • For non-banking financial institutions, at least 25% of the share capital must be owned by another financial institution.
  • At least 50% of the share capital must be owned by a juristic person.

DIRECTORS AND OFFICERS - RESTRICTIONS

There are no specific restrictions imposed by law on who can hold the position of director or officer of a bank in Egypt. However:

  • Prior approval from the CBE is required for appointing the chairman of the board of directors and certain other directors.

FOREIGN INVESTMENT

While there are no foreign ownership or investment restrictions applied to acquisitions within the financial services sector in Egypt, security clearance must be obtained for any foreigner seeking to work or do business in the country. In practice:

  • Regulatory requirements for obtaining security clearance can be highly restrictive for certain countries.

COMPETITION LAW AND MERGER CONTROL

The Egyptian Competition Authority (ECA) has introduced a new pre-approval scheme for economic concentration, which requires that any transaction that constitutes a change of control or material influence obtain its prior approval. The implementation of this new requirement is pending the issuance of the Executive Regulations of the relevant amendment.

CONCLUSION

These developments reflect Egypt’s commitment to promoting financial sector stability and security while encouraging fintech innovation and foreign investment. As the country continues to navigate these changes, it remains to be seen how they will impact the financial sector and its stakeholders.