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Know Your Customer Regulations in Egypt: A Step Towards Combating Fraud and Illicit Financial Flows

In an effort to combat fraud and illicit financial flows, US and Egyptian officials are pushing for Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. While American measures have yet to be approved, Egypt has already taken significant steps in this direction.

Financial Regulatory Authority of Egypt’s Initiatives

The Financial Regulatory Authority of Egypt has issued several decrees regulating the development and use of fintech within non-banking financial services and activities. These include:

  • Decree 139 of 2023: Outlines requirements for the digital infrastructure of non-banking financial institutions, establishing governance, risk management, and cybersecurity frameworks.
    • Requires these institutions to enter a service level agreement with their customers and establish a 24/7 customer service center.
  • Decree 140: Mandates that non-banking financial service firms obtain a license certifying they have processes in place to verify digital IDs and keep records of their use. The digital identity process outlines multi-factor authentication requirements based on risks, including biometrics.
  • Decree 141: Establishes a registry for companies using fintech for outsourcing services. Registered entities must:
    • Ensure data security and customer privacy
    • Obtain liability insurance
    • Pay a registration fee of 25,000 Egyptian pounds (approximately US$809) per sector of activity The registration is valid for one year

United States’ Initiatives

In the US, lawmakers are reintroducing the bipartisan Digital Asset Anti-Money Laundering Act to extend rules combating crypto fraud. If passed, the act would:

  • Require digital wallet providers and other participants facilitating digital transactions to comply with AML checks, including KYC requirements
  • Mandate banks to verify customer identities for unhosted wallets that bypass AML checks

The bill has been endorsed by several organizations, including:

  • Major County Sheriffs of America
  • AARP
  • Global Financial Integrity

The introduction of these regulations aims to mitigate risks to national security by closing loopholes used to finance terrorism, drug trafficking, and other criminal activities.