Remote VASP serving residents in Egypt

Article 206 of Law No. 194 of 2020 prohibits the issuance or trading of cryptocurrencies, or the establishment or operation of platforms for their trading, or conducting any related activities, without a license from the Board of Directors of the Central Bank.

Given that the CBE has not issued any such licenses, and has reiterated its warnings, this effectively means that the activities typically performed by VASPs (exchanges, custodians, etc.) are prohibited in Egypt.

Law No. 80 of 2002 (Anti-Money Laundering Law), as amended: This is the primary AML/CFT legislation in Egypt.

Prime Minister's Decree No. 164 of 2020 (Executive Regulations of Law No. 80/2002): Provides detailed rules for the implementation of the AML Law.

Law No. 194 of 2020 (The Banking and Central Bank Law): As mentioned above, this law governs banking and financial activities and explicitly addresses virtual assets.

Identification and Verification: Identifying the customer and verifying their identity using reliable, independent source documents, data, or information. This includes individuals, legal persons, and legal arrangements.

Beneficial Ownership: Identifying the beneficial owner(s) of the customer and taking reasonable measures to verify their identity.

Purpose and Nature of Business: Understanding the purpose and intended nature of the business relationship or transaction.

Ongoing Monitoring: Conducting ongoing due diligence on the business relationship and scrutinizing transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the financial institution's knowledge of the customer, their business, and risk profile.

Risk-Based Approach (RBA): Applying CDD measures based on a risk assessment. Activities involving virtual assets would inherently be considered high-risk, necessitating Enhanced Due Diligence (EDD), which would include:

Obtaining additional information on the customer and beneficial owner.

Obtaining additional information on the customer and beneficial owner.

Obtaining information on the source of funds or source of wealth of the customer.

Obtaining information on the reasons for the intended or performed transactions.

Obtaining the approval of senior management for establishing or continuing the business relationship.

Conducting enhanced ongoing monitoring of the business relationship.

Obligation to Report: Any transaction, regardless of amount, where there are reasonable grounds to suspect that it involves proceeds of crime or is linked to terrorist financing, must be reported without delay.

No Tipping-Off: Financial institutions and their employees are prohibited from disclosing to the customer or any third party that an STR has been filed or that an investigation is underway.

Customer Identification Data: All documents, data, and information used for identification and verification.

Transaction Records: All details of domestic and international transactions, including the nature, amount, currency, and parties involved.

Business Correspondence: Records of business correspondence relating to the customer relationship.

The CBE is responsible for licensing, regulating, and supervising banks and payment service providers, and ensures their compliance with AML/CFT regulations. As virtual assets fall under their purview according to Law No. 194 of 2020, they are the key regulator.

Egyptian Money Laundering and Terrorist Financing Combating Unit (EMLCU/EMLCFTU):

The EMLCU is Egypt's Financial Intelligence Unit (FIU) and is responsible for receiving, analyzing, and disseminating STRs to relevant law enforcement authorities. While operationally independent, it often works closely with the CBE.

Legal Basis: Article 206 of Law No. 194 of 2020 (the Central Bank and Banking Sector Law) explicitly states: "It is prohibited to issue cryptocurrencies or trade them, or promote them, or establish or operate platforms for their trading, or to carry out activities related to them without obtaining a license from the Board of Directors of the Central Bank in accordance with the rules and conditions determined by it."

Legal Basis: The FRA issued Decree No. 171 of 2023 "Regarding the Rules for the Establishment and Licensing of Companies to Practice Non-Banking Financial Activities Using Digital Technology." This framework focuses on digital assets that qualify as financial instruments (e.g., tokenized securities, tokenized bonds, NFTs representing fractional ownership in real assets or funds).

Article 206 of Law No. 194 of 2020 states: "It is prohibited to issue, trade, or promote cryptocurrencies or deal in them or create or operate platforms for their trading without obtaining a license from the Board of Directors of the Central Bank in accordance with the rules and procedures specified thereby."

Article 217 of Law No. 194 of 2020 stipulates:

"Anyone who violates the provisions of Article (206) of this Law shall be punished by imprisonment for a period of not less than three years and not exceeding ten years, and a fine of not less than one million Egyptian pounds and not exceeding ten million Egyptian pounds, or one of these two penalties."

This penalty applies to anyone who issues, trades, promotes, or deals in cryptocurrencies, or creates/operates platforms for their trading without the required license from the CBE.