In the last instalment of a series of articles on the rationale behind Egypt's investment and financial market regulation, Doha Abdelhamid and Ziad Bahaaeldin focus on the much-heralded law against money laundering In the third and final part of this series, we will discuss the regulatory trends of money laundering while drawing the curtain on the issue in question by drawing the attention of the government, public and legislature on few issues relating to the rationale of regulation in Egypt. Money laundering was not a significant regulatory concern in Egypt for a long time. Before proceeding, that is not to say that it was a permissible activity. In fact, long before the passing of money laundering prevention legislation, the crime itself was potentially punishable under the general rules of criminal law. But as the interest in the subject grew internationally, first as a function of regulatory focus on crimes relating to narcotics production and trade, and later to the funding of terrorism, money laundering prevention legislation began to be adopted the world over. The speed with which such legislation mushroomed around the globe is a unique example of the new trend in international law where specific norms and regulatory standards were being adopted by countries keen to abide by the modern sets of the competitive regulatory game rules. The question of whether countries willingly adopted such legislation or were "forced" to do so is a petty matter and is of no real significance to us. Countries did voluntarily enact the new rules and issued them mostly through independent national legislatures. However, the fact that in so doing they were more concerned about the need to abide by international standards than driven by a "genuine" belief in their merits is difficult to affirm. In the case of money laundering prevention rules, the inclusion of a large number of countries on a published list of "non-cooperative countries" by the Financial Action Task Force (FATF) undoubtedly had an accelerating effect on the adoption by most of the proposed legislation. Moreover, the fact that the FATF had already published its "recommended" terms and guidelines for what constitutes appropriate money laundering prevention law left little room for variation or delay. Egypt was included on the "non-cooperative" list in 2001. It had, however, been discussing the prospect of introducing money laundering prevention legislation prior to this date. What delayed the law's issuance was the correct belief that the general rules of criminal law were sufficiently covering this crime, and that no significant money laundering activity was known to occur in Egypt before or after then. In any case, the Egyptian Money Laundering Prevention Law was passed through Law No. 80 of 2002. To the credit of Egyptian legislators, the law was not a blind adaptation of the proposed principles by FATF, but a carefully thought-out piece of legislation that combined international standards on the subject with an acknowledgment of the peculiarities of Egyptian law. The Money Laundering Prevention Law prohibits all activities which aim at concealing the true nature, origin or ownership of funds that are the proceeds of certain major crimes. In so doing, the law follows the established norms of criminal legislation in fields of economic and organised crimes, and largely follows the principles already established in the Egyptian criminal law. The issuance of the Money Laundering Prevention Law was accompanied by significant opposition in the press and among various other circles. The subject of concern was precisely the fear that the law was being issued in response to international pressure, and as a result of Egypt's inclusion in the FATF's list of non-cooperative countries. However, it is our opinion that what was missing from the debate was the whole notion of "regulatory competition" and "convergence in the playing field of economic legislation". Egypt's inclusion in the FATF list may have had the effect of accelerating the process, but it did so by highlighting a regulatory gap that existed, indeed, between its operative regulatory system and what had come to be considered a minimum set of accepted international standards. Thus the whole debate took a U-turn by exaggerating international pressures on the one hand and denying them on the other, whereas a more balanced approach would have recognised the need to comply with international regulatory norms as an impetus for change which is worthwhile for its own merits. The previous two parts of this series have attempted to reveal the regulatory approach in economic legislation as evolved and adopted in Egypt during the deregulation era (the 1970s to the present) with reference to three areas of policy and manifest laws -- investment promotion, capital market regulation, and money laundering prevention. It remains to be seen what possible explanation may lie behind the fundamentally different regulatory approaches, rationales and substantive impacts for each of the three cases. It is argued in the previous instalments that what determined the regulatory approach was some form of "regulatory competition among counterpart jurisdictions". However, whereas the development of the investment regime in Egypt was driven by a simple need to attract investments based on an outdated approach of offering increasingly more incentives and benefits, and expanding the scope of qualified fields -- thus presenting a race to the bottom. Conversely, securities regulations have been characterised by a race-to-the-top of the regulatory standards, based on internationally acknowledged norms. This may be explained by a number of factors. Firstly, investment legislation was since its inception prone to favour producer rather than consumer interests -- hence the increasingly long lists of exemptions and of investment fields contained, often with conflicting rationales. Secondly, securities regulation benefited from the existence of a large body of literature concerning norms, standards and guidelines for best practices which regulators all over the world were encouraged to follow. And thirdly, securities regulations -- unlike investment laws -- are more clearly rewarded in their attempts to achieve higher standards. It was not until recently, as previously mentioned, that a new regulatory approach was introduced in the investment regime -- in the form of the New Economic Zones Law -- which attempts to encourage investments not only by reference to tax and customs exemptions, but by introducing a more comprehensive regulatory model and by raising certain industrial, urban planning and environmental, standards. Finally, the Money Laundering Prevention Law was reviewed as a model of a third example of legislation that was influenced as well by regulatory competition. But here, rather than advance the objectives of producers or consumers as an identifiable group, the law reflects a growing tendency towards following internationally- accepted norms and standards for the economy as a whole. The theme that should drive players in the present consultation process is consumer protection and systemic stability. These two rationales were by far and large the main rationales of regulation in many countries in the developed world that preceded Egypt on the path of deregulation. It is that proper policy and regulatory mix that would insure a "win-win" solution for the citizen and the investor is the one that should prevail at the end of the day. In this three-part series, we have attempted to come closer to an understanding on how Egypt is faring vis-�-vis the currents of globalisation, competitiveness and integration. Doha Abdelhamid is senior policy advisor in the Ministry of Finance. Ziad Bahaaeldin is attorney at law in the Bahaa-eldin Law Office. This is a synopsis of an earlier paper presented to the Eighth Annual Conference of the Faculty of Economics and Political Sciences in cooperation with Conrad Adenauer Stiftung on 'Structural Adjustment of the Egyptian Economy,' 13-14 April 2003, Cairo, Egypt. The arguments expressed in this article represent the personal views of its authors and do not reflect those pertaining to any of the institutions they are affiliated with.
