Is the new law against money-laundering designed to catch crooks, or fetter anyone the US labels a terrorist? Gamal Essam El-Din follows the debate in parliament The People's Assembly voted by a large majority on Monday to pass Egypt's first ever law against money-laundering. The law grants the government strong powers to track and freeze funds and assets and to report suspect financial transactions to foreign countries and international agencies. The new law was rammed through the assembly in just four sittings that lasted from Saturday morning to Monday morning. This haste went against the run of events: the law was first drafted a month after the terrorist attacks against the US on 11 September and was approved by the ruling National Democratic Party's (NDP) economic committee as far back as 2 December, 2001. This led one MP to complain that "the law was kept in the drawers of the NDP's Economic Committee for five months then pushed through the Assembly in a few days." Justice Minister Farouk Seif El-Nasr, addressing the assembly on Saturday, gave two reasons for the government's sudden hurry. The first, he said, was that the Financial Action Task Force (FATF), an anti-money-laundering body set up by the G7 group of industrialised nations to monitor global money- laundering operations, had alerted several countries to the need for a stand-alone law to combat money-laundering. He added, "We also have to comply with UN Security Council resolution 1737 passed last 28 September. The resolution states that an anti-money- laundering action plan must be adopted by every country in the world no later than 1 May [2002]." The minister then added that Egypt needed to catch up with the 47 countries who have already acted on the resolution. El-Nasr also revealed that Patrick Moulette, FATF's secretary-general, visited Egypt last year and insisted that the Central Bank of Egypt's (CBE) "know your customer" strategy, adopted in May 2001, was not enough to combat wide-scale money-laundering and that a "separate law" was needed. "In a symposium held in Egypt last year, Moulette said Egypt must pass a separate law if it is to comply fully with FATF recommendations," El-Nasr said. El-Nasr's also made reference to an increase in money-laundering activities in Egypt. The government's haste, he said, was not primarily due to pressure from the FATF and UN Security Council. "Our second reason for enacting the law is that recent studies point to growing indications of money-laundering in Egypt," he said. "We have some applicable laws (such as the Penal Code and the Illicit Gains Law), but all of them aim to stem the flow of dirty money in one way or another and do not tackle money-laundering directly. We desperately need a law devoted exclusively to clamping down, strongly and directly, on laundered money." The minister cited a local study that claims money-laundering transactions now account for 30 per cent of the black market in Egypt. The value of the black market in Egypt was estimated in 1998 by some economists to stand at LE57.2 billion, almost 30 per cent of the nation's Gross Domestic Product for that year. The new law includes 20 articles. Article II bans laundered money from circulation. Among the crimes the article names as sources of laundered money are drug-trafficking; kidnapping; terrorism; the illegal import, manufacture and trade of weapons; prostitution; misappropriation of public funds; and offences committed in violation of environmental laws (such as improper handling of hazardous waste). Significantly, it will become illegal to launder money from any of these crimes, even if the original offence was committed abroad. Article III allows for the creation of a taskforce at the CBE to combat money- laundering, authorised by a special presidential decree. Working at the unit with the staff of the CBE, the article says, will be "representatives from certain concerned agencies," which is likely to mean the intelligence agencies. Articles IV, V and VI list the responsibilities of the taskforce. It will, for example, receive reports submitted by financial institutions regarding suspected money-laundering. Article I of the law names 10 types of financial institution empowered to produce reports. The list includes banks, forex bureaus, money-transfer companies, financial securities companies, post office savings funds, mortgage and financial leasing companies, and insurance and re- insurance companies. The taskforce will exchange the information provided with state supervisory agencies, foreign countries and international organisations. It may also pass evidence on to the prosecutor- general. The taskforce will be committed by law to submitting an annual report to the People's Assembly about money laundering activities in Egypt. To meet their obligations, the listed financial institutions will have to design new systems (says article VIII) to collect financial and legal information about their customers through officially sanctioned procedures. Banks, for example, will no longer be able to open or accept unnamed current accounts and deposits. They will be committed to creating a central register of all their local or international financial operations to help identify their customers and make their operations more transparent. Customers under suspicion will not be informed of any of the measures used to monitor their finances (article XI). In what is considered to be the toughest action of its kind, article XII requires travellers leaving or entering the country to register on their passport the foreign currency they are carrying if it exceeds $20,000 in value. Money-launderers (or those found guilty of pursuing activities banned under article II) will be sentenced to seven years in prison and fined the amount of money they laundered. The laundered money itself will be confiscated. If the authorities have difficulty in seizing the money, additional fines may be levied. Offenders against articles VIII, IX and XI could face imprisonment and a fine ranging between LE5,000 and LE20,000. During parliament's debate of the draft law no MPs objected to the idea that a law was needed. In the final vote, there were just three abstentions. Yet for all this apparent approval, wide differences over the law's articles have emerged. Mounir Fakhri Abdel-Nour, speaker for the liberal-oriented Wafd Party, argued that the law was drafted primarily in response to external pressures. The prime source of these pressures, Abdel- Nour said, was the "FATF," which blacklisted Egypt alongside 16 other countries, for "not cooperating" in passing a stand-alone law to deal with money-laundering. "I know that these pressures were intense which is why I have reservations over the law," he said. "My first concern is that it deals a blow to economic liberalisation by toughening controls on the free movement of foreign exchange (article XII). It also contravenes the Secrecy of Bank Accounts Law (number 205 of 1990) and stirs investors' anxiety by increasing the number of transactions that may fall under suspicion," he continued. According to Abdel-Nour, the CBE's "know your customer" rules are enough. "We just have to be tougher in the implementation, rather than bowing to external pressures with this law," he said. CBE's governor Mahmoud Abul- Oyoun replied that Abdel-Nour's reservations were unjustified, saying the anti-money-laundering unit would never level arbitrary accusations against investors out of malice. Leftist and Muslim Brotherhood MPs were also concerned. They warned that the law would oblige the Egyptian government to accept "the US approach to squeezing terrorist funds." This led to intense debates in the assembly late on Sunday night over article XX, which compels Egypt to implement judicial rulings issued abroad and confiscate money a foreign court says is laundered. Nasserist-oriented MP Kamal Ahmed raised the point that the US considers money channelled to freedom fighters, such as Palestinian resistance organisations, "terrorist funds" which would then have to be confiscated. Ahmed also asserted that the CBE's anti-money-laundering taskforce, by exchanging information with foreign agencies, could "give the Israelis access to valuable information about every Egyptian businessperson; indeed about every Egyptian person." Mustapha El-Fiqi, chairman of parliament's foreign affairs committee, said: "The law must confront money channelled to terrorists such as those who plagued Egypt (in the first half of the 1990s), but not the money allocated to freedom fighters such as those in Palestine." Mortada Mansour, an independent MP, said: "We must not be committed to implementing US verdicts which consider freedom fighters such as Hizbullah in Lebanon and Hamas in Palestine as terrorists." Mansour also urged that "spying for Israel for money" also be listed as a money-laundering crime. Parliament's speaker, Fathi Sorour, argued that it was a basic legal rule that Egypt was a sovereign country and was free to implement rulings according to its beliefs. "Verdicts which condemn freedom fighters as terrorist are not consistent with our convictions and they will never be implemented," he claimed. Other MPs, by contrast, argued that the law had come too late. "The government is at least six years late in submitting this law to parliament. Had it been passed in 1996, it would have spared Egypt from a draining capital flight," said Fayeka El-Rifaie, deputy chairman of parliament's Plan and Budget Committee. Adel Eid, an independent MP, added that political corruption had become a major source for generating dirty money. "The past few years have seen an increasing number of businessmen vying for parliamentary seats and immunity as cover for their suspect financial activities. This is clear from their lavish spending on election campaigns," Eid said. Mustapha Awadallah, a Brotherhood MP, said a report by the Administrative Control Authority reckoned that money laundered in Egypt in 1999 amounted to $5 billion, $3 billion of which was generated by the traffic in drugs. Other MPs, such as the NDP's Said Al-Alfi, wondered about the role of "the Arab International Bank" in the fight against the launderers. "This bank (which is a joint Egypt-Libyan bank) does not fall under the CBE's supervision," Al-Alfi said.
