Egypt’s House of Representatives has approved the legislation to regulate the fintech industry in January 2022. The bill was first drawn up by the Financial Regulatory Authority (FRA) in 2020 and empowers the regulator broadly in terms of licensing and corporate governance in the sector, as well as penalizing firms that breach legislative provisions.
Robo-advisory, nano-finance, insurtech, and (tech-enabled) consumer finance, among others, are the activities that can be counted as fintech, according to the bill.
The FRA also gives freedom to take steps for using fintech tools to promote financial inclusion, which the law defines as expanding the use of banking and non-banking financial services (NBFS).
The individual needs to submit a standard request form in order to apply for a fintech license, along with proof of sufficient issued capital for the product that the individual will provide and of having onboarded as an auditor. NBFS players seeking a fintech license will also need to have the necessary tech, database, and data protection infrastructure, as per FRA requirements.
There will be a separate, time-limited fintech license for startups. Startups can apply for a short-term fintech startup license that is valid for a maximum of two years under the law.
The act will also describe the FRA’s data protection regulations to protect users who rely on fintech products or services and raise awareness of the fintech services available to consumers.
The FRA will also prepare and publish studies and statistics to help encourage fintech activity, apart from regulating a testing medium to assess new fintech products.
The act empowers the regulator to set out further requirements pertaining to the governance of the business, including ownership and structure of the board of directors, the price of each license, and the experience, that will be required to register with the FRA as a service provider. Providers will also need to follow anti-money-laundering regulations and procedures.
Penalties:
A business that doesn’t follow one or more of its licensing requirements, or violates the law in any manner, can face a warning issued by the FRA. FRA can decide to hold a board or general assembly meeting to resolve the issue, dissolve its board and temporarily appoint an FRA official to manage the business for up to one year. FRA can also suspend the activities of the business for six months or revoke the license altogether.
Unlicensed operators face minimum prison terms of six months, and fines of EGP 200k-1 mn. License holders, who do not follow data privacy regulations, also face prison sentences of at least three months and an EGP 200k-1 mn fine. Any disputes that arise from implementing the law will be mediated by the nation’s economic courts.
Fintech players have a six-month time limit, starting from the date of the publishing of executive regulations, to comply with the requirements under the legislation. The FRA has the right to grant three further extensions of six months each, for which the final limit is 2 years, for the individual to comply with the law. The prime minister has the right to grant a further two-year extension.
The ban on brokerages using payment solutions of fintech firms only applies to transactions carried out online. Transactions processed at branches of fintech firms are accepted, provided identity checks are carried out properly.
