Cairo, Abu Dhabi close ranks on Banque Misr after US Iran sanctions warning

Central banks in Egypt and the United Arab Emirates have pledged to closely coordinate over the operations of Banque Misr in the UAE, following a US proposal to restrict the bank's access to the dollar system over alleged links to Iran.

A 28 August notice by the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury, targeted the branches the bank operates in the UAE, describing them as a "critical node" for Iranian access to US dollars.

The same branches, the bureau also claims, had processed $1.8 billion in transactions, involving 103 Iranian companies, between January 2024 and June 2026.

It said those companies were potentially linked to Iranian shadow banking networks, including fronts allegedly tied to Iran's Defence Ministry, the IRGC, and related entities.

The proposed special measure, which is subject to a 30-day public comment period, stems from Section 311 of the USA PATRIOT Act which was passed in response to the 11 September 2001 attacks.

Banque Misr operates five branches in different parts of the UAE.

Although the FinCEN notice is not yet a full US Office of Foreign Assets Control designation, it has alarmed officials in Egypt and the UAE.

On 30 August, the central banks of the two countries pledged full cooperation to keep Banque Misr's UAE branches operating normally during the review period.

Such cooperation is important to ensure that the Egyptian bank is taking the necessary measures and actions during the public comment period, observers in Cairo said.

"Apart from ensuring normal operations, such coordination between financial regulators in the two countries would also send assurances to the bank's clients across the UAE," Sahar al-Damati, a former deputy head of Banque Misr, said.

Speaking to The New Arab, she added that Egyptian and UAE regulators would ensure the bank adopts the organizational measures proposed by FinCEN and respond to the notice within the required period.

Iran war fallout

The proposed rule arrives at a pivotal moment in the Iran conflict, particularly when the US intensifies efforts to restrict Tehran's access to the dollar system, observers said.

Cutting Iranian entities off US dollar lifelines adds to other measures taken by Washington to weaken the Islamic Republic, including a naval blockade around it, they added.

The measures come nearly six months into the US-Israeli war on Iran, with both sides holding firmly on their demands, especially over control of the strategic Strait of Hormuz.

Egypt has been trying to avoid getting entangled in this conflict since its beginning, advocating diplomacy over arms.

Cairo has also been stepping up its contacts with all parties, including the Iranians, to find a common ground and a way out of a conflict that is draining everybody's economic energy, including states standing on the periphery, analysts said.

"Egypt has been working hard to deescalate tensions related to this conflict which has had a heavy toll on regional stability," Iranian affairs specialist Mervat Zakaria told TNA.

The Iran conflict, she added, has so far negatively affected the Egyptian economy, including by causing a sharp surge in energy prices and threatening maritime traffic in crucial maritime chokepoints, such as the Strait of Hormuz and the Bab el-Mandeb Strait.

Egypt's efforts to stay clear of the conflict and pursue an independent regional defence policy were clearly shown in recent weeks by its reluctance to join a fledgling Saudi-Turkish-Pakistani strategic alliance.

The same efforts were also demonstrated by Egypt's resistance to provocations to drag it into the conflict, including a drone attack at its Mediterranean Port of Damietta on July 29.

What comes next

Whether FinCEN's claims against Banque Misr will undermine Egypt's efforts to stay out of the Iran conflicts remains to be seen in the coming weeks.

Egypt's second largest state-owned commercial bank, Banque Misr was founded in 1920 to mobilize national savings for economic development and reduce foreign dominance in the financial sector. It is now a joint-stock company with the Egyptian government as its primary owner.

With over 850 electronically integrated branches and around 17 million clients across Egypt, the bank operates a series of branches and representation offices in other countries.

Its five UAE branches are based in Abu Dhabi, Dubai, Sharjah, and Ras Al Khaimah.

The bank's initial reaction to the 28 August FinCEN notice was confirmation in a statement on 29 August that it respects regulatory processes. It also said that it would continue to serve customers in the UAE under applicable rules.

The UAE Central Bank had earlier announced a "special" and "urgent" examination of Banque Misr's branches, including a forensic/in-depth look back focused on the period and companies referenced by US authorities.

It called on banks licensed to operate in the UAE to avoid reputational risks to the UAE financial system and respect relevant laws.

In their 30 August joint statement, the Central Bank of Egypt and the UAE Central Bank said Banque Misr's branches in the UAE were conducting their business as usual and would take all necessary actions within the specified period.

The Central Bank of Egypt had earlier clarified that the US measures do not affect other Egyptian banks or Banque Misr's non-UAE operations.

In Cairo, specialists expect the dispute over the bank's UAE operations to be resolved quickly once Banque Misr completes its internal review and submits a documented legal response to the FinCEN notice.

"The notice isn't a decision to impose sanctions on this Egyptian bank," leading economist Mohamed Fouad said.

"The bank now carries out a thorough financial examination and will submit the necessary documents to the US Department of the Treasury," he told TNA.