Will the takeover of Banque Misr UAE branches end the crisis from US sanctions?

The predicament surrounding Banque Misr's branches in the UAE entered a new phase on Tuesday, 22 September, after US Treasury Secretary Scott Bessent announced that the Dubai branch "will be closed", following US allegations that around $1.8 billion was processed in transactions linked to Iranian entities.

The US escalation has placed Banque Misr in a crisis that goes beyond suspending dollar transactions or cutting correspondent banking relationships from 1 October, according to the deadline set by the US Treasury Department.

On Tuesday when Banque Misr and the National Bank of Egypt said in a joint statement that the Central Bank of the UAE had issued preliminary approval for the National Bank of Egypt's request to acquire Banque Misr's branches in the UAE.

A confirmation followed from senior Egyptian sources to The New Arab that the government was moving quickly to put alternatives in place to manage the crisis.

The sources said a delegation from the Central Bank of Egypt and the Foreign Ministry would travel to the UAE in the coming hours to meet officials and relevant parties to discuss the repercussions of the decision to close Banque Misr's five branches.

The delegation would also discuss the operational procedures that would follow until the end of the current month, as well as notifying customers of the branches before the decision is implemented from 1 October.

Takeover of Banque Misr branches

In an exclusive interview with The New Arab, former Banque Misr deputy chairwoman Sahar El-Damaty said the announcement of the closure meant that the decision had already been taken.

She explained that the US Treasury secretary had given Banque Misr 30 days to respond to questions concerning transactions by the bank's branches with institutions and individuals affiliated with Iran's Islamic Revolutionary Guard Corps. However, the deadline had not expired when the decision was initially announced.

She said that Bessent had spoken before Congress about a week ago during a hearing, before later announcing that the branch would be closed, and the closure was announced on Monday evening, 21 September, before the deadline expired.

Damaty explained that the decision meant the US side had evidence of financing passing through some companies that Washington considers fronts for Iran and its sanctioned institutions.

She stressed that banks normally carry out all the required procedures to verify customers' identities and the documents submitted to them. However, she quickly pointed out, they cannot necessarily know whether a company or certain individuals are transferring money to entities affiliated with people or institutions with a military nature in Iran unless they have an intelligence service investigating the activities of companies.

This is usually carried out by central banks in cooperation with intelligence agencies, something that was not available to Banque Misr's branches in the UAE.

Damaty also explained that the amount involved in the US decision, $1.8 billion, does not represent a large sum compared with what a country such as Iran, with millions of residents, could purchase, and the import and arms deals it concludes are worth tens of billions of dollars.

She stressed that the existence of financial transactions through a bank with a country or companies does not necessarily mean the bank itself was involved, explaining that responsibility could relate to employees or other parties.

Damaty said that Banque Misr has five branches in the UAE, questioning the size of these branches and the impact of their closure on the bank.

At the same time, she stressed the need to respect US sanctions, confirming that dealing with sanctions had always been handled with great caution when she served as deputy chairwoman of Banque Misr and that the necessary measures should have been taken at the time.

She noted that bank employees work in the UAE under existing procedures and oversight, questioning the role of the Central Bank of the UAE in monitoring the transactions in question and that UAE banks operating in Egypt are subject to the supervision of the Central Bank of Egypt, while Egyptian banks operating in the UAE are subject to the supervision of the Central Bank of the UAE.

Money laundering in the UAE

Damaty also discussed money laundering in the UAE, noting that the UAE had faced a problem in this area and had recently resolved it.

She questioned whether it had taken measures at the time to close entities that held funds linked to the issue, and said that the presence of people of Iranian origin in the UAE does not mean that dealings with them should be closed. Rather, transactions involving the purchase or financing of military or non-military equipment and other operations that may not be permitted should be examined.

She also question the importance of the Central Bank of the UAE moving to close Banque Misr's branch in the UAE, as one of the branches operating under its jurisdiction, laws and direct supervision.

Damaty stressed that the decision to close Banque Misr's branches in the UAE, according to what the US side announced, does not mean the closure of Banque Misr itself, as closing five branches does not mean closing the entire bank.

She explained that the issue concerns the closure of the branch, rather than simply suspending dollar transactions or the "SWIFT" system, noting that Banque Misr in the UAE deals in various major currencies.

She further said that closing the branch in this way, if implemented, would represent a severe penalty because it would mean halting all branch operations, rather than merely suspending its dollar activities.

She expected that the branch's activities could be limited to transactions in the UAE dirham, noting that there are UAE banks that could carry out the same transactions.

She added that transfers made by Banque Misr could be conducted in other currencies, including the UAE dirham, Chinese yuan and Egyptian pound.

Regarding the impact of the decision on remittances by Egyptians in the UAE, Damaty said there are other banks that Egyptians can use such as the National Bank of Egypt in the UAE, although it is smaller than Banque Misr.

Damaty said dealing with the United States on such issues is "very difficult", and that matters could change through negotiations and political channels.

She said the Central Bank of the UAE and the Central Bank of Egypt are the two parties capable of resolving the issue because they have been involved in the matter since the first day.

She added that the penalty itself remains unclear in terms of its duration and nature, as the announcement of the closure did not specify whether it was final or for a set period.

Banks' public image

Banking and investment expert Rashad Abdo told The New Arab that Egypt would not lose much from a banking perspective because Banque Misr has a large number of branches inside and outside Egypt.

He said the more important issue was its external image before public opinion, amid talk of dealing with the Iranian regime and allegations of money laundering.

He added that the most that could happen would be the punishment of the branch manager and its employees.

However, Egypt should begin implementing the decision and consider possible alternatives, he said.

He pointed to the possibility of reaching an agreement with the UAE government for a branch of another bank, such as the National Bank of Egypt, to perform the same role for Banque Misr customers in the UAE.

The bank would have to comply with the directives and take into account all matters related to the decision, which he said was reflected in the preliminary approval of this approach.

Abdo explained that Banque Misr's branch in the UAE is subject to the Central Bank of the UAE.

He noted that UAE authorities said they monitor and inspect transactions and, following the US position, announced that they would send a committee to conduct further inspections and examinations, informing Egypt and the US side.

Noting this was the first time such an incident had occurred, he explained that the United States has its own controls and rules and implements what it considers necessary to impose its dominance.

He added that the US had begun a naval blockade of Iran and that the blockade would also become aerial.

Arguing that the US power is based primarily on its currency, as the dollar is the currency in which oil and minerals are sold globally, strengthening its influence, Abdo also opined this was why Washington was concerned about moves towards creating an alternative currency for the BRICS group, particularly as the group expands, a step that Washington strongly fears.

Article translated from Arabic by Afrah Almatwari. To read the original, click here.