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Egypt tackles embezzlement

Egypt’s judiciary will consider a new reform to allow for amicable settlement between the government and those accused of embezzlement, bringing in recovered funds but also possibly legalizing corruption.
An employee counts money at an exchange office in downtown Cairo June 5, 2014. Egypt's currency black market is under threat from two directions, as aid from wealthy Gulf states promises to ease a dollar shortage and an increasingly confident central bank engineers a gradual depreciation of the Egyptian pound. REUTERS/Amr Abdallah Dalsh  (EGYPT - Tags: POLITICS BUSINESS) - RTR3SDW1

The Cabinet’s amendment of Law No. 62 of 1975 on Illicit Earnings, which is to be submitted to the legislative reform committee for approval, has stirred debate across Egypt. The amendment allows for amicable settlement between the government and the public figures who embezzled public funds. Some see this law as an attempt to recover the embezzled money and introduce a hard currency, which the country’s declining economy needs. Others consider the law a legalization of corruption and a loss to state authority.

Maj. Gen. Mohamed Saad, former head of the Public Funds Investigation Department, told Al-Monitor, “Article 25 is one the most important aspects of this new law, as it allows for amicable settlement. The article states that the accused, who is under the [jurisdiction of the] Illicit Gains Authority, can at any moment reach a settlement with this authority by returning the illicitly gained funds. As a result of the settlement, investigations are stopped and the penal proceedings for the accused are halted, but he is obliged to pay the expenses of the lawsuit and the judges’ fees.”

Saad noted that the new law includes several amendments, which would add new functional categories that did not exist under the Illicit Gains Authority, such as members of the judiciary and its six committees and members of the police forces. Other categories would be removed, such as members of the socialist union, which is a political popular organization founded by the late leader Gamal Abdel Nasser. The membership in this union was a prerequisite to run for parliamentary and trade union elections, and it was abolished under the era of President Hosni Mubarak, following the approval of the establishment of political parties under specific conditions.

Saad said the new law stipulated the complete independence of the Illicit Gains Authority by transferring its subordination from the executive authority, represented by the Minister of Justice, to the Supreme Judicial Council, in addition to allocating a budget for the authority to spend on cases. The law also stated the right of this authority to manage suspicious funds or companies by assigning a financial comptroller to maintain and monitor them. The comptroller would also open a special account for the profits of these funds. The previous law prevented the investment of suspicious funds until the completion of investigation. As for the new law, it allows the investment of suspicious funds, and the defendant whose innocence is proved can get back his suspicious funds and the profits resulting from the investment.

Meanwhile, Ali Lutfi, Egypt’s former prime minister and a professor of economics at Ain Shams University, told Al-Monitor, “I believe that this law will have a positive influence, as none of the funds that were smuggled or stolen have been returned, although four years have passed since the 2011 January 25 Revolution. This means that a certain amendment to this law was required, especially since some of the people who embezzled money fled Egypt with large sums, such as Hussein Salem. We could not recover one single penny [from those individuals]. The law should open the door of amicable settlement under certain conditions, mainly giving the state its full rights. I believe that this is important and will have a positive impact on the Egyptian economy that needs a hard currency.”

“We should put a time frame for the amicable settlement, such as six months for instance. Otherwise, many 'vulnerable' people might be tempted to steal public funds. If they are legally pursued, they will suggest amicable settlement as long as it exempts them from jail sentence. Therefore, the jail sentence must not be canceled because it is a deterrence tool, and this law only applies to the cases occurring before its issuance,” he said.

Meanwhile, Ahmad Refaat, former dean of the faculty of law at the University of Cairo, said that he supported the amicable settlement system and that it was applicable in Egypt to cases related to customs smuggling, tax evasion and currency exchange in unofficial rates.

Money has been smuggled abroad, but its destination, route and amount remain unknown. Some states such as Switzerland announced that they froze the accounts of Mubarak and some of his men. This move benefits the banks and states where the money is frozen because they do not pay interest on frozen funds, and at the same time, they do not disclose the amount of funds nor do they return them — except if a final judicial decision is issued that pinpoints the smuggled funds and proves they are corrupt with irrefutable evidence. Yet, all of this data is unclear given Egypt’s status quo.

“The illicit gains committees that were formed did not manage to reach any settlements, as the state’s institutions did not make specific accusations nor did they present tangible evidence. As a result, most businessmen who were accused of corruption cases were acquitted,” Refaat said.

“When the committees visited the states, like Switzerland, that had declared freezing the accounts of Mubarak and some of his men, their banks refused to disclose any information about these accounts, because they are bound by the principle of secrecy. An amicable settlement should be applied to funds that were smuggled during Mubarak’s rule, provided that the state’s monitoring institutions play their role in the new phase and close the loopholes that allow leeway for the corrupt,” Refaat said.

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