Company:        ABC Bank Egypt
         PR Contact:     Hany Abouel Fotouh (Hany.AbouelFotouh@arabbanking.com.eg)
         Posted By:      Medilyn Manibo (medilyn@ameinfo.ae)
         Published:      Egypt, Sunday, May 11 - 2008 at 11:47 (GMT+4)
         Media Value:    US$ 3,250 (based on reach of audited readership)

         Leading banker speaks on electronic banking
                 and risk mitigants in Bahrain

        Abou-El-Fotouh, ABC Bank
        Egypt, First Vice President spoke
        recently at Remote Banking
        Fraud Management Forum in
        Bahrain under the title of "The
        fight against fraud crime and
        money laundering issues in
        electronic payments.

        "The constant development of electronic banking and electronic money contributes to improving
        the efficiency of the banking and payment system. However, banks should adopt methods for
        identifying, assessing, managing and controlling the risks related to electronic banking and
        electronic money," said Abou-El-Fotouh.

        He said that banks have used electronic channels for years to communicate and transact
        business. With the advent of the Internet, banks are increasingly using e-banking or Internet
        banking to deliver their products and services to their customers. The open and automated
        nature of the Internet means that neither geography nor time may create major barriers between
        banks and their e-banking customers. The common delivery channels include "closed" and
        "open" networks. "Closed networks" restrict access to participants bound by agreements on the
        terms of membership. "Open networks" have no such membership requirements. Currently,
        banks e-banking services through point of sale terminals, automatic teller machines, telephones,
        personal computers, smart cards and other devices.

        Explaining the term electronic money, Abou-El-Fotouh said, "Electronic money refers to "stored
        value" or prepaid payment methods for executing payments using point of sale terminals, direct

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        transfers between two devices, or over the Internet. Stored value products include "hardware
        " or "card-based" mechanisms (also called "electronic purses"), and "software" or "network-
        based" mechanisms (also called "digital cash"). Banks may participate in electronic money
        schemes as issuers, or distributors of electronic money issued by other entities; redeeming the
        proceeds of electronic money transactions for merchants; handling the processing, clearing,
        and settlement of electronic money transactions; and maintaining records of transactions.

        He further added, "Due to rapid changes in information technology, it is not possible to compile
        an exhaustive list of risks. However, there are specific risks facing banks engaged in electronic
        banking and electronic money activities. Among the different risk categories, operational risk,
        reputational risk, and legal risk may be the most important risk categories for most electronic
        banking and electronic money activities. Other risks include, reputational risk, security risk,
        cross border risks, credit risk, liquidity risk and money laundering risk.

        Abou-El-Fotouh explained that e-banking is vulnerable to abuse by money launderers. He said
        "it is attractive to money launderers if the systems offer liberal balance and transaction limits or
        when there are limited or no audit trail. It would be difficult to apply traditional anti-money
        laundering rules for some e-payments due to factors such as relative lack of physical bulk;
        potential anonymity and payments can be conducted remotely,"

        In order to mitigate the risks, banks should design adequate risk management strategy which
        addresses the risks having regard factors such as e-products characteristics, channels, target
        customer, cross-border issues etc.

        The risk mitigations should include the following among many others:

        For prepaid cards: adequate due diligence before accepting non face-to-face before accepting
        customer relationships; limiting funding options; limiting card value and\or the number of cards
        that individual can purchase and\or value per transaction; limiting cross-border access to cash
        etc. Other factors for considerations include on-line interaction with card issuers or a central
        operators; monitoring and tracing individual transactions; maintenance of cumulative records
        in a central database; use of tamper-resistant devices incorporated into stored-value cards and
        merchant hardware; implementing multi-factor authentication and enhance web sites with
        Embed 'Secure Socket Layer' and Virtual Keyboards.

        Abou-El-Fotouh concluded by saying, "We are becoming increasingly sophisticated in how we
        apply measures to combat international security threats of fraud in electronic banking. This new
        era requires that financial institutions and regulators search for threats to the financial system,
        and ensure such threats are effectively isolated. Through collaboration of key players, we can
        continue to build strong and relatively safe electronic banking markets."

        Notes and Media Contacts
        About Hany Abou-El-Fotouh

        First vice president and group head of corporate governance and compliance, ABC Bank, Egypt. He is a
        leading expert on money laundering and terrorist financing controls in the Middle East-North Africa region with
        extensive experience in AML compliance and training. Founder of the Middle East Compliance Officers' Forum,
        he has been honored for his work in promoting compliance awareness in Egypt and the MENA region.
        Previously, he held top compliance positions in multinational institutions, such as HSBC Bank Egypt, Banque
        Saudi Fransi, and Oman International Bank.

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