On August 28, the Financial Crimes Enforcement Network of the US Treasury proposed a rule that would prohibit American financial institutions from opening or maintaining correspondent accounts for the UAE branch of Banque Misr, Egypt's second-largest bank. The rule also requires US banks to take measures to avoid processing transactions involving this branch through their correspondent accounts.

The Treasury alleged that between January 2024 and June 2026, the branch processed approximately $1.8 billion in suspicious transactions for about 103 companies, which it claims may be linked to an Iranian shadow banking network. The action was taken under Section 311 of the USA PATRIOT Act, designating the branch as a foreign institution of "primary money laundering concern." The rule will only take effect after a 30-day public comment period, meaning it has not yet been implemented. Treasury Secretary Scott Bessent made clear that those assisting Iran cannot continue to use the dollar or the global financial system.

Where the case stands: A key conduit for Iranian funds

The Treasury described the Banque Misr UAE branch as a critical node for Iran's access to dollars, noting that its clients include shell companies used by Iran's Defense Ministry and the Islamic Revolutionary Guard Corps to evade sanctions, as well as channels for money laundering on behalf of Supreme Leader Mojtaba Khamenei. Documents show that over two and a half years, roughly $1.8 billion in transactions flowed through the branch, involving about 103 corporate entities.

On the same day, the Office of Foreign Assets Control also imposed sanctions on Reza Mohammad Tayedi, general manager of the Dubai branch of Bank Melli Iran, and sanctioned a Hong Kong-registered company accused of assisting a sanctioned Iranian exchange house with money laundering. These actions align with the "economic expulsion operation" announced by Bessent on August 24, which aims to cut off Iran's remaining financial channels.

Notably, the proposed rule targets only the UAE branch of Banque Misr. Its Cairo headquarters and other offices in Paris, Frankfurt, Riyadh, Beirut, and Djibouti can still conduct dollar clearing, meaning the bank group has not been entirely removed from the dollar system.

Reactions from the UAE and Egypt: Targeted inspections and distancing

The Central Bank of the UAE announced on August 30 that it would launch a "special emergency inspection" of Banque Misr's local branch, covering the period referenced in the US statement, with a focus on verifying transaction records involving the named companies. The central bank required all licensed banks in the UAE not to expose the country's financial system to reputational risk and stated it was evaluating the branch's licensing arrangements should the rule take effect, while also considering obligations to clients.

Banque Misr responded by saying it respects procedures and the law, will cooperate with the investigation, and that its UAE branch will continue to serve clients under current rules. The bank operates five branches in Dubai, Abu Dhabi, Sharjah, and Ras Al Khaimah. The Central Bank of Egypt stressed that the US measure only applies to transactions between the bank's UAE branch and dollar correspondent banks, and does not affect Egypt's domestic banking system or the bank's normal operations in Egypt and elsewhere.

On August 30, the UAE Central Bank and the Central Bank of Egypt issued a joint statement saying they remain in continuous coordination and that the UAE branch is "handling all business as usual," with necessary measures to be taken within the specified period.

Deciding factor: A 30-day window for five branches

So far, the Treasury has not publicly itemized the 103 companies or the $1.8 billion in transactions, and the rule remains in a 30-day public comment phase. If the rule takes effect, US banks will be barred from maintaining correspondent accounts for the branch, and transactions involving the branch that pass through US correspondent accounts from third-country banks will also be blocked. The Cairo headquarters and other branches can still clear dollars normally, meaning the group retains a place within the dollar system.

The outcome of the UAE central bank's special inspection and the final version of the rule after the 30-day comment period will jointly determine the future of these five branches—whether they adjust operations, reduce dollar exposure, or face follow-up actions regarding their licenses.