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On a recent trip to Egypt, the hotel required - either for obvious economic-situation or legislation reasons - that the payments for my room and booked tours be paid in US Dollars.

The payment was made via an online portal that seemed legitimate (it went via MasterCard's portal site at least), a link sent by the staff via WhatsApp, but they told me that the amount I paid would be higher than the billed amount and they would give me the difference in cash. Either in EGP or USD, whichever I preferred. Neither are my home currency.

The first time, this difference was $35. The second time they tried to make it $65 more, on a tour that cost $85. They said it was something to do with them being unable to change some predefined amount. That second time I only had one day left in the country, so said I didn't need or want $65-worth in cash and would rather cancel the tour. Miraculously, it dropped to $35 difference soon after again.

Each time they did give me the correct amount difference in EGP, and the shown amount does seem to have been what was paid from my account. In a way it was also useful because I used it almost as an ATM. But there's clearly a con here of some kind, I just can't think what.

Someone suggested they were hoping I'd want the EGP refund, them having an assumption that their currency would continue to devalue and they'd be holding steady USD. Others suggested that a commission is paid by my bank for USD transactions and they'd receive some of that. I had another idea that perhaps they need to hit some turnover threshold to receive preferential rates on something, and this would appear to count towards that.

Has anyone encountered this before and/or uncovered an explanation?

2 Answers2

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Until recently, there was an up to 2x difference between the official EGP/USD exchange rate and the black market rate. By getting dollars from you, then giving EGP to you at the official rate, they were able to sell the dollars off at the black market rate and pocket the difference.

As of March 2024 this no longer really works though, because the pound was floated on March 6th (losing 60% of its value overnight) and the black market gap has disappeared.

lambshaanxy
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As Traveller stated in the comments:

The hotel isn’t performing a ‘normal’ foreign exchange transaction, it is inflating an invoice for a service and returning the extra as cash. In money laundering terms that’s classic placement (placing the ‘dirty’ money into a legitimate financial system).

The "dirtiness" of the money is not tied to the banknotes themselves, it's a metaphor which is valid only to the extent to which the parties involved are aware that this is a money laundering scheme. For it to succeed, it is important that a certain party in the flow of fictious "transactions" no longer knows, or at least can credibly pretend not to know, that they are participating in a money laundering scheme. That is what makes the laundered money (be it cash or somebody's bank account balance) effectively clean again.

The hotel also tried to offer a foreign exchange service atop the money laundering placement. That foreign exchange service component was entirely above the board.

The price of the trip itself (e.g., $85) is not part of the placement. However, the hotel's own records will present the trip price as the amount charged (e.g., $120), and the cash paid out will not be recorded in hotel's accounting at all, regardless of the cash currency chosen by the guest. In the extreme case where the currency exchange converts USD to USD (at a 1:1 rate), the service resembles a mere forced cash back, but its true purpose is to convert some unofficial cash into business revenue whose source is the OP without having to pay the OP for their help.

By the time the authorities come after the hotel, if they ever do, the OP will be long out of the country and thus unreachable for the authorities, so the trip price discrepancy ($85 vs. $120) will no longer be provable.

This is not the sole explanation possible, given the limited facts. The strongest signal of money laundering is that the "cashback" component is not optional, but the currency conversion is. So perhaps the hotel really, really needs to make the price of the trip appear as $120 in their accounting.

Jirka Hanika
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