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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?

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  • @Fattie answers should be posted as answers whether they're correct or not. An incorrect comment cannot be downvoted.
    – phoog
    Commented Mar 17 at 8:30
  • Comments can be deleted and sometimes are. So any comment that should have posted as an answer is likely to disappear when someone post the same information as an answer. Whether right or wrong.
    – Willeke ♦
    Commented Mar 17 at 8:48

2 Answers 2

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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.

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    Black market by definition is illicit trade in goods or commodities in violation of official regulations. Profitable yes, legal no. And the OP is facilitating it. Crimes and penalties for dealing in foreign currency
    – Traveller
    Commented Mar 14 at 21:43
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    @lambshaanxy I’m not so sure about that. 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 OP is enabling financial crime; even if that happens unwittingly ignorance and error may not be deemed to be valid excuses by the authorities. Highly unlikely the Egyptian authorities would pursue an overseas visitor duped in this way, of course. Unless the amounts involved were very large.
    – Traveller
    Commented Mar 15 at 11:13
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    @Traveller This really isn't classic placement though. There is no reason to believe before the transaction starts either pool of money is 'dirty'. The simplest explanation is that the hotel is trying to force the questioner to exchange money at the official rate which they can then either keep the dollars, or exchange it back at the black market rate for an instant profit. This is certainly unethical -- but up to the point where the hotel interacts with the black market -- is tough to say if it's a actually a crime or not depending on local laws.
    – Chuu
    Commented Mar 15 at 14:40
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    @Chuu - There is such a strong reason in what happened after the OP refused to launder $65; the hotel made them launder $35. The OP would not and did not exchange any currency at any rate and they knew he wouldn't. The mere placement was the goal. After the transaction, those extra $35 that the hotel had could be demonstrated to be coming from the OP, legitimate income; before the transaction, it was just... cash.
    – Jirka Hanika
    Commented Mar 15 at 22:10
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    @Fattie I used to work in the Anti-Money Laundering dept of a major bank…
    – Traveller
    Commented Mar 16 at 18:35
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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.

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  • The OP paid for and received a tour worth $85, how is this money laundering?
    – lambshaanxy
    Commented Mar 17 at 9:18
  • @lambshaanxy - If you read the question to the end, you'll conclude that either the OP backed off from the $85 tour (i.e., neither paid for it nor received it), or their bank account was charged $120 and they received a tour worth $85 and $35 in cash.
    – Jirka Hanika
    Commented Mar 17 at 12:01
  • That's the second tour, the OP took their first tour But you're not answering my question: if the foreign exchange part (the extra $35) is separate and optional, how is there any money laundering involved in the $85?
    – lambshaanxy
    Commented Mar 17 at 20:37
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    @lambshaanxy - The cost of the first tour is not given in the OP (Dan's question), unless you assume that all tours costed the same. The OP is very clear about the $35 atop that cost that was also charged to Dan's account but then refunded in cash, in the same currency (USD). While the tour cost is a real transaction and not itself money laundering, that unwanted "cash back" service is money laundering (placement). The origin of the $35 will thus be faked to appear to be Dan's account, and the business reason for the $35 - the trip. This is in addition to the real cost of the trip.
    – Jirka Hanika
    Commented Mar 17 at 21:23
  • We agree paying USD and getting back USD would be sus, but that didn't happen, the OP exchanged to EGP. So how is paying $35 by credit card and getting it back as EGP different from walking up to the hotel desk with $35 and exchanging it there?
    – lambshaanxy
    Commented Mar 17 at 22:09

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