Financial Crime World

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Financial Crime Prevention Best Practices in Israel

Israel, home to some of the world’s most innovative fintech companies, is also a prime target for money launderers and terrorist financiers. As a result, the country has implemented robust financial crime prevention measures to safeguard its financial system.

Who’s Affected?

In Israel, almost all financial service providers are required to comply with the country’s anti-money laundering (AML) regulations. This includes:

  • Banks
  • Insurance companies
  • Stock exchanges
  • Portfolio managers
  • Investment advisors
  • Trading platforms
  • Currency service providers
  • Virtual asset service providers
  • Other financial institutions

What Are the Key AML Requirements?

Companies must conduct:

  • Customer identification and verification
  • Transaction monitoring
  • Reporting on transactions in cases established by AML regulations
  • Sanctions and Politically Exposed Persons (PEP) screening
  • Ongoing monitoring
  • Record-keeping
  • Appointing a Money Laundering Officer to oversee the implementation of these obligations

What Are the Penalties for Non-Compliance?

Sanctions differ depending on the category of the offense and other supplemental circumstances. For example:

  • According to the Prohibition on Money Laundering Law, 5760-2000, a person undertaking a property transaction with the intent to conceal or disguise its origin may be liable to imprisonment for up to ten years or a fine of twenty times that stated in Section 61(a)(4) of the Penal Law.

What Are the Online Identification Requirements?

According to the E-banking Directive:

  • Identification of applicants (including authorized signatories for corporations) may be carried out through one of two methods:
    • Based on the applicant’s ID card and an additional identifying document issued by the State of Israel
    • Using technology for remote face-to-face identification and authentication

What Are Some Additional Tips for Financial Institutions?

Financial institutions should:

  • Conduct regular training sessions for employees to ensure they are aware of the AML requirements and the risks associated with money laundering
  • Implement effective risk-based approaches to customer due diligence, ongoing monitoring, and reporting suspicious transactions

Frequently Asked Questions

  • What is the AML law in Israel?
    • The key AML law in Israel is the Prohibition of Money Laundering Law, 5760-2000.
  • Is Israel a high-risk country for AML?
    • According to FATF, “due to its geographic location, Israel faces a particularly high terrorist financing risk from sources outside Israel, while fraud, tax offences, organized crime, public sector corruption and the use of cash are among the sources of money laundering risk for the country.”
  • Is Israel FATF compliant?
    • Yes. Israel has been a FATF member since 2018 and follows its Recommendations.

By understanding these requirements and best practices, financial institutions can ensure compliance with Israeli AML regulations and help prevent financial crime in the country.