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Banks Face Fresh Obligations and Clarifications from Regulatory Authorities
In an effort to strengthen oversight and ensure compliance with anti-money laundering regulations, the Supervisor of Banks has issued a directive outlining new obligations for banks operating in Israel. The directive adds to existing requirements for formulating policies on know-your-customer, risk management, customer identification, ongoing monitoring, and reporting obligations.
Regulatory Authorities
The Bank of Israel’s Supervisor of Banks is responsible for overseeing banking corporations, including credit card companies and entities engaged in clearing debit card transactions. Non-bank financial entities require a license from the Capital Market, Insurance and Savings Authority, which is overseen by the Supervisor of Financial Services. The Securities Authority will take over supervision of certain financial asset service providers currently under the Capital Market, Insurance and Savings Authority.
Government Deposit Insurance
The government has implemented a comprehensive reform of payment systems, introducing the Zahav system for real-time credits and transfers. This system reduces credit and liquidity risks, as well as operational and legal risks. The Bank of Israel provides banks with Intraday Credit to manage liquidity, and banks are required to maintain sufficient collateral against this credit.
Transactions between Affiliates
The Supervisor of Banks has issued a Proper Banking Management Directive outlining legal and regulatory limitations on transactions between banks and their affiliates. An affiliate is defined as a company controlled by the bank or in which the bank holds more than 50% ownership. The directive prohibits certain activities, such as providing credit to affiliates without proper risk assessment, and requires banks to maintain adequate internal controls and reporting.
Q&A File
The Supervisor of Banks regularly updates its Q&A file with additional clarifications on the directive’s requirements. Key questions addressed in the file include:
- What constitutes an affiliate for the purpose of this directive?
- How do I determine whether a transaction between a bank and its affiliate is prohibited?
- What are the reporting obligations for banks engaged in transactions with affiliates?
To stay up-to-date on regulatory changes and clarify any questions, banks operating in Israel should consult the Supervisor of Banks’ Q&A file and ensure compliance with all applicable regulations.
Additional Clarifications
The directive includes additional clarifications on various aspects of banking operations, including:
- Risk management policies
- Customer identification procedures
- Ongoing monitoring requirements
- Reporting obligations to the Supervisor of Banks
Banks should carefully review these requirements and take necessary steps to ensure compliance. Failure to comply may result in regulatory action or penalties.
Conclusion
The Supervisor of Banks’ directive aims to strengthen oversight and ensure compliance with anti-money laundering regulations, while also providing additional clarity on transactions between banks and their affiliates. By reviewing the Q&A file and ensuring compliance with all applicable regulations, banks operating in Israel can maintain a safe and sound banking system that protects depositors and promotes economic stability.
Media Contact
For further information or to request an interview with the Supervisor of Banks, please contact [Name] at [Email] or [Phone].