Title: Israel’s AML/CFT System commended by FATF and Moneyval: Areas for Improvement

Overview

Israel’s anti-money laundering (AML) and counter-terrorist financing (CFT) system has received high praise from the Financial Action Task Force (FATF) and the Council of Europe’s Moneyval organization in their joint assessment. In this article, we will discuss the strengths of Israel’s system, areas for improvement, and the recommendations provided by FATF and Moneyval.

Strengths of Israel’s AML/CFT System

• Identifying, investigating, and disrupting money laundering and terrorist financing activities: Israel’s AML/CFT policies and activities have resulted in successful investigations and prosecutions.
• Addressing unique risks: Israel faces unique risks from terrorism financing and money laundering. Despite these challenges, Israeli authorities have cooperated to prosecute suspects and seize illicit gains.
• Effective cooperation: Israeli authorities have cooperated with international counterparts and shown a commitment to preventing money laundering and terrorist financing activities.

Areas for Improvement

Despite its accomplishments, Israel’s AML/CFT system is not without weaknesses. Some key areas for improvement include:

Preventing the misuse of non-profit organizations

• Resource investment: Israel needs to invest more resources into registering and supervising non-profit organizations to tackle the risk of terrorist financing.

International cooperation

• Executing requests: Israel has faced challenges in promptly executing requests from foreign partners to prevent money laundering and terrorist financing activities.

AML/CFT framework for specific sectors

• Implementing risk-based supervision: Regulators have not fully implemented risk-based supervision, especially in the money service business sector.
• Including specific sectors: Lawyers, accountants, real estate agents, precious metals dealers, and trust and company service providers should be included in the AML/CFT framework.

Reporting of suspicious transactions

• Lawyers and accountants: Lawyers and accountants are significant risk factors, but they are not legally obligated to report suspicious transactions.

FATF and Moneyval’s Recommendations

FATF and Moneyval have provided recommendations to help Israel address these weaknesses. Israel will continue to strengthen its supervision and execute preventive measures to further enhance its AML and CFT capabilities. The specific recommendations include:

1. Expanding the AML/CFT framework to cover specific sectors, such as lawyers, accountants, and real estate agents.
2. Implementing risk-based supervision more fully, especially for the money service business sector.
3. Enhancing cooperation with international partners to prevent money laundering and terrorist financing activities.
4. Investing sufficient resources to register and supervise non-profit organizations.
5. Ensuring that lawyers and accountants are subject to AML/CFT reporting requirements.

Conclusion

Israel’s AML/CFT system has proven effective, with successful investigations and prosecutions of money laundering and terrorist financing cases. By addressing the areas for improvement recommended by FATF and Moneyval, Israel will continue to strengthen its capabilities and meet international standards.

Sources

The article is based on a press release from FATF and Moneyval, published on October 26, 2018.

• FATF website - https://www.fatf-gafi.org/
• Moneyval website - https://www.moneyval.org/

Timeline

• October 2018: FATF adopts assessment report at the Plenary meeting.
• December 2018: Moneyval follows suit at its meeting.