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Financial Institution Security Measures in Israel: A Look into the Country’s Anti-Money Laundering Regime
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Israel, a global fintech hub, is home to some of the world’s most prominent unicorns. However, its geography also makes it vulnerable to money laundering and terrorist financing risks.
Money Laundering Risks in Israel
According to the Authority for the Prohibition of Money Laundering and Terrorist Financing, money laundering in Israel rose by 12.2% in 2021, with a recent high-profile case involving a Franco-Israeli gang laundering criminal proceeds through multiple bank accounts.
Implementing Robust Anti-Money Laundering Regulations
To combat these threats, Israel has implemented robust anti-money laundering (AML) regulations. The Prohibition of Money Laundering Law, 5760-2000, is the key legislation governing AML in Israel. Under this law, financial institutions must implement strict customer due diligence measures, including identification and verification procedures.
Customer Identification and Verification
Financial institutions in Israel are required to identify and verify their customers through a combination of methods. These include:
- Presenting identification documents, such as ID cards or passports
- Undergoing remote face-to-face identification and authentication using technology
In addition, financial institutions must conduct ongoing monitoring of customer transactions and report suspicious activities to the relevant authorities. Sanctions and PEP screening are also mandatory, ensuring that customers are not involved in any illegal activities.
Penalties for Non-Compliance
Penalties for non-compliance with AML regulations are severe, including imprisonment and fines. For example, a person found guilty of money laundering can face up to ten years in prison or a fine of twenty times the stated amount in the Penal Law.
Is Israel a High-Risk Country for AML?
According to the Financial Action Task Force (FATF), Israel faces a high risk of terrorist financing and money laundering due to its geographic location. However, the country has successfully identified these risks and implemented policies and activities to mitigate them.
FATF Compliance
Israel’s AML regime is FATF-compliant, with the country having been a member since 2018. The government has taken steps to strengthen its AML regulations, including increasing cooperation with international authorities and improving customer due diligence procedures.
Conclusion
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In conclusion, Israel’s financial institutions are subject to robust anti-money laundering regulations designed to prevent money laundering and terrorist financing. Financial institutions must implement strict customer due diligence measures, conduct ongoing monitoring of transactions, and report suspicious activities to the relevant authorities. Failure to comply with these regulations can result in severe penalties.