Israel’s Banking Sector Needs Improvement in Anti-Money Laundering Efforts, Says FATF
Progress Made, but Room for Improvement
A joint assessment by the Financial Action Task Force (FATF) and MONEYVAL has revealed that Israel’s anti-money laundering and counter-terrorist financing system is sound and effective in many areas. However, there are still several areas where improvement is needed.
Identifying and Combating Risks
Israel has successfully identified and understood the risks it faces, including terrorist financing from outside sources and money laundering through fraud, tax evasion, and organized crime. The country’s authorities have also demonstrated their ability to investigate and disrupt terrorist financing activity early on, using a range of effective instruments and mechanisms.
Prosecution and Conviction Rates
Israel has shown improvement in prosecuting and convicting those involved in terrorist financing activities. This is a positive step forward in combating these crimes.
Areas for Improvement
Despite the progress made, there are several areas where Israel needs to improve:
- Coordination with Non-Profit Organizations: Israel needs to improve its coordination with non-profit organizations to prevent misuse for terrorist financing purposes.
- Risk-Based Supervision Model: Financial supervisors have not yet developed a full risk-based anti-money laundering and counter-terrorist financing supervision model.
- Financial Intelligence Unit and Law Enforcement Agencies: These agencies need to increase their resources to register and supervise non-profit organizations more effectively.
- Preventive Measures: Israel needs to improve its implementation of preventive measures, particularly in the money service business sector where there has been a recent increase in reporting unusual activity.
Confiscation of Illicit Gains
Despite these challenges, Israel has made significant progress in depriving criminals of their illicit gains, with an average annual confiscation of over EUR 24 million. The country’s financial institutions and supervisors have also shown good understanding of the risks they face, although this knowledge is weaker in some sectors.
Conclusion and Membership Requirements
The assessment concludes that Israel needs to introduce major improvements to strengthen supervision and implementation of preventive measures. With its membership requirements met, Israel has officially joined the FATF with immediate effect.