Financial Crime World

Israel’s Banking Supervision Department Ensures Stability in Highly Centralized System

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In a country with a highly centralized banking system, stability is paramount. To ensure this stability, the Israeli government has implemented various regulations and laws to oversee banks and maintain financial integrity.

Laws and Regulations

Banking (Licensing) Law

  • Outlines areas of activity where banks are permitted to operate
  • Imposes restrictions on holding control by a banking corporation or its controlling shareholder
  • Aims to increase competition in the banking system

Banking (Customer Service) Law

  • Focuses on bank-customer relations
  • Sets out obligations for banks to provide certain services, such as:
    • Receiving deposits
    • Opening checking accounts
  • Prohibits deception by act or omission
  • Requires proper disclosure of information
  • Regulates fees charged to customers

Regulatory Authorities

Supervisor of Banks

  • Has general supervision and audit powers over every banking corporation
  • Can require banks to provide information and documents related to their transactions and those under their control
  • Can issue instructions on proper banking management directives
  • Ensures the bank’s proper management and protects customer interests

Proper Banking Management Directives

Recent decades have seen the publication of numerous proper banking management directives, covering various areas such as:

  • Capital measurement and adequacy
  • Management and control
  • Credit and investments
  • Financial risk
  • And more

Reporting Obligations

The Supervisor of Banks has also published a profusion of directives on reporting obligations to the public and reporting obligations to the supervisor. These include requirements for:

  • Annual financial reports
  • Libra and off-balance sheet data
  • Profit and loss statements
  • And more

Anti-Money Laundering Law 2000 and Prohibition of Terrorist Financing Law 2005

These laws aim to prevent money laundering and terrorist financing by requiring banks to:

  • Identify customers
  • Report suspicious transactions
  • Maintain records

Proper Banking Management Directive on Preventing Money Laundering and Terrorist Financing

This directive adds to the existing obligations, including requirements for:

  • Customer identification
  • Ongoing monitoring
  • Reporting to the supervisor

Conclusion

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The regulatory authorities primarily responsible for overseeing banks in Israel are:

  • The Governor of the Bank of Israel
  • The Supervisor of Banks

These authorities ensure that Israeli banks operate in a stable and secure environment, protecting customers’ interests and maintaining financial integrity.