Financial Crime World

Title: New Regulations Reshape Israel’s Financial Services Landscape: A Closer Look at Credit and Asset Services Licensing

Israel’s financial services sector continues to evolve with the enactment of The Law on the Supervision of Financial Services, 2016 (The Law). This legislation oversees various financial occupations such as:

  • Credit service providers
  • Financial asset service providers
  • Peer-to-peer (P2P) mediation systems
  • Deposit and credit services associations

The Law aims to foster competition, establish effective oversight, promote transparency, and prevent illicit activity. In this article, we focus on the requirements and guidelines for obtaining licenses under The Law, specifically for credit services and financial asset services.

Supervision and Objectives

The Insurance and Savings Capital Market Authority Commissioner serves as the supervisor for financial service providers. Some of The Law’s key objectives include:

  • Encouraging the growth of alternative financial services
  • Promoting competition
  • Ensuring regulatory compliance

License Conditions

To obtain a license, financial service providers must meet various conditions:

  1. Minimum equity requirements

    • Credit services provider: Half a million NIS
    • Financial asset service provider: Two million NIS
    • Deposit and credit services association: Four million NIS
    • P2P mediation system: Half a million NIS

  2. Moral character evaluation

    • Applicants, including corporations, undergo thorough assessments of their honesty, integrity, and competence.

  3. Legal permits

    • Controlling shareholders and interested parties must obtain permits to hold and maintain shares or control.

  4. Document submission

    • A business plan or activity document and sufficient financial means are required, contingent on license type.
      • Credit providers must provide proof of reliable funding sources.

Duties and Requirements for Licensees

Once licensed, financial service providers are expected to adhere to several duties and requirements:

  1. Truthful advertising

    • Misleading information is prohibited.

  2. Comprehensive disclosure

    • Licensees must reveal all pertinent transaction details.

  3. Regulated agreements

    • The inspector may necessitate written agreements in unregulated areas.

  4. Uniform fees

    • Consistent pricing structures are enforced.

  5. Regular reporting

    • Periodic reports to the Capital Market Authority are mandatory.

Application Procedure

In November 2019, The Capital Market Authority announced an updated application procedure for financial asset and credit service providers:

  1. Policy implementation

    • Financial service providers are required to create and implement supporting policies for their activities.

  2. Organizational structure assessment

    • An evaluation of the applicant’s organizational structure transpires.

  3. Business plan examination

    • A comprehensive analysis of the business plan is executed.

  4. Financial stability check

    • The financial stability of the applicant is scrutinized.

  5. Background screening

    • Applicants, particularly officers and controlling shareholders, undergo extensive background checks.

  6. Consumer protection compliance

    • Applicants must demonstrate adherence to consumer protection laws.

  7. Legal counsel approval

    • An attorney must approve all statements and documents involved.

Our team is experienced in navigating Israel’s complex financial services licensing landscape. We can handle the entire application process, including necessary preparations, document creation, and organizational design. Additionally, we regularly accompany financial service providers to ensure continued compliance with The Law and Capital Market Authority guidelines. For further guidance on financial regulation, kindly contact our financial services experts.