Financial Crime World

Israel Cracks Down on Money Laundering: The Prohibition of Money Laundering Law

Background

In August 2000, Israel passed the Prohibition of Money Laundering Law to tackle the country’s reputation as a money laundering haven. This legislation came in response to Israel’s placement on the Financial Action Task Force (FATF) “blacklist” in June 2000. Historically, Israel’s demographic and economic circumstances made it an attractive location for money laundering activities. The Ministry of Justice, in cooperation with other authorities, worked swiftly to legislate the law, which had begun a few years prior, to remove Israel from the FATF list as soon as possible.

Key Provisions

The Prohibition of Money Laundering Law aims to confront money laundering from several angles. Some of its key provisions include:

Money Laundering Offenses

  1. The law defines various money laundering offenses, such as actions to conceal the origin of property or provide legitimate cover for transactions originating in a criminal offense.
  2. It outlines offenses derived from source offenses, which is a closed list of offenses committed in Israel or other countries often linked to money laundering.

Harsh Penalties

  1. The law imposes severe penalties for money laundering offenses, including imprisonment for up to 10 years or a fine equivalent to 20 times the amount stipulated in Section 61 (a) (4) of the Punishments Law.
  2. The state can seize profits gained through money laundering offenses.

Reporting and Recording Duties

  1. Financial institutions and other reporting bodies are obliged to identify, recognize, and report suspicious transactions.
  2. They must maintain records related to these transactions.

Intelligence database and Enhanced Powers

  1. The law enables money laundering prevention authorities to establish a national intelligence database.
  2. It grants them wide-ranging powers to investigate and prevent money laundering activities.

Selected Provisions

Section 3(a) of the law focuses on money laundering offenses and determines that executing any action in property obtained through a criminal offense, with the intention of concealing or camouflaging its origin, is a money laundering offense.

Sections 3(b) and 4 of the law address the prevention and reporting of suspected money laundering activities, imposing penalties for hindering the reporting of such activities and for dealing with prohibited property, respectively.

Implementation

The Prohibition of Money Laundering Authority, established in January 2002, is tasked with collecting and analyzing reports received through the regulatory framework established by the law. The database at the Ministry of Justice includes a significant amount of information and is accessible by various enforcement entities, including law enforcement agencies and foreign authorities when the property being investigated is prohibited property according to the law.

Conclusion

Israel’s Prohibition of Money Laundering Law represents a critical step forward in the fight against money laundering and organized international crime. The legislation’s comprehensive approach, paired with harsh penalties and intelligence-sharing provisions, positions Israel as a leader in combating such illicit activities.