Financial Crime World

Israel’s Crusade Against Money Laundering: Financial Institutions in the Frontline

Israel’s commitment to the United Nations Convention against Transnational Organized Crime (UNCAC), Article 14, Prevention of Money Laundering, has seen significant strides in implementing effective measures to address the issue. In this article, we discuss Israel’s approach to prevent money laundering, detailing its legislative measures, penalties, and international collaboration efforts.

Comprehensive Regulatory Framework

Israeli authorities have established a comprehensive regulatory and oversight regime within its financial sector to deter and detect money laundering. This regime is anchored by the Israeli Prohibition on Money Laundering Law (PMLL) enacted in 2000.

Prevention

The PMLL grants various financial institutions, including banks and non-bank financial institutions, specific obligations to ensure effective customer and beneficial owner identification, monitor transactions, and maintain accurate record-keeping. These sectors include stock exchanges, insurance companies, and provident funds.

Customer Due Diligence (CDD)

Under the PMLL, financial institutions must:

  • Set policies
  • Analyze customer business practices
  • Continuously monitor financial activities
  • Identify deviations
  • Keep records and update them periodically

Reporting Obligations

Institutions must also adhere to reporting obligations to the Israeli Money Laundering and Terror Financing Prohibition Authority (IMPA) in certain circumstances involving transactions and customers with irregular activities.

Penalties for Non-Compliance

Penalties for non-compliance with the PMLL regulations can be severe, including fines, license revocation, or even criminal charges.

Punishment

Criminal Offenses and Penalties

The PMLL also established punishments for certain money laundering offenses. Penalties rise to 7 or 10 years’ imprisonment for serious criminal offenses of money laundering.

Assets Recovery

The PMLL enables the State of Israel to seize and confiscate properties related to the offenses or used to facilitate them. This includes assets that were used as payment, gained as fruit of the committed offense, or intended for such purposes. The PMLL outlines explicit provisions for the confiscation of property, both in criminal and civil proceedings.

International Collaboration

To further strengthen its stance against money laundering, Israel allows IMPA to collaborate and share information with counterpart financial intelligence units in other countries. This collaboration assists law enforcement agencies in their investigations, especially those focusing on transnational serious crimes and organized crime networks.

Conclusion

Financial institutions in Israel play a critical role in combating money laundering. Regulations require these institutions to implement robust measures such as:

  • Effective customer due diligence
  • Accurate record-keeping
  • Reporting

This creates a robust framework to obstruct the flow of laundered funds and proceeds of crime into the legitimate economic and financial system.