Financial Crime World

Risk Assessment: “Next Risk” Scale

The Israeli Securities Authority (ISA) has proposed new regulations for payment companies, aiming to safeguard customers’ funds and prevent financial harm. The regulations cover various aspects, including:

  • Capital requirements
  • Custodians
  • Investments
  • Insurance
  • Corporate governance
  • Money laundering
  • Fees
  • Foreign corporations’ access to financial systems in Israel

Risk Level: Medium-High

The proposed regulations pose a medium-high risk to payment companies, as they introduce:

  • Stricter capital requirements
  • More stringent custody rules
  • Increased scrutiny of investment policies
  • Higher operational costs due to the need for additional insurance coverage and internal controls

Breakdown of Risk Levels by Clause:

  • Payment Remittance Service Only: Low risk (minimum initial capital of ILS 80,000)
  • Basic or Advanced Payment Initiation Service: Medium risk (minimum initial capital of ILS 200,000)
  • Services of Issuing Means of Payment and Acquiring Payment Transactions (excluding payment remittance services): Medium-High risk (minimum initial capital of ILS 500,000)
  • Payment Account Management: High risk (minimum initial capital of ILS 1,400,000)

Key Takeaways:

• Payment companies must maintain a higher level of capital to operate in the Israeli market. • Custody rules are becoming more stringent, requiring payment companies to ensure the safety and security of customers’ funds. • Investment policies will be subject to increased scrutiny, with a focus on ensuring that they do not pose a risk to customers’ funds. • Payment companies may need to invest in additional insurance coverage and internal controls to comply with the regulations.

Conclusion:

The proposed regulations by the ISA aim to strengthen the stability of the Israeli financial system and protect customers’ funds. While the regulations may present some challenges for payment companies, they are expected to benefit from a more secure and regulated environment. Payment companies should carefully review the regulations and assess their impact on their operations to ensure compliance and minimize risks.