ISRAELI LEGISLATION ON MONEY LAUNDERING

Main requirements of the Act on the Prohibition of Money Laundering enter into force in Israel. The main purpose of this law is to let the authorities locate funds derived from the criminal activity. Financial institutions of Israel must identify customers in accordance with a set of rules and regulations and to report on certain financial transactions or unusual actions of the client. In order to combat attempts to launder money through the financial system, the Act requires that financial service providers, including banks, receive and confirm the authenticity of the identification details of any applicant for opening of a bank account or performing banking transactions, and also requires that banks report certain transactions to the authorities specially created for that purpose in the Ministry of Justice.

Banks are required to obtain a list of identification features, most of which were required before the new law, from any applicant for opening of an account or changing the account holder, to perform certain transactions on the account. Such identification features include: name, ID / passport number, address, identity of other beneficiaries of the account and the person with access to account transactions.

The client is obliged to report whether he opens the account for himself or on behalf of another person, so that banks could determine, who is the real owner of the account. For accounts opened on behalf of the corporation, customers must provide names of those who have ultimate control of the corporation, whether a man or a corporation. Under the law, clients that do not provide the necessary information within the specified period will be required to close their accounts, and will not be able to carry out banking transactions.

Reports on banking operations, to be provided to the authorities in the Ministry of Justice, are divided into two categories:

1) Reports about the size of the transaction.
This is an automated report. It is associated with operations, amounts of which are above a certain size. These transactions are not suspected of money laundering. However, in light of experience gained in other countries, the legislator has decided that information about such transactions should be referred to the authorities for consideration.

2) Reports of suspicious transactions.
Banks are required to report unusual transactions on the account. As an example, some of these operations:
• Withdrawals of funds from the account or securities shortly after they were deposited, without an apparent reason;
• Unusually frequent use of bank safe by different people, for no apparent reason;
• Activity on the account, which may have been done to avoid "automatic" reporting about the size of the transaction.
• The bank has suspicions that the account holder performs operations on the account on behalf of another person, without declaring this fact.
• Unusual number of account transactions or significant change in the balance of the account, for no apparent reason.

The decision on whether to classify the transaction as "suspicious" and report it to the authorities is never thoughtless. In accordance with the law, banks are required to appoint a staff member, who will monitor the implementation of the law. Among the duties of the employee are: the compilation of all the procedures for verification and clarification, and also the decision whether to report on specific transactions. The bank is forbidden by law to inform clients about sending reports of suspicious activity regarding transactions on their accounts.

It is worth noting that all information reported to the authorities is treated as confidential. Access to it can only be obtained in accordance with the requirements of the law to investigate the crimes of money laundering, threats to national security or in the fight against terrorist organizations.