WHAT ARE THE
Money laundering and terrorism financing laws in Israel?
In Israel, money laundering and terrorism financing are serious offences and are governed by the following laws and regulations:
- Prohibition on Money Laundering Law, 5760-2000: This law is the primary legislation in Israel addressing money laundering offences. It criminalises money laundering activities and establishes measures to prevent and combat money laundering and terrorist financing. The law imposes obligations on reporting entities, including financial institutions and designated non-financial businesses and professions (DNFBPs), to implement anti-money laundering (AML) measures.
- Prohibition on Financing Terrorism Law, 5765-2005: This law addresses terrorism financing offences and imposes criminal penalties on individuals or entities involved in financing terrorist activities. It establishes measures to prevent the use of the financial system for terrorism financing purposes and requires reporting entities to report suspicious transactions related to terrorism financing.
- Anti-Money Laundering Authority (AMLA) Law, 5760-2000: This law establishes the Anti-Money Laundering Authority (AMLA) in Israel, responsible for coordinating and overseeing the implementation of AML/CFT measures. The AMLA works to enhance cooperation between government agencies, financial institutions, and law enforcement authorities to combat money laundering and terrorism financing effectively.
- Bank of Israel Law, 5770-2010: The Bank of Israel Law provides the legal framework for the operation and regulation of the Bank of Israel, the central bank of Israel. The Bank of Israel plays a significant role in overseeing the financial system and ensuring compliance with AML/CFT regulations by financial institutions under its supervision.
- Supervision of Financial Services (Regulated Entities and Services) Law, 5776-2016: This law regulates the provision of financial services in Israel and establishes the regulatory framework for financial institutions, including banks, credit institutions, payment service providers, and other financial intermediaries. It sets out requirements for AML/CFT compliance and supervision by the relevant regulatory authorities.
- Securities Law, 5728-1968: The Securities Law regulates the securities market in Israel and establishes the regulatory framework for securities exchanges, brokers, investment advisers, and other participants in the securities industry. It includes provisions related to AML/CFT compliance and supervision within the securities sector.
- Tax Ordinance (Reporting Requirements for Financial Institutions), 5739-1979: This ordinance sets out reporting requirements for financial institutions regarding certain transactions, including cash transactions and transactions with foreign residents. Compliance with these reporting requirements is essential for AML/CFT purposes.
WHAT ARE THE
Key obligations reporting entities have under Israeli law?
The key obligations under the AML/CTF laws in Israel include:
- Business-Wide ML/TF Risk Assessments: Reporting entities must conduct business-wide risk assessments to identify and assess the money laundering and terrorism financing risks associated with their business activities, customers, products, and services. This involves evaluating the likelihood and potential impact of money laundering and terrorism financing risks and implementing measures to mitigate those risks.
- Internal Controls and Compliance Programs: Reporting entities are required to establish and maintain internal controls and compliance programs to ensure adherence to AML and CTF regulations. This includes policies, procedures, and training programs for employees to detect and prevent money laundering and terrorism financing activities.
- Customer Due Diligence (CDD): Reporting entities are required to conduct customer due diligence procedures to verify the identity of their customers and assess the risk associated with their business relationships. This involves collecting information such as the customer's name, address, identification documents, and the nature of the business relationship.
- Enhanced Customer Due Diligence (EDD): In cases where there is a higher risk of money laundering or terrorism financing, reporting entities must apply enhanced customer due diligence measures. This may include obtaining additional information about the customer, the source of funds/wealth, and the purpose of the transactions.
- Employee Training: Regular training must be provided to employees, ensuring they are knowledgeable about AML/CFT laws and regulations, including how to identify and report suspicious activities. Ongoing awareness programs should also be in place to keep staff informed of evolving risks and responsibilities related to money laundering and terrorism financing.
- Suspicious Transaction Reporting: Reporting entities are obligated to report suspicious transactions to the relevant authorities, such as the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). This includes transactions that are unusual, inconsistent with the customer's known profile or business activities, or otherwise raise suspicion of money laundering or terrorism financing.
- Record-Keeping: Reporting entities must maintain records of customer identification, transactions, and due diligence measures for a specified period. These records must be sufficient to enable authorities to reconstruct transactions and demonstrate compliance with AML and CTF requirements.
- Reporting Obligations to Authorities: In addition to reporting suspicious transactions, reporting entities may have other reporting obligations to regulatory authorities. This may include reporting large cash transactions, cross-border fund transfers, and other activities specified in the regulations.
- Independent Audits and Reviews: Institutions must conduct independent audits and reviews of their AML/CFT programs to ensure compliance with regulations and to assess the effectiveness of their internal controls and procedures.
WHO ARE THE
ML/TF regulators in Israel and what functions do they perform?
In Israel, the regulators responsible for overseeing and enforcing AML/CFT measures are primarily:
- Israel Money Laundering and Terror Financing Prohibition Authority (IMPA): IMPA is the primary government agency responsible for coordinating and overseeing the implementation of AML/CFT measures in Israel. It operates under the Ministry of Justice and plays a central role in combating money laundering and terrorism financing activities. IMPA is responsible for issuing guidelines, conducting risk assessments, and supervising reporting entities' compliance with AML/CFT regulations.
- Israel Securities Authority (ISA): The Israel Securities Authority regulates and supervises the securities market in Israel, including stock exchanges, brokerage firms, investment advisers, and other participants in the securities industry. It ensures compliance with AML/CFT regulations within the securities sector and may issue guidelines and regulations to address AML/CFT risks.
- Bank of Israel: The Bank of Israel is the central bank of Israel and plays a significant role in overseeing the financial system's stability and integrity. While not a dedicated AML/CFT regulator, the Bank of Israel collaborates with other regulatory authorities and financial institutions to ensure compliance with AML/CFT regulations by banks and other financial institutions under its supervision.
- Israel Tax Authority (ITA): The Israel Tax Authority is responsible for tax enforcement and revenue collection in Israel. While not primarily focused on AML/CFT regulation, the ITA may collaborate with other government agencies in identifying and investigating financial transactions that may involve money laundering or terrorism financing activities.
- Ministry of Finance: The Ministry of Finance oversees AML/CFT policies and initiatives in Israel and collaborates with other government agencies to strengthen the country's AML/CFT framework. It may issue regulations, directives, and guidelines to enhance AML/CFT compliance and enforcement efforts.
- Law Enforcement Agencies: Various law enforcement agencies in Israel, including the Israel Police and the Israel Security Agency (Shin Bet), play a role in investigating and prosecuting money laundering and terrorism financing offences. They work in collaboration with IMPA and other regulatory authorities to combat financial crimes effectively.
WHAT ARE THE
Industry sectors subject to ML/TF regulations?
The regulated industry sectors in Israel subject to AML/CFT regulations include, but are not limited to:
Designated Non-Financial Businesses and Professions (DNFBPs)
DNFBPs are entities or individuals outside the traditional financial sector that are susceptible to being used for money laundering or terrorism financing purposes. In Brazil, DNFBPs may include lawyers, accountants, real estate agents, trust and company service providers, dealers in precious metals or stones, and other professionals or businesses engaged in high-value transactions.
WHAT ARE THE
Penalties for non-compliance with AML/CTF laws?
The penalties for non-compliance with money laundering and terrorism financing laws in Israel can include the following:
- Administrative Sanctions: Regulatory authorities, such as the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA), have the authority to impose administrative sanctions on entities found to be in violation of AML/CFT regulations. These sanctions may include fines, warnings, temporary suspensions of operations, or revocation of operating licences.
- Criminal Penalties: Serious violations of AML/CFT laws may lead to criminal prosecution. Individuals or entities engaged in money laundering, terrorism financing, or related offences may face criminal charges, which can result in imprisonment, substantial fines, asset freezing or seizing or any combination of these. Criminal penalties may vary depending on the severity of the offence and applicable laws.
- Civil Penalties: In addition to administrative and criminal sanctions, non-compliance with AML/CFT laws may expose individuals and entities to civil penalties. This could involve legal action brought by regulatory authorities or affected parties seeking damages for harm caused by the violation of AML/CFT regulations.