The Government of Israel (GOI) has made substantial progress enacting anti-money laundering legislation to support its efforts to strengthen its anti-money laundering regime. That progress prompted the Financial Action Task Force (FATF) to remove Israel from its list of noncooperative countries and territories (NCCT) in the fight against money laundering in June 2002 and from its monitoring list in the fall of 2003.
Israel enacted the “Prohibition on Money Laundering Law” (PMLL), on August 8, 2000. The PMLL established a legal framework for an anti-money laundering system, but required the passage of several implementing regulations before the law could fully take effect. Among other things, the PMLL criminalized money laundering and noted more than 18 serious crimes as predicate offenses for money laundering, in addition to offenses described in the prevention of terrorism ordinance. The PMLL also authorized the issuance of regulations requiring financial service providers to identify, report, and keep records for specified transactions for seven years. The law also provided for the development of the IMPA to gather financial intelligence to combat money laundering and terrorist financing. In November 2000, Israel enacted an implementing regulation called for by the PMLL. The “Prohibition on Money Laundering (Reporting to Police)” regulation established mechanisms for reporting to the police transactions involving property that was used to commit a crime or that represents the proceeds of crime.
Israel continued its efforts to reform its anti-money laundering system, and enacted additional implementing regulations provided for by the PMLL. The “Prohibition on Money Laundering (The Banking Corporations Requirement Regarding Identification, Reporting, and Record Keeping) Order” was approved in 2001. The Order establishes specific procedures for banks with respect to customer identification for account holders and beneficial owners, record keeping, and reporting of irregular and suspicious transactions reporting. The “Prohibition of Money Laundering (Methods of Reporting Funds when Entering or Leaving Israel) Order,” also approved in 2001, requires individuals who enter or leave Israel with cash, bank checks, or traveler’s checks above the equivalent of $12,500 to report that information to customs authorities. Failure to comply is punishable by imprisonment of up to six months and a fine of approximately $37,000 or ten times the amount not declared, whichever is greater. Additional regulations passed in 2001 addressed financial sanctions for covered institutions that fail to comply with their obligations under the PMLL, including requirements for customer identification, record keeping, and reporting of irregular transactions upon their respective financial sectors.
The PMLL also authorized the issuance of regulations requiring financial service providers to identify, report, and keep records, for specified transactions for seven years. The law also provided for the development of a Financial Intelligence Unit.
In 2002 Israel enacted several new amendments to the PMLL that resulted in: the addition of currency service providers to the list of entities required to file CTRs and STRs; the establishment of a mechanism for customs officials to input into the IMPA database, the creation of regulations stipulating the time and method of bank reporting, and the creation of rules on safeguarding the IMPA database and rules for requesting and transmitting information between IMPA and Israeli national police and the Israel security agency.
In February 2002, Israel’s FIU, the Israeli Money laundering Prohibition Authority (IMPA), began operations. In 2003, the IMPA has received over 120,000 currency transaction reports (CTRs) and 1,300 suspicious transaction reports (STRs). Banks, portfolio managers, stock exchange members, currency service providers, customs, the postal bank, insurance providers, and provident fund mangers must file CTRs and STRs with the IMPA. IMPA develops intelligence cases that it passes on to the Israeli National Police, Customs, and the Israeli Security Agency for Criminal Investigation and Enforcement.
The FATF removed Israel from the NCCT list in June 2002. Israel was removed from the FATF monitoring list in the fall of 2003. Israel’s efforts to meet FATF’s recommendations include establishing currency-reporting guidelines, creating an FIU, criminalizing money laundering associated with serious crimes, and improving Israel’s ability to locate and freeze assets associated with terrorism. In June 2002, IMPA was admitted into the Egmont Group of Financial Intelligence Units. A U.S. advisory issued by the Department of Treasury’s Financial Crimes Enforcement Network in June 2000 to U.S. financial institutions, emphasizing the need for enhanced scrutiny of certain transactions and banking relationships in Israel to ensure that appropriate measures are taken to minimize risk for money laundering, was withdrawn in 2002, acknowledging Israel’s enactment and implementation of reforms in its anti-money laundering system.
Under the legal assistance law, Israeli courts are empowered to enforce forfeiture orders executed in foreign courts for crimes committed outside Israel. This ability has recently been enhanced by the new anti-money laundering law. Informally, the GOI has cooperated with requests from U.S. law enforcement in matters of financial crime, including those involving narcotics and terrorism. In 2002, Israeli and U.S. law enforcement cooperated as part of an “Operation Joint Venture,” a long-term money laundering investigation focusing on an international Israeli network that launders cash proceeds from Colombian drug-trafficking organizations. The Israeli National Police have provided U.S. law enforcement with information on the network that has led to the arrest of six individuals, including two Colombian traffickers. The United States and Israel also have a Mutual Legal Assistance Treaty that entered into force in May of 1999.
In August 2003, the GOI passed a comprehensive amendment to the PMLL that in addition to other things: lowered the threshold for reporting CTRs from new Israeli shekels (nis) 200,000 ($42,000) to nis 50,000 ($10,500), lowered the document retention threshold from nis 50,000 to nis 10,000 ($2,100), and imposed more stringent reporting requirements. As a result of the lowering of the reporting thresholds, the IMPA expects the number of CTRS and STRS to increase in 2004.
In 2003, the GOI reports that there have been 48 money laundering and/or terrorist financing cases that have reached various stages of investigation and/or adjudication. Ten of these cases have yielded indictments. In 2003, the GOI seized approximately $13 million in illicit assets. In addition, the GOI transferred $6.8 million to Swiss authorities as part of an Israeli-Swiss collaboration in the investigation of an Israeli businessman suspected of money laundering.
In 2004, Israel expects to pass an amendment to the PMLL that will modernize Israel’s antiterrorist financing laws by adapting them to existing tools and arrangements for countering terrorist financing.
Israel is a party to the 1988 UN Drug Convention, and has signed, but has not yet become a party to, the UN International Convention for the Suppression of the Financing of Terrorism. Israel has also signed, but has not yet ratified, the UN Convention against Transnational Organized Crime, which recently entered into force internationally.
The Government of Israel continues to make progress in strengthening its anti-money laundering and terrorist financing regime in 2003. Israel has enacted several new laws pertaining to money laundering and continues to improve the role of its FIU. Israel should examine the misuse of the international diamond trade to launder funds. Israel should continue to enact all regulations pursuant to the PMLL and continue improving its anti-money laundering and antiterrorist financing regime. Israel should become a party to the UN International Convention for the Suppression of the Financing of Terrorism.
From: The International Narcotics Control Strategy Report -2003
Israel was identified as an NCCT in June 2000. After that time, Israel adopted legislation and regulations for the money laundering criminal offence, customer identification, and record keeping and reporting requirements. In January 2002, the Israel Money Laundering Prohibition Authority (IMPA) was established and functions as an FIU; the IMPA was admitted into the Egmont Group in June 2002. After substantial implementation of these reforms, Israel was de-listed in June 2002.
As of September 2003, Israel had made significant progress in further implementing a comprehensive and effective AML regime, including customer identification procedures for existing customers of banks and portfolio managers. The Israeli Central Bank had completed general inspections of all 27 banking groups—resulting in 11 sanctions (10 for minor violations and one for a major violation). An amendment to the banking regulations addressed funds in accounts, which had not been adequately identified. The IMPA received 544 STRs in 2002, and 578 STRs from January-July 2003. These resulted in 126 files being disseminated to the Israel Police and 28 referrals to foreign FIUs. The Israel Police initiated 29 money-laundering cases from January-July 2003; prosecutors were also pursuing several money-laundering cases.
Recognising the sustained efforts by Israel to implement its anti-money laundering regime, the FATF decided in October 2003 to end formal monitoring of Israel.
From : The last report of the FATF July 2, 2004.