Israel Cracking Down on Money Changers

Demands more info on large transactions, details on big customers, to foil terror, money-laundering.

Money changers face tougher reporting requirements, following the Knesset Constitution and Law Committee’s approval of regulations yesterday to prevent them being used as conduits for laundering money.

The new regulations will require money changers to report on large transactions to the government’s Anti-Money Laundering Authority, as well as the details of the customer.

They will also be required to implement a “know your customer” policy to ensure that customers are not connected with the shadow loan market or with terrorist groups.

Until now only banks were required to report such transactions to the authorities in which money laundering or terror finance might be suspected. But experts say money changers are key conduits for organized crime to launder money and that many changers are owned by criminal groups.

The new regulations — which passed the committee by a 5-4 vote — which go into force in another nine months, require money changers to report all transactions in excess of 5,000 shekels ($1,445) involving funds coming into or going out of the country without reporting the identity of the customer. The same rule will apply to all transactions in excess of 10,000 shekels cash or 50,000 shekels in any form.

They will also be required to identify all customers or beneficiaries of foreign currency transactions whose total business exceeds 200,000 shekels in any six-month period. Money changers will be required to identify the source of the funds being changed and report any suspicious transactions to the authorities.

Adi Barkai, an attorney who represents money changers, said the law added a regulatory burden on money changers and would not achieve its goals.

“The problem today is not about collecting information on customers. The problem is the lack of enforcement of existing regulations,” Barkai said. “The authority knows very well that side by side with regulated money changers, a big industry of unsupervised changers is operating.”

Combined with changes planned to tax regulations, the money changing restrictions will strike a blow at the ultra-Orthodox community, many of whose members engage heavily in off-the-books transactions to avoid taxes.

On Tuesday, Haredi lawmakers objected on procedural grounds to how the committee vote was conducted and asked it to be taken again, which resulted in the committee re-voting along the same lines two hours later.

Haaretz
shekels
Reuters