Central Bank Stricter on Laundering Laws

The Bank of Israel is drafting an amendment to the anti-moneylaundering law that would lower transfers the retail banks must report from NIS 200,000 to NIS 50,000.

The Bank of Israel is drafting an amendment to the anti-moneylaundering law that would lower transfers the retail banks must report from NIS 200,000 to NIS 50,000. The amendment covers transfers and funds received from abroad, bank checks, and traveler's check purchases.

The central bank aims to adjust Israeli regulations to match those in the U.S. where transfers of $10,000 must be reported. The lower reporting threshold is meant to track those who split financial activities to circumvent the law.

The banks issue the reports automatically without the customers' cooperation being required. The Anti-moneylaundering Authority collects the data, analyzes it and decides which transfers merit investigation. The plan to lower the threshold doesn't mean an increase in the frequency of investigations, but the need for better capital tracking tools.

In addition, the retail banks are currently sending customers special forms asking them to declare any other beneficiaries of their accounts, part of the implementation of new anti-moneylaundering laws. The comprehensive direct mail operation will involve six million letters, identical to the number of bank accounts in the retail banks.

The law defines a beneficiary as someone for whom accounts or sums in accounts are held or managed, or someone able to directly or indirectly command activity in the account. Bank customers will have to report the existence and identities of any beneficiaries. The reports will be transmitted to the Anti-Moneylaundering Authority in the event reportable transactions are conducted in the accounts.

In the event customers do not return the forms by August 18, the banks will prevent further deposits in their accounts. The law seeks to prevent persons hiding behind account-holders to conduct banking activity. However, there are a few unclear points in the legislation, primarily those regarding accountants and lawyers who manage accounts with large numbers of beneficiaries.

For instance, lawyers manage accounts for several clients who use them to transmit payments to courts or receive compensation. In this case, the lawyer should report the identities of all the account's beneficiaries to the bank and update the list frequently. Bank of Israel is drafting an amendment exempting lawyers and accountants from the reporting requirement on accounts where the balance does not exceed NIS 200,000.

Another group likely to receive an exemption is accounts for community or social purposes, such as PTA groups and condominium committees. These groups will not need to report beneficiaries of accounts with balances less than NIS 50,000.

The reports will also help banks in battles with indebted clients. Today, those customers can conduct activity via third parties without the bank's knowledge. The reports will constitute legal proof that the client has money in someone else's account. However, it is unclear if the banks will be entitled to seize funds in accounts held by customers with whom the bank has no legal dispute. The banks' legal departments are examining the ramifications of using the information on account beneficiaries for internal legal purposes.