Prohibition on Money Laundering and Financing of Terrorism Laws

    Middle East

    Prohibition on Money Laundering and Financing of Terrorism Laws

    The Prohibition on Money Laundering Law, 5760 – 2000 (‘the ML Law’) sets out the framework for financial institutions to combat serious and organised financial crimes and endeavour to comply with the internal standards prescribed by the Financial Action Task Force (‘FATF’).  

    The Prohibition of Financing of Terrorism Law, 5765-2005 (‘the FT Law’) (only available in Hebrew here) was promulgated in 2005 and aims to bring Israel in line with the FATF international standards.

    Last Updated: July 30, 2019


  • Requirements

    The ML Law establishes requirements of identification and customer due diligent (‘CDD’), obliging financial institutions to set policy and establish procedures for CDD, including the customer’s nature of business and to keep an on-going monitoring of the customer’s financial activities to benefit the identification of unusual activities. For instance, a financial institution is not to open an account for an individual who is acting on behalf of an undeclared third party unless there is information available about the third party. Financial institutions are also obliged to carry out continuing due diligence on customer accounts which are considered high security risk by using enhanced CDD including analysis of the customer’s financial history.   

    Article 8B(b) of the ML Law financial institution shall not provide any business service to a customer unless the customer possesses all the identification data or of the third party on whom behalf the business service is requested.   

    Article 11C(8) outlines that anyone engaged in providing financial assets to an individual in return for an assignment of that individual’s right to obtain financial assets from a third party is in this regards ‘providing of financial assets’.  

    The FT Law includes offences closely linked to financing of terrorism activities and administrative, in judicial mechanism which enhance the ability to wage war against financing of terrorism. In particular, the FT Law highlights that engaging in a transaction in property with the intention of facilitating promotion of financing of terrorism or with the intention of facilitating or promoting an activity which is designated to serve a terrorist organisation is a criminal offence. In addition, the FT Law outlines the requirement to report any of the above activities or any suspicion that the above activities are carried out, to the Authorities, otherwise this is an offence punishable up to one years of imprisonment.  

    Furthermore, the FT Law introduces the scope of authority for confiscation after conviction, of property of a person convicted of financing of terrorism including property that was transferred to another party without consideration.  

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