International Narcotics Control Strategy Report -‫מתוך דו"ח‬
Released by the Bureau for International Narcotics and Law Enforcement Affairs
March 2003
Israel. The Government of Israel (GOI) has made substantial progress enacting antimoney laundering legislation to support its efforts to strengthen its anti-money laundering
regime, which resulted in the 2002 removal of Israel from the Financial Action Task’s list
of Non-Cooperative Countries and Territories (NCCT) in the fight against money
laundering.
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. 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 criminalizes money laundering and notes more than 18 serious crimes as
predicate offenses for money laundering. These specified unlawful activities for money
laundering are 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 a Financial Intelligence Unit.
Under the PMLL, money laundering offenses are punishable by up to ten-years’
imprisonment and heavy fines. In 2002, the Government of Israel reported that there were
18 money laundering cases that had reached various stages of investigation and/or
adjudication. Five cases yielded indictments; one case is under consideration by the
district prosecutor; one case is completed; one case ended with the deportation of the
suspect; and ten cases are in various stages of investigation. In 2002, the government
seized approximately $19.1 million in illicit assets, of which approximately $15 million
were seized within the framework of money laundering cases.
In February 2002, Israel’s FIU, the Israeli Money-laundering Prohibition Authority
(IMPA), began operations. The IMPA has received over 100,000 currency transaction
reports (CTRs) and 407 suspicious transaction reports (STR) since becoming operational.
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.
As noted above, FATF removed Israel from the NCCT list in June 2002. 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 counter-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.
However, U.S. and foreign law enforcement continue to see Israeli subjects and
involvement in a wide variety of money laundering operations.
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 International
Convention Against Transnational Organized Crime, which is not yet in force
internationally.
The Central Bank of Israel should accelerate the process by which it examines industry
compliance with its anti-money laundering law, and ensure that financial institutions are
moving quickly to fully verify customer identity for accounts opened before the law was
enacted. In addition, the government should re-examine the relationship between IMPA
and the police to determine ways to maximize interaction between the two agencies.
Israel should continue to enact all regulations pursuant to the PMLL to strengthen its anti-
money laundering regime. Israel should also focus on the misuse of the international
Israeli diamond trade to launder funds.