Israel has been enforcing strict rules and regulations for anyone or company opening a bank account in the country. The Bank of Israel released a statement claiming that steps are being proposed that would ease the process of managing and opening a business account in Israel.
Understanding why this is a concern and a possible benefit requires a full understanding of why strict regulations were in place in the first place.
Money laundering and terrorism financing caused Israel, with a definite push from the United States, to start imposing stricter rules on opening a bank account. The experience over the past two years since the Prohibition on Money Laundering and Terrorism Financing in Israel Law, has led the Banking Supervision Department to recommend a few changes.
The key change in the supervisory letter was the allowance for a bank to rely on a customer’s signed declaration as a business customer for opening and managing an account.
Deposits into Israeli banks by foreigners has shrunk by 100 billion shekels in the past 10 years, and deposits by foreigners fell from 26% to just 7%.
Israel has to take on the heavy burden of losing money and staying compliant with U.S. authorities. The no-risk policies on accepting money from unknown sources has led many foreigners away from Israel’s banks. Clients and their source of money have become identifiable over the last decade, and the no-questions-asked policies of the past can be met with heavy fines from U.S. authorities.
“Typically, money laundering charges are brought as conspiracies to commit the crime on multiple occasions. In addition, you can be charged with a new count of money laundering for each transaction knowingly conducted with criminally obtained funds. This means if you engaged in one banking transaction per day for one month, you could be charged with as many as 30 counts of money laundering,” explains Mark I. Cohen, NYC criminal attorney.
The ease of regulations is expected to bring more cryptocurrency companies to Israel.
An unofficial ban on transfers and accounts operated by cryptocurrency exchanges would also be lifted under the proposal. The 2016 Money Laundering Prohibition Law has been what many banks call “excruciating.” Businesses, both foreign and domestic, have had to jump through hoops to open accounts in Israel.
The issue became so widespread and unreasonable that the Bank of Israel and tax authorities are having to intervene.
Customers that are trying to exchange their cryptocurrency into fiat currency aren’t able to under today’s compliance system over fears that the person is attempting to evade taxes or hide illegal activities.
The new proposals suggest that a public company, which is already subjected to financial reporting requirements, will be able to have the 18 “red flags” of in the 2016 Law overlooked.
The proposals are a major “win” for cryptocurrency companies, which have been a hot topic of debate in Israel. Two cases where Israeli banks refused to accept cryptocurrency-related money were taken to court.
Cryptocurrencies are an alternative currency that is trying to gain acceptance, and the move by Israeli authorities would allow for more crypto currencies to flourish in Israel’s start-up culture. The ability for established public companies to open bank accounts with greater ease will be a relief for many Israeli banks that have lost revenue due to the strict restrictions and potential “18 red flags” of money laundering.