Israel Enforces New Regulations for the Transfer of Digital Currency

Richard M. November 15, 2021 3 minute read

The new digital currency regulations will allow Israeli banks to profit from cryptocurrency trading without conflicting with anti-money laundering laws.

Sunday, November 14, the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) announced new regulations for the transfer of digital currency in a statement at the Ministry of Justice.

The Money Laundering Prohibition Ordinance applies to all types of financial service providers, including fintech companies, cryptocurrency exchanges, and credit providers. These institutions are obliged to implement measures designed to prevent them from becoming the source for criminal activities like money laundering and terror financing.

The ordinance includes obligations for identifying and verifying customers, reporting their activity, analyzing risks, and keeping records of transactions as part of a Know Your Customer (KYC) procedure. Regulations are also imposed on electronic funds transfer within Israel or abroad, as well as the transfer of virtual assets.

According to Globes, The Money Laundering Prohibition Ordinance sets conditions for account opening, requiring financial institutions to incorporate remote customer identification. These measures aim to make financial operations secure and convenient for fintech companies without face-to-face interactions with customers.

The Capital Markets Insurance and Savings Authority has also issued a draft notice on risk management for money laundering terror financing that applies to financial service providers under the Money Laundering Prohibition Ordinance. The notice supports the regulations provided by the ordinance.

Before the Money Laundering Prohibition Ordinance, cryptocurrency investors feared money laundering penalties while transferring their profits to banks. However, the new regulations will allow banks to process transactions coming from entities that hold a license and meet the requirements of the ordinance.

Bank Hapoalim and Bank Leumi have already implemented such policies, requiring certification from crypto experts, accountants, or lawyers that the crypto transactions comply with the regulations stated in the Money Laundering Ordinance, along with documentation of those transactions.

According to Tomer Ravid, the CEO of BlocTax, a regulatory service provider to crypto investors, “if you trade with entities overseas and want to put the money back into the financial system in Israel, it is recommended that you should trade only with supervised, licensed entities that meet the money laundering prohibition rules of the FCA in the UK or of the New York State Department of Financial Services BitLicense.”