Israeli banking institutions must report any transactions
involving NIS 200,000 or more according to a new regulation
approved by the Knesset Constitution, Law and Justice
Committee on Monday. The information on these transactions
will be recorded in a permanent database maintained by the
Justice Ministry. The regulation will first take effect next
year.
U.S. tax authorities have been waging a determined worldwide
campaign against the illegal flows of money. Modern
electronic methods of communications allow criminals to move
funds easily all over the world, disguising their origins in
illegal activities. Often the appearance of unaccountable
profits is an important lead to uncovering criminal acts and
tax evasion. Maintaining records of funds flow is thus an
important aid to modern crime fighting.
The new regulation, proposed by Bank of Israel Governor
David Klein, follows legislation passed in August aimed at
preventing money laundering.
The governor's advocacy of this regulation was one of the
conditions stipulated by United States tax authorities when
they permitted Israeli banks to serve as authorized agents
for non-American citizens who wish to buy and sell stocks
traded on Wall Street, without requiring these investors to
file reports with the U.S. tax authorities. U.S. citizens
must register with their Israeli banks as well if they buy
U.S. stocks through them.
The new regulation specifies that Israeli banking
institutions must report the following transactions by their
clients: Bank account cash deposits or withdrawals to the
value of NIS 200,000 or more, whether in shekels or foreign
currency; Cash transactions of NIS 200,000 or more; Currency
exchanges of NIS 50,000 or more; Bank checks written for at
least NIS 200,000, with the exception of bank checks for
mortgage loans, in which case only sums over NIS 1 million
must be reported; The purchase of travelers checks for NIS
200,000 or more; The deposit of checks in foreign currency
equivalent to NIS 1 million or more; The transfer of at
least NIS 1 million in funds to or from Israel.
The bank will not be required to report the specified
transactions if they are made by a public institution, bank,
credit card company, insurance company, or similar
entity.
The regulation also stipulates that a banking institution
must report other unusual activities, such as the
unexplained use of a single vault box by a large number of
people. Banks will be required to maintain records of
transactions of NIS 50,000 or more for seven years.
The regulations also include instructions for verifying the
identity of clients before carrying out transactions. The
database now being prepared at the Justice Ministry is
slated to be fully operational by April 2002.
