Compliance with the Provisions of the Law by the Banks and their Customers
Banks have an obligation to properly recognize customers and service recipients with whom they do business in a "Know your Customer" process as required by the provisions of the legislation. Pursuant to these provisions, the Bank is required to know the customers, including the purpose of opening the account, the customer’s background, the scope of activities expected to pass through the account, its business / private activity, its nature, the characterization of the customer’s own customers, suppliers, and an understanding of the customer’s source of wealth, his expected income, and more. To meet this obligation, the Bank has to identify its customers (including those performing transactions in the name of the customer, and incidental persons who are not recorded in the account) by the rules determined, to monitor the activity conducted in the accounts, detect unusual activity, understand the nature of the transactions executed by the customer, and receive relevant documentation about these transactions.
Below are some highlights on the subject of compliance with the law:
1. When opening an account, and when performing a transaction, the customer has to answer the questions asked by the banking official, and provide the documents requested by him. The customer has to understand that the banker’s questions are designed to ensure that both the Bank and the customer / service recipient comply with the provisions of the legislation, and are not a result of curiosity or nosiness. It should be mentioned that the banker has a "duty of confidentiality" and therefore all the information obtained is subjectto the duty of banking confidentiality applying to the Bank.
We are to assume that the average citizen performing a transaction has no reason to hide basic information from the bank with which he works. However, refusal to cooperate in answering the questions, and to present the necessary documents that the banker is required to request pursuant to the law, raisesconcern regarding the legality of the requested activity.
2. The provisions of the law in Israel state that managing an account for another person without declaring this (even if this is an immediate family member) is a criminal offense.
Accordingly, you should make sure to notify the Bank of all interested parties in the account, namely any partners, authorized signatories, powers of attorney, beneficiaries, and controlling owners of the account.
3. Banks are required to obtain certain details from anyone who wishes to open an account or change the account ownership (or perform transactions that are not recorded in any customer account), most of which were required before the enactment of the law (name, ID number, passport, address, other beneficiaries in the account , powers of attorney in the account, etc.).
4. Customers have to declare if the account was opened for them or if they manage the account for another person, in order to know who the real beneficiary of the account is. For accounts opened for corporations, customers will also be required to provide the details of the controlling shareholders of the corporation, in order to allow full transparency.
5. The Prohibition on Money Laundering Order stipulates a series of threshold amounts, above which the carrying out of transactions triggers a mechanism for the transmission of a computerized (automatic) report to the Prohibition of Money Laundering Authority.
Please note that splitting amounts of deposits raises suspicion that the depositor wants to circumvent the computerized reporting mechanism, and avoid reporting, even if in fact it is money from sources other than criminal activity. Israeli courts have ruled that splitting funds into different deposits (whose sole purpose is to avoid computerized reporting) is amoney laundering offense. In view of this: you should avoid splitting deposits / withdrawals unnecessarily.
More information can be found on the Prohibition of Money Laundering Authority website and on the Bank of Israel website.