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Amendment to Israel’s Anti-Money Laundering Law

At the end of March 2022, the Israeli Ministry of Justice published a draft amendment to the Prohibition on Money Laundering Law.

The proposed amendment seeks to grant supervisory authority to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA), comparable to that of the Capital Market, Insurance and Savings Authority (CMISA), over financial service providers for aspects of the prohibition on money laundering and terror financing.


Importance of the Amendment

The amendment represents a dramatic change in the supervision of financial entities in Israel. It seeks to grant extensive supervisory and enforcement authorities to the IMPA, in recognition of the global practice of combining intelligence with supervisory and enforcement authorities in this sector. One example is the Financial Crimes Enforcement Network (FINCEN) in the United States, which began exercising its enforcement authorities over financial service providers and is now seeking to expand them.

Israel’s IMPA was originally established to serve as an intelligence authority managing a database containing reports from financial entities. It was then to process this information and forward it to the relevant intelligence and enforcement authorities, such as the Israel Security Agency and the Israel Police.


Objective of the Amendment

The amendment will ensure adequate and increased supervision over the financial services sector by delegating several supervising authorities, depending upon the level of risk posed by each entity’s activities, and while taking advantage of the IMPA’s unique expertise in the prohibition of money laundering and terrorist financing field.

First enacted in 2000, the Prohibition on Money Laundering Law initially imposed a registration obligation on some financial service providers in 2001. Later, a mandatory licensing model was imposed pursuant to the recommendations of the team analyzing the regulations on currency service providers and following the enactment of the Control of Financial Services Law, 2016, while considering the Financial Action Task Force’s reports pertaining to the State of Israel.


Practicalities of the Amendment

The IMPA and the CMISA will carry out supervision in parallel, while separating between the information contained in the IMPA’s database as an intelligence body and its supervisory role. The authorities will carry out their enforcement based on an annual supervision plan that will define the financial service providers requiring supervision that year. In addition, the two authorities will set up a uniform policy for imposing financial sanctions.

The two supervisory authorities will also establish a dedicated coordination mechanism to ensure, inter alia, that only one entity supervises the same financial service provider that year. With regard to enforcement authorities, the amendment proposes that the financial sanctions committee include a CMISA representative and a legal advisor on behalf of the Ministry of Justice. This will prevent a situation whereby all committee members are representatives of IMPA.


You may forward comments to the memorandum of law until April 18, 2022.



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Tags: AML | Anti-money laundering