Nature of the Offence
A new law has been enacted to combat money laundering, effectively bringing Israel into line with the legislative standards of the world's major financial centres.
The Prohibition of Money Laundering Law 5759/2000 is as comprehensive as the EC Directive on Money Laundering and embraces the key recommendations of the Financial Action Task Force (FATF) created at the 1989 economic summit for implementing and coordinating money laundering laws in leading Western economies.
Although Israel's banking sector has been subject to a relatively strict supervisory regime, no formal law has previously existed to prohibit money laundering. The new law provides a number of specific measures designed to enable the government and law enforcement bodies to combat this international crime.
The law makes it a crime for any person to deal in property which has directly or indirectly been obtained through an offence, or was used during an offence, or has enabled an offence (Section 3).
The term 'offence' encompasses crimes involving the following:
- illegal arms trading;
- the sale and distribution of blasphemous material;
- currency forgery;
- certain offences under the Securities Law 1968;
- customs orders (including the Importing and Exporting of Goods Ordinance);
- copyright, patent and trademark offences; and
The law has an extra-territorial aspect in that offences considered to be offences in foreign states will also be deemed offences under the new law.
Appendix 2 provides that property must have a minimum value of at least IS120,000 (New Israel shekels) and encompasses artefacts, precious metals and stones, securities, real estate, antiques, and finances in excess of IS400,000 that have been accumulated over three months.
'Finances' include cash, travellers cheques, bank cheques, financial assets (eg, investments in pension funds and provident funds), investment trusts, savings and certain option and futures contracts.
Under Section 7, a bank is subject to stringent reporting and verification requirements. A bank will not be permitted to perform any services regarding property without seeing identification details. The identity of the person requesting the banking service must be verified, as must the particular corporation represented by such person, or the identity of the person controlling the bank account. Banks will be required to maintain records of all actions regarding the property and to report certain actions (to be stipulated by the minister of justice). It remains to be seen whether details regarding verification of a person's identification alone will be sufficient when this law is implemented and whether the details required will also extend to the provenance of property and its ownership.
Any corporation which falls under the requirements of Section 7 will be obliged to appoint a person who will be responsible for ensuring employees' and officers' compliance.
Under Section 9, any person entering or leaving Israel will be subject to reporting duties if the amount he or she is exporting or importing exceeds IS80,000. Individuals entering Israel for the first time with immigrant visas are permitted to carry up to IS1 million. This includes the transfer of money through postal services, banks and any other body to be named by the minister of finance or the minister of defence.
Infringement of the law incurs a range of penalties. Any person who (i) performs an act falling under the law and (ii) knows that the property in question is prohibited, will be liable to a term of imprisonment of up to seven years or a fine of IS1.5 million (Section 4). The authorities will not have to prove that the defendant knew exactly what offence gave rise to the property to be prohibited.
Any person who has reported the relevant action to the police, in accordance with specific requirements, will be exempt from prosecution.
Any violation by a party obliged to report his finances under Section 9 may incur the following:
- imprisonment for six months;
- a fine of IS150,000; or
- 10 times the sum which he failed to report.
In addition, the police or customs authorities will be permitted to take possession of the finances without the need to obtain a court order.
If an indictment is not filed or a monetary fine is not imposed within 10 days from the finances being taken, they will be returned. However, the police or customs authorities can request a 10 day postponement for repossession, although the court will require the individual to participate in the hearing. The court has the right to order the return of the finances at any time. Any fines imposed may be made from the seized finances.
Banks will be subject to fines in the event of their breaching duties under the law. Under Section 13 the governor of the Bank of Israel and ministers responsible for the Stock Exchange, provident funds, insurance companies and the Post Office bank, are to establish a committee authorized to impose various monetary fines. The minister of justice will be responsible for determining the procedures of this committee.
If the committee determines that a Section 7 violation has occurred (ie, failure to comply with identification and reporting requirements), a fine of up to IS1.5 million may be imposed.
If a corporation has been found to breach its obligation to appoint a person who will be responsible for ensuring employees' and officers' compliance, it may be fined up to IS150,000. A person who fails to report finances or transfers upon leaving or entering Israel may be fined up to IS75,000 or five times the unreported amount, whichever is higher. A person or party fined by the Committee cannot be re-indicted.
The minister of justice has the discretion to determine fines. Payment of fines must be made within 30 days.
Under Section 21, the court may order the confiscation of property used for or during the commission of an offence (in addition to imposing a fine or term of imprisonment). If the wrongdoer does not have sufficient property to be confiscated, property can be seized from a relevant third party who has received the property in question.
The defendant must participate in the confiscation proceedings. If the property is claimed by a third party and the claim will interfere with the criminal case, the court has the power to transfer the case to a civil court. The District Court can order civil confiscation if (i) the property was obtained during the commission of the offence and (ii) the individual against whom civil foreclosure proceedings are being instituted does not live in Israel and therefore cannot be indicted.
Under Section 28, the Minister of Justice will establish an Information Centre. A person with the qualifications of a District Court judge will be appointed as head of the governing authority. The authority will operate the centre and decide to whom information should be transferred. Workers in the authority must pass a police security check. Only certain officials named by the head of the authority will be allowed to access the information. Information concerning the prevention of certain crimes, national security and terrorist organizations can be transferred to the police and the General Security Service.
The authority can transfer information to equivalent centres outside Israel if the information concerns a crime under Section 2 of the Law for Legal Assistance between States, 1998.
The minister of justice must establish the Information Centre no later than 18 months from the publication of the law (ie, August 17 2000).
Sections 7 and 9 will take force at a date no later than 18 months from the law's publication date and the establishment of the Information Centre.
For further information on this topic please contact Nicholas Cannon at Herzog Fox & Neeman by telephone (+972 3 692 2020) or by fax (+972 3 696 6464) or by e-mail([email protected]).
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