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Trends and climate

Trends

Have there been any recent changes in the enforcement of anti-corruption regulations?

Enforcement of anti-corruption and bribery offences is clearly on the rise.

Recent high-profile investigations into both foreign corruption and bribery allegations and allegations against high-ranking Israeli officials have received extensive media coverage and have involved extensive investigative and prosecutorial efforts.

In December 2016 the Tel Aviv Magistrate Court rendered the first conviction on the account of bribery of a foreign public official pursuant to Sections 291A, 293 and 294 of the Penal Law (1977) in Tel-Aviv District (Fiscal and Financial) v NIP Global Ltd (TP 57177-11-16). The court convicted NIP Global on the basis of a plea agreement. The corporation was required to pay a NIS2,250,000 fine (approximately $630,000) and suffer a NIS2,250,000 confiscation.

Further, various high-profile Israeli public officials have been investigated for bribery and corruption-related charges, including:

  • former prime minister Ehud Olmert, who was found guilty of receiving bribes in December 2015 and served a prison sentence;
  • former deputy minister Faina Kirschenbaum, against whom an indictment on account of corruption and receiving bribes was filed in August 2017;
  • serving Prime Minister Benjamin Netanyahu, who is at the centre of criminal investigations pertaining to bribery and corruption scandals in which he was allegedly involved; and
  • an investigation into bribery and corruption related to defence procurement from a foreign corporation.

Legislative activity

Are there plans for any changes to the law in this area?

In recent years, the attorney general has published for public consultation two draft bills relevant to anti-bribery and corruption enforcement. As yet, neither have begun the required legislative processes to become law, so that both remain non-binding. It is unclear if and when they will become law.  

The first draft bill was published in 2012 and aims to amend the Criminal Procedure Law 1982 so as to codify the legal instructions regarding confiscation of the proceeds of crime. This amendment would introduce an obligation to confiscate proceeds in the case of a criminal conviction (replacing the present discretionary-based court-ordered confiscation), and enable broader confiscation to be ordered in respect of convicts which the court determines are engaged in a ‘criminal lifestyle’.  

The second draft bill was published in 2014 and aims to codify the present common law regarding the liability of legal persons (ie, corporations) as part of Section 23 of the Penal Law 1977. This draft bill would further introduce a duty of supervision and control to prevent any criminal misconduct of the company and associated parties.

Legal framework

Authorities

Which authorities are responsible for investigating bribery and corruption in your jurisdiction?

The National Unit for Fraud Investigations, under the Lahav 433 unit of the Israeli police, is responsible for investigating all corruption-related cases, including those pertaining to bribery. Investigations are usually accompanied by a prosecutor appointed by the State Attorney's Office, and in the cases of foreign bribery will often involve prosecutors from the Tax and Economics Department in the Tel Aviv District Attorney’s Office.

Investigations involving money laundering or terror financing may entail cooperation and data sharing between the Israeli police and the Israel Money Laundering and Terror Financing Prohibition Authority. 

Domestic law

What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?

The main regulatory framework addressing bribery and corruption under Israeli law is Article 5 of the Penal Law 1977, which pertains to bribery offences and essentially criminalises the offering, acceptance, giving or receipt of bribery to or from a public servant.

Section 34X of the Penal Law broadly defines a ‘public servant’ to include employees of:

  • the State of Israel;
  • a municipal authority;
  • certain government-affiliated organisations; and
  • any enterprise or institution in whose management the Israeli government has a role.

The definition also includes any arbitrator or director acting on behalf of the State of Israel in a government company or subsidiary, and the employees thereof.

In respect of the bribery offences enumerated in Article 5 of the Penal Law, Section 290(a) expands the general definition ‘public servant’ to include "any employee of a body corporate that provides service to the public".  Israeli case law has interpreted this definition to encompass a broad range of activities.  

Further, Section 291A defines a ‘foreign public official’ as an employee of:

  • a foreign country (including any national, district or local governmental unit) or any person holding a public office or exercising a public function on behalf of the foreign country;
  • a public body constituted or controlled (directly or indirectly) by the foreign country; or
  • a public international organisation formed by two or more countries, or by other organisations formed by two or more countries.

International conventions

What international anti-corruption conventions apply in your jurisdiction?

Israel has ratified and is party to the Organisation for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the UN Convention against Corruption.

Specific offences and restrictions

Offences

What are the key corruption and bribery offences in your jurisdiction?

Article 5 of the Penal Law 1977 stipulates the bribery offences prosecutable and punishable under Israeli law as follows.

Bribe taking and bribery (Sections 290 to 291) A public official who agrees to or accepts any bribe in his or her official capacity may be imprisoned for up to 10 years or face a fine as set out in the law. An individual or legal person that offers or gives a public official a bribe may face a similar fine or up to seven years’ imprisonment.

Bribing a foreign public official (Section 291A) An individual or legal person that offers or gives a foreign public official any bribe in order to obtain, guarantee or promote a business activity or other related advantage will face the penalties described above.

Brokering bribery (Section 295) Individuals or legal persons are considered to have accepted a bribe if they receive (including indirectly or on behalf of another) money, a monetary equivalent, a service or any other benefit in order to offer a bribe or motivate a public official or foreign public official to discriminate or act with favouritism (Sections 295(a) and (b)).

Individual or legal persons that exert significant influence over the election of a candidate to the position of prime minister, minister, deputy minister, member of parliament or the head of a local authority will be considered to have accepted bribery if they accept money, a monetary equivalent, a service or another benefit, in order directly or indirectly to motivate the candidate to discriminate or act with favouritism in his or her official capacity (Section 295(b1)).

Lastly, an individual or legal person that offers any of the above shall be considered to have given a bribe and shall face penalties similar to those in Section 291 (Section 295(c)).

In addition to the Penal Law, each of the above bribery offences would constitute a predicate offence under Sections 2 and 3 of the Prohibition on Money Laundering Law 2000. 

Hospitality restrictions

Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?

The Public Service (Gifts) Law 1979 mandates that gifts received by any public official (ie, the holder of an office or position on behalf of the state, including a soldier as defined by the Military Justice Law 1955), which are not of nominal value, must be registered and become the property of the state. In addition, other specific acts provide for similar limits imposed on ministers, elected public officials in the local municipalities and members of parliament.

Similar provisions are included in the Government Service Regulations that apply to all public employees in Israel. The regulations define a ‘gift of small value’ as "a gift the value of which in shekels does not exceed NIS300 (approximately $60), excluding any gift given in cash". Section 42.76 of the regulations mandates that a public employee must turn to an office or ministerial committee to determine whether any gift received may be defined as a reasonable ‘gift of small value’, taking into account the circumstances surrounding the acceptance of the gift and the standard receipt of gifts of such kind. The public employee may accept a gift only after approval by the committee.

Other laws specifically address the acceptance of gifts and hospitality and the obligation to avoid any conflicts of interest in respect of ministers and deputy ministers, members of parliament or elected officials in local authorities. These laws include:

  • the Rules on Prevention of Conflict of Interests of Ministers and Deputy Ministers;
  • the Rules on Prevention of Conflict of Interests of Elected Officials in the Local Municipalities; and
  • the Knesset Ethics Committee decisions on matters of conflict of interests in relation to members of parliament.

There are also various attorney general guidelines on this topic, such as Attorney General Guideline 1.1709, which prohibits the receipt of free invitations to – and tickets for – sports, arts, cultural and other events.

Facilitation payments

What are the rules relating to facilitation payments?

Facilitation payments would most probably constitute bribery under Article 5 of the Penal Law 1977. Section 293(7) to the Penal Law specifically mandates that any payment received by a public official causing it to conduct (or fail to conduct) an action in the course of its duty will be considered a bribe. This applies even when the public official has no discretion as to whether to perform the act.

Liability

Scope of liability

Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?

Yes. Under Section 23 of the Penal Law 1977, criminal liability may be established not only in relation to individuals, but also to corporate bodies. Criminal liability of a corporate body may be established both for strict liability offences and for offences that require criminal intent.

For offences involving strict liability, corporate liability may arise if an individual commits an offence in the course of performance of his or her function in the corporate body. For offences requiring criminal intent or criminal negligence, liability will be borne by the corporate body inasmuch as it can be proven that, under the circumstances and in light of the position, authority and responsibility of the person managing the affairs of the body corporate, the criminal intention and act of the person which committed the offence are deemed the criminal intention and act of the body corporate. This means that when the act is committed by a manager in charge of a certain activity, it can be viewed as an act of the company.   

Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?

Yes. Section 295 of the Penal Law 1977 covers bribery conducted by intermediaries or which involves prohibited consideration for a person with significant influence. Further, according to Sections 293(4) and 293(5), a bribe may also be facilitated by an intermediary, so that:

  • bribe taking includes the receipt of a bribe in consideration for an act by the receiver or for the influence the receiver exerts on a third party; and
  • bribery includes bribes given by the provider or via an intermediary and received by the receiver or via an intermediary:
    • before or after the occurrence of the act for which bribe was facilitated; and
    • regardless of whether the beneficiary of the bribe was the receiver or a third party.

Further, the offences prescribed in Article 5 of the Penal Law explicitly apply to the individual or legal person that directly or indirectly commits them.

Foreign companies

Can foreign companies be prosecuted for corruption in your jurisdiction?

Yes. Chapter three of the Penal Law 1977 stipulates the applicability of Israeli penal laws based on the place where the offence is committed. The laws thus apply in respect of a ‘domestic offence’, which includes:

  • any offence committed in whole or in part in the territory of Israel; and
  • any act in preparation, attempt or conspiracy in respect of an offence.

If a foreign company has performed any of the bribery offences in Sections 290 to 295 of the Penal Law, in a way which forms a domestic offence, it may be prosecuted on charges of bribery in Israel.

Whistleblowing and self-reporting

Whistleblowing

Are whistleblowers protected in your jurisdiction?

The Israeli Ministry of Justice, which oversees the enforcement of bribery and corruption prohibitions, demonstrably aims to protect whistleblowers that expose bribery or corruption allegations.

The Protection of Employees (Exposure of Offences of Unethical Conduct and Improper Administration) Law 1997 prohibits a public or private employer from taking any adverse steps against an employee who lodges a complaint against a fellow employee or the employer.

Further and specific to public bodies, Section 43.52 of the Government Service Regulations prohibits the employer of an employee who has exposed acts of corruption from taking any steps adversely affecting his or her employment conditions. If the employer takes such adverse steps, the employee can lodge a formal complaint to the Israeli State Comptroller. Under Section 45c of the State Comptroller Law 1958, the State Comptroller may issue orders for the protection of such employees, including the annulment of their dismissal or the grant of damages in the form of money or rights.

Self-reporting

Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?

There is no specific mechanism by which companies self report and are thus shown leniency. Nevertheless, the prosecution may consider such self-reporting or cooperation as part of its broad prosecutorial discretion on a case-by-case basis (eg, in reference to a plea bargain or request for reduced sentencing).  

Experience shows that, depending on the circumstances and gravity of the case, self reporting will most probably have significant weight in the prosecution’s indictment and sentencing decisions.

Dispute resolution and risk management

Pre-court settlements

Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?

Yes. For example, in Tel-Aviv District (Fiscal and Financial) v NIP Global Ltd (TP 57177-11-16), the court convicted NIP Global on the basis of a plea agreement. The corporation was required to pay a fine of NIS2,250,000 (approximately $630,000) and a NIS2,250,000 confiscation.

Defences

Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?

No. Any type of payment which falls under Article 5 of the Penal Law (1977) may be prosecuted. 

What other defences are available and who can qualify?

Any of the general defences that are available to the defendant in a criminal proceeding, such as self defence (Section 34J of the Penal Law 1977) or necessity (Section 34K), may potentially apply (eg, where facilitation payments were made by an individual or a legal person under duress or in extreme circumstances). Otherwise, there no specific defences with respect to bribery or corruption are available.

Risk management

What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?

A company can draft a compliance policy ensuring that it does not carry out any act amounting to a bribery offence under Article 5 of the Penal Law 1977 and further committing to comply with Israeli anti-corruption laws, the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and any other relevant countries' anti-bribery laws.

Such policies should specifically detail the prohibitions applicable to the company's organs or employees regarding Israeli or foreign public officials (eg, forms of hospitality, travel or gifts) and charitable or political contributions. They should also ensure that any business partners, affiliates or individuals hired by the company similarly comply.

The policies should further expand on the company's record-keeping and internal controls protocols to ensure full compliance with anti-bribery regulation, and put in place mechanisms to prevent and address any deviations or violations of such policies.  

As part of the compilation of the Phase III Report on Implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in Israel, some Israeli judges referred to the existence of compliance programmes (along with their actual implementation and enforcement) as factors that would be considered as part of the legal person liability-determination process, with the burden of proof resting on the company.

Record keeping and reporting

Record keeping and accounting

What legislation governs the requirements for record keeping and accounting in your jurisdiction?

Under the Companies Law 1999, private Israeli companies (including foreign companies that have registered in Israel) must maintain accounts and prepare financial statements. All public companies and some private companies must conduct similar accounting and record keeping under the Securities Law 1968.

In addition, the Income Tax Ordinance 1961 further obliges both individuals and companies to maintain books and accounts.

What are the requirements for record keeping?

The Companies Law 1999 requires companies to maintain records of any changes to the company's details (eg, name or address), ownership, share distribution or board membership, as well as the minutes of board and shareholders' resolutions.

The Securities Law 1968 requires public companies to prepare and publish periodical reports, including quarterly financial statements and annual reports (including audited reports).   

Reporting

What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?

Israeli law mandates no specific obligation to disclose potential violations of anti-corruption regulations. Nevertheless, such disclosure may be mandated in instances where failure to disclose would amount to failure to prevent the conduct of a serious offence under Section 262 of the Penal Law 1977.

Hence, an officer of a company who becomes aware of a pending violation of anti-corruption regulations may potentially be held as an accomplice or as liable to attempt or commit a bribery offence under Article 5 of the Penal Law 1977.

Further, where a public company has violated anti-corruption regulations, it may be required to disclose the violation due to the obligation under the Securities Law (1968) to disclose to the public any event that occurs out of the ordinary course of business and that may have a material influence on the company or influence the value of its shares.

Penalties

Individuals

What penalties are available to the courts for violations of corruption laws by individuals?

An individual may face the following penalties under the Penal Law 1977:

  • Bribery accepted by a public servant pursuant to Section 290, or by an intermediary pursuant to Section 295, is punishable by 10 years’ imprisonment or a fine of the higher of:
    • NIS1,130,000 (approximately $320,000); or
    • four times the value of the benefit obtained by acceptance of the bribe.
  • Bribery given to a public servant pursuant to Section 291 or to a foreign public official pursuant to Section 291A is punishable by seven years’ imprisonment or a fine of the higher of:
    • NIS1,130,000; or
    • four times the value of the benefit obtained by providing the bribe.
  • Bribery accepted by an intermediary which exerts significant influence over the election of a candidate pursuant to Section 295(b1) is punishable by three years’ imprisonment. Where the bribe was taken in order to influence the candidate to discriminate or act with favouritism, the punishment is 10 years’ imprisonment or a fine of the higher of:
    • NIS1,130,000; or
    • four times the value of the benefit obtained by acceptance of the bribe.
  • Bribery given by a person to an intermediary which exerts significant influence over the election of a candidate pursuant to Section 295(b1) is punishable by 10 years’ imprisonment or a fine of the higher of:
    • NIS 1,130,000; or
    • four times the value of the benefit obtained by providing the bribe.

In addition, Section 297 mandates that if an individual or legal person is convicted pursuant to any of Sections 290 to 296, the court may further:

  • confiscate what was given as a bribe and anything that came in its place; and
  • cause the individual or legal person that provided the bribe to pay the state treasury the value of the benefit derived from the bribe.

Further, each of the above bribery offences would constitute a predicate offence under Sections 2 and 3 of the Prohibition on Money Laundering Law 2000, which mandates the following penalties:

  • ten years’ imprisonment or a NIS4,520,000 fine in the case of money laundering; or
  • seven years’ imprisonment or a NIS2,260,000 fine in the case of performance of a prohibited transaction with property under the anti-money laundering rules.

Companies or organisations

What penalties are available to the courts for violations of corruption laws by companies or organisations?

Similar fines as those applicable to individuals may be imposed on corporate bodies. However, where a fine is imposed on a company, it will be in the amount of NIS2,260,000.