Oct 23

Published by the “Israeli Ministry of Justice”, and the “Israeli money laundering and terror financing prohibition authority”, on July 2015

Published by the “Israeli Ministry of Justice”, and the “Israeli money laundering and terror financing prohibition authority”, on July 2015

In September 2014, the Israeli Tax Authority published a Voluntary tax compliance protocol, which grants immunity from criminal prosecution on tax offenses, for applicants who reveal their concealed assets to the tax authorities, in return for paying civilian tax (hereinafter: “Voluntary disclosure procedure”).

We will clarify that the Voluntary disclosure procedure only grants immunity regarding tax offenses, and does not affect the obligation of financial institutes to uphold their duties under the Israeli Money laundering law 2000, and the directives that were issued under that law. Therefore, when funds are either deposited or transferred as a part of a Voluntary disclosure application, the financial institute is obligated to uphold all of the obligations imposed on it, including but not limited to: identifying the recipient of the service, identifying the beneficiary in the account, conduct an inquiry regarding the source of the funds and reporting to the Israeli Financial action task force on money laundering in appropriate cases, all in accordance with the financial risk management policy of that institute. The fact that it is a Voluntary disclosure, does not affect the obligation of the financial institute to verify the source of the funds, and to examine whether it’s an action that raises concern for money laundering or terror funding.

This document indicates a list of “Red Flags” regarding the Voluntary disclosure procedure. Those red flags are a useful tool, but the list does not constitute as an exhaustive list. Therefore, the list of red flags should be examined together with all of the additional existing information regarding the client. Those red flags are not necessarily constitutes as a cause for suspicion, and they do not include all of the symptoms that will require a thorough examination of actions.

These red flags are to be used as an operative tool, which will assist the evaluation of actions regarding terror financing or money laundering:

  1. Actions that are known to be linked with voluntary disclosure, when the sum of capital revealed is in proportional to the client’s financial status, capital or income.
  2. Use of complex legal structures (e.g. limited company or another legal entity), that are used for transferring property into Israeli territory.
  3. Use of financial structures, devices, products, transactions and transferring channels that are located in countries or territories that are considered a high level of risk, and/or countries that does not implement adequately the recommendations of the FATF.
  4. Discrepancies between the information that was given in the process of knowing the client, and information that was given in the process of a Voluntary disclosure procedure.
  5. Discrepancies between the details of the action, and the information detailed in the documents that were delivered by the client in the Voluntary disclosure procedure.
  6. The client cannot supply adequate documents or information that will explain the purpose of the action.
  7. The client cannot supply adequate documents or information that will explain the source of the funds.
  8. Voluntary disclosure procedure that is made through a proxy on the behalf of a third party.
  9. Doubt arises regarding the true owner/ beneficiary in the declared property.
  10. Transference of property from countries or territories that are considered a high level of risk, and/or countries that does not implement adequately the recommendations of the FATF or countries that does not implement similar demands to those that exist in European union legislation.
  11. Professional services regarding property from countries that implement Voluntary tax compliance protocol that is inconsistent with the international standards of the FATF, as is known to the financial institute.
  12. Joining a Voluntary tax compliance protocol in countries that ensures immunity from criminal prosecution (as is known to the financial institute).
  13. Transference of property due to a Voluntary disclosure procedure, to/from financial entities that are not subject to any regime that prohibits money laundering (as is known to the financial institute).
  14. Transference of property due to a Voluntary disclosure procedure to/from factors that are not related to the client.
  15. Transference of property due to a Voluntary disclosure procedure from a high number of accounts, and/or from different countries without a reasonable explanation.
  16. The client shows great concern or a special interest regarding the demands of reporting and exposure that apply on the institute, due to the Israeli Money laundering law 2000.
  17. Cash deposit regarding a Voluntary disclosure procedure.
  18. Actions that are made regarding Voluntary disclosure procedure, that appear to be meant for avoiding from reporting to the Israeli money laundering and terror financing prohibition authority.