Anti-money laundering law comes into force in Israel

Israel is joining the trend of taking the crypto market under strict control and limiting the anonymity of digital transactions. A new bill defining measures to combat money laundering using cryptocurrencies comes into force on the first day of next month.

Early this year, after several years of uncertainty, Israel Tax Authority published an official circular that equated cryptocurrencies to financial assets and defined tax rules for crypto companies and individuals.

The new document confirmed previously published norms and defined the regulatory framework for banks and financial institutions under working with virtual currencies. The updated law on regulating the activities of financial service providers and on measures to combat money laundering now contains separate provisions related to the crypto market. The lack of control over cryptocurrency transactions and the anonymity of transactions make it difficult for financial services to operate. The new rules will include virtual currencies in the regulatory apparatus designed to prohibit money laundering in the financial services sector and is based on the following activities:

 • Adopting a risk-based approach.

The rules specify 37 money laundering tracking markers, including large amounts of more than NIS 5,000 (approximately $1,400) transferred into a digital wallet;

 • Compliance with proper checks and Know Your Customer policies.

Compliance with AML/KYC norms is mandatory in relation to cryptocurrency accounts. 

 • Monitoring and reporting of suspicious transactions/activities.

Any money transfers made using an anonymous IP address or an address inconsistent with the geographic origin of the connection, cryptocurrency transfers to online gambling sites, any activity in anonymous cryptocurrencies such as monero or zcash are considered suspicious transactions and must be reported to financial regulators. 

 • Accounting.

 Financial service providers must maintain complete documentation of cryptocurrency activity, which includes all digital addresses of the parties' wallets, IP addresses, type and amount of currency for at least five years.

Identification of possible risks and compliance with new rules applies to all participants in the crypto market, which includes traders, banks, cryptocurrency exchanges and trading and commercial platforms in Israel.