During the third week of February 2019, the plenary meeting of the FATF (the international task force to combat money laundering and terror financing) took place in Paris. This was the first meeting in which Israel participated as a full member of the FATF.
As you may recall, last December the FATF announced the acceptance of the State of Israel as a full member, following a long review process, which included a comprehensive international audit.
During the meeting, delegates worked through several issues, including mitigating the ML/TF risks associated with virtual asset activities, and drafted an interpretive document in the matter (Interpretive Note to Recommendation 15), which included, among other things, the following recommendations:
- The FATF recommends that countries consider virtual assets as “property”. This recommendation, however, is relevant only to certain issues (mainly taxation and ML), and does not prevent other regulator to consider same virtual assets as “securities”.
- The FATF recommends that virtual asset service providers (VASPs) (of which a large part require, under Israeli law, to hold a license for performing their services in Israel), are to be subject to supervision and monitoring by the relevant local regulator.
This recommendation emphasizes the urgency in drafting and implementing the delayed relevant anti-money laundering order, because under current regulatory status in Israel, the Financial Services Law does not provide any regulator with the specific authority to supervise the AML/CTF activities of financial services providers.
- Failure to comply with AML/CTF requirements will expose to sanctions not only the VASPs, but also their directors and senior management.
This recommendation adds to current status in Israel, which allows sanctions on a natural person, only if such person himself failed to comply with the requirements of the AML law or any order pursuant thereto.
- A VASP is required to perform client due diligence for any occasional transaction exceeding USD/EUR 1,000.
Currently, Israeli law requires client due diligence only with respect to an occasional transaction exceeding NIS 5,000, and only if it involves a country or territory which the FATF declared as non-compliant with its recommendations.
The FATF further announced it would hold in Israel the coming annual international experts’ event, which will be divided into several breakout sessions, including terror financing risk assessment, detection/investigation/confiscation of virtual assets, as well as cross-border asset recovery.