Money Laundering

 

Required Reporting of Transfer of Money into and out of Israel

 
General
According to the Prohibition of Money Laundering Law, 2000, and the Regulations on Prohibition of Money Laundering (Methods of Reporting Funds when Entering or Leaving Israel 2001), starting from Sunday February 17, 2002, reporting of transfer of money into or out of the country is required by law, as described below.
 For the purpose of reporting, "money" refers to cash, cashier checks, traveler's checks, bearer securities, negotiable instruments, payment cards.
  1. The amount of money that must be reported is 50,000 New Israeli Shekels (NIS) or higher   (combined sum in reporting party's possession, whether entering or leaving the country).
  2. When entering to Israel from Gaza or exiting from Israel to Gaza, the declaration threshold is 12,000 New Israeli Shekels (NIS).
  3. When entering Israel or exiting Israel through land borders from Egypt (Taba crossing or Rafah crossing or Nitzana crossing) or from Jordan (Jordan River crossing, Yitzhak Rabin crossing), the declaration threshold is 12,000 New Israeli Shekels (NIS).
 
Background 1
The fight against international crime, especially in the fields of illegal drugs and other serious crime, has focused in the last decade on the phenomenon of money laundering. These offenses are mostly conducted by drug dealers and criminals belonging to organized crime, working at an ever-growing sophistication, as a means to keep the profits of their criminal activities.
Money laundering is a felony against property, usually using an existing financial system, with the intent of hiding illegally obtained property in legal property by obscuring the illegal source of the property.
The methods of money laundering are numerous and varied, however, the common denominator among these methods is the misuse of the efficiency, computerization and globalization of the world financial systems for the purposes of depositing funds and transferring from place to place by disguising the identities of the owners and the sources of the money.
The process includes, among other things "placing" money (mostly cash with a high value) in legitimate financial systems in such a way that significantly conceals the illegal source of the money and makes locating the money difficult. In addition, the process includes additional legitimate transactions that are conducted between the local authorities in various countries. These transactions are done by "hiding" the property in the legitimate financial systems, in order that the criminal source of the money can not be located. Typical methods of money laundering are:
 
  1. Smuggling money into countries in which the supervision of currency is lax, confidentiality laws in the banks are strict and there is no obligation to report suspicious bank transactions;
  2. Counterfeit electronic transfer of money, as a first step in placing the property in a legitimate financial system;
  3. Formulation" or splitting of deposits and transfers into a series of transactions which are exempt from the obligation to report and document, where such obligations exist, on bank transactions for certain sums;
  4. Use of fictitious companies as a vessel for money transfer, and the use of a frontal companies which engage in legitimate business, usually companies which have a high cash flow, which is hard to assess, by manipulating the business documentation of that company;.
  5. Exaggerating profits in reporting to authorities;.
  6. Importation and exportation of goods with fictitious invoices at a heightened price;
  7. Establishing underground banking systems, which enables international electronic transfer of money;
  8. Use of money changers for conversion and transfer of large sums of money;
  9. Fictitious "lending"  transactions;
  10. Purchasing of valuable assets (diamonds, gold, art, real-estate);
  11. Investing cash in companies with high business capital  (contracting companies, insurance companies and investment companies);
  12. Use of a "cover company" and "cover men" for the purpose of conducting laundering transactions.


These methods are conducted by misuse of the banks' confidentiality laws and by exploitation of the countries interests in financial and economic investments in these fields, including their readiness to look the other way as to the source of the investigated capital.

The awareness to fight against the phenomenon of money laundering as a main strategy in the fight against drugs, and organized crime, with international cooperation, is considered important by most countries.
Investing efforts into neutralizing the basis of profits from illegal transactions have a twofold result: first this money is taken out of the fiscal turnover and thus can not be re-introduced to fund further illegal transactions, and secondly, preventing the criminal from making a profit from these business dealings eliminates the incentive to commit the crime.

The international awareness as to the new strategy in the fight against drugs and organized crime is expressed by a number of steps that have been taken on the international level, with common standards and adoption of legislation which enables the implementation of those standards. This international awareness, together with the concern that the State of Israel is beings used as a base for money laundering and that the lack of organized, practical steps to deal with this phenomenon, Israel is in the danger of being used as a widespread base for money laundering, which might damage the reputation of the financial and bank systems of Israel, and the publics' trust in these systems in Israel- these brought forth the Prohibition on Money Laundering Law2 (hereinafter "The Law").


The deployment model which was chosen, suited with certain changes, was the European Union's model. Which is based on the obligation to report suspicious transactions and limited reporting of transactions bearing certain characteristics, unlike the American model, which requires an all-encompassing and general obligation to report.


The Department of Customs and VAT has taken upon itself to handle the physical transfer of money into Israel, and out of Israel, by creating a wide reporting system using legal regulations3, according to them, people who must report the transfer of money will report to the Customs Authorities using a reporting form, which will be transferred to a data base located at the Ministry of Justice.

 
Obligation to Report
The law obligates every person entering Israel or leaving Israel who carries with him money ("money" here refers to cash, cashier checks, traveler's checks, bearer securities, negotiable instruments, payment cards), must report these upon entering to Israel or exiting from Israel, if the combined sum is 50,000 New Israeli Shekels (NIS) or higher and if he is entering through one of the land borders from Egypt or from Jordan, the declaration threshold is 12,000 New Israeli Shekels (NIS) or higher. 
 
Violation to Report
Violation of the obligation to report is an offense for which the penalty is 6 months imprisonment or a fine as stated in Paragraph 61(A)(4) to the Penal Law, or ten times the amount which was not declared, whichever sum is higher. In addition the law authorizes police officers and customs officials to seize the money exceeding the exempted sum, and authorizes the Director General of Customs and VAT to create a committee for imposing monetary sanction for the said violation.
 
 
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1  Sefer Hahkukim ("Book of Laws") P. 293
2  Regulations Compilation, P. 275
3  Laws of the State of Israel, New Version 3 P. 39
4  Official Gazette, Appendix P. 45
 
Method of Reporting
  1. Reporting shall be done on Customs Form 84 "Declaration on the Report of Monetary Transportation". The form is available at all customs houses and at border stations. In addition the form may be mailed or faxed to persons contacting the "National Center".
    The form may also be downloaded from this website.
  2. In instances where money is taken into or out of the country as accompanying luggage: Upon leaving Israel, the traveler must complete the reporting form and submit it to a Customs official in the exit lounge, In exits where there is no customs post, the form must be completed and submitted to the Customs official upon located at the entry point into the country. In entrances where the dual "Red/Green" channel exists - the traveler must contact a customs official in the red channel, complete and submit the reporting form. In other entrances - the traveler must complete the form and submit it to the customs official stationed on site.
    Travelers must submit the form to the Border Control Official in the following 
     Locations: Sde- Dov Air Port, Asheklon Marina, Hertzelia Marina and Tel-Aviv Marina.
  3. In instances where money is brought in or taken out of Israel by post or dispatched by any other delivery method: The form must be submitted to the Customs official at the postal/delivery receipt site. If there is no Customs official on site, the completed form must be sent by registered mail with a delivery confirmation before the sending of the shipment for a delivery exiting Israel, and for a delivery which is entering Israel within 72 hours from reception, to the following address:
    The National Center for the Prohibition of Money Laundering,
     Israel Tax Authority
     P.O.B .320, Jerusalem, Israel 91012
     Tel: 972-2-6511911
     Fax: 972-2-6536111