With provision specifically pertaining to virtual currencies, the Israeli Ministry of Finance has issued a draft law stating the restriction of money laundering regulations. Including strict conditions regarding the cryptocurrency activities of clients, the proposed regulations will also introduce a suite of new reporting requirements for financial providers.
Draft Money Laundering Regulations Published by Israeli Ministry of Finance
With the proposed legislation now containing provision pertinent to cryptocurrencies, the Israeli Ministry of Finance issued a draft of the amended Money Laundering Prohibition Order. Designed to prohibit money laundering in the financial sector, the new regulation will incorporate virtual currencies into the regulatory apparatus.
In addition to main service providers, explanatory notes accompanying the draft acknowledge the intention to expand the law to be applicable to firms offering in virtual currency, stating “The definition of a service in a financial asset that comes to replace and expand the term ‘currency services’ includes all the activities and services performed in financial assets through a business that does not involve granting credit. The intention is to enable the supervision of financial services, other than tangible assets or standard financial means, in an area that has been developing in recent years.”
Proposed Regulations to Introduce Suite of Reporting Requirements
Regarding Clients’ Cryptocurrency Activity
A number of new reporting requirements on Israeli financial institution will be imposed by the proposed regulations, additionally, to incorporate virtual currency service into the legislative apparatus. In addition to the above, a local media stressed, as reported by NewsBitcoin.com. As of June 1, brokers, banks, money changers and cryptocurrency trade and commerce platforms in Israel will be obligated to report any suspicious cryptocurrency activity by their clients […] The draft, which is open to public purview until June 13, specifies 37 money laundering red flags, among them large sums of over NIS 5,000 (approximately $1,400 USD) transferred to a digital wallet; any money transfers made using an anonymous IP address or an address that is incompatible with the geographic origin of the connection; cryptocurrency transfers to online gambling sites; and any activity in anonymous cryptocurrencies such as monero or zcash. The draft also states service providers must maintain full documentation of cryptocurrency activity, which includes all parties’ digital wallet addresses, IP addresses, and the type and amount of currency, for a period of no less than five years.”
The New Money Laundering Laws To Take Effect on June 1st
Regarding the virtual currency sector, the chief executive officer of the international payment provider, Yishay Trif, Moneynetint, elaborated that financial institutions have responded in preference to the proposed legislation resulting to more regulations.
Mr. Trif’s sentiment was echoed by the chairman of the Israeli Bitcoin Association, Meni Rosenfeld, stating that On many of the occasions in which banks have refused to accept money that originated with cryptocurrency, we met with the statement that the field is not regulated. The new order will regulate certainty for those involved in the field and will define rules that are permitted and forbidden, which will enable banks and financial institutions to know who is compliant with the law, and whose money they can safely receive. The union gave a proposal on the subject to the Israel Anti-Money Laundering Authority several weeks ago, and we welcome the regulator’s quick action to allow those involved in the field to operate,” according to NewsBitcoin.com.