Israel has strengthened its anti-money laundering (AML) framework in recent years. What are the biggest challenges still facing the country in the fight against financial crime, and how can enforcement be further improved?
Israel faces a particularly high risk of terrorist financing from external sources, a threat that became even more evident following the horrific October 7th terrorist attack. This underscores the need for continuous enhancements in the country’s financial crime prevention measures. In 2018, the Financial Action Task Force (FATF) conducted a mutual evaluation of Israel and concluded that the country had successfully identified and understood these risks. This is reflected in Israel’s National Risk Assessment for AML/CFT, which informs its policies and enforcement strategies. Despite being a fully compliant member of FATF and actively participating under the leadership of the Israeli Anti-Money Laundering and Terrorism Financing Prohibition Authority (IMPA), challenges remain. Strengthening inter-agency cooperation, enhancing technological capabilities for financial intelligence, and increasing international collaboration will be key to further improving enforcement efforts.
Given Israel’s high-risk geopolitical landscape, combating terrorist financing (CTF) is a critical priority. What unique challenges does Israel face in this area, and what measures are proving most effective in disrupting illicit financial networks?
As a small country surrounded by terrorist organisations and hostile entities, Israel operates in a complex and volatile security environment. This makes counter-terrorist financing (CTF) a top national priority. A key factor in Israel’s effectiveness in this area is real-time collaboration between law enforcement, intelligence agencies, and financial regulators. Recent legal amendments have been introduced to further streamline and enhance inter-agency cooperation, ensuring a more efficient and coordinated approach to identifying and disrupting illicit financial flows. Additionally, public-private partnerships are playing an increasingly vital role in tracking and intercepting terrorist funding. These collaborations enable financial institutions and technology-driven enterprises to support authorities in identifying suspicious activities, uncovering hidden networks, and countering financial support for extremist groups.
Israel’s fintech sector is thriving, bringing both innovation and compliance complexities. How can regulators and fintech companies collaborate to balance innovation with robust AML and CTF controls?
Technology often evolves faster than regulation, making it essential for regulators to stay ahead of emerging innovations and the risks they pose. Effective regulators proactively educate themselves on new technologies, ensuring that regulatory frameworks strike the right balance between AML/CTF compliance and the adoption of innovative financial solutions. To achieve this balance, fostering open dialogue between regulators and fintech companies is key. Roundtable discussions and collaborative working groups can serve as powerful tools for aligning regulatory requirements with technological advancements. By engaging in continuous dialogue, both sides can develop practical, risk-based approaches that support financial innovation while maintaining strong safeguards against financial crime.
With the rise of real-time payments, digital wallets, and cross-border transactions, what proactive steps should financial institutions take to mitigate financial crime risks in the payments industry?
Cross-border payments present significant challenges, as terrorist organisations often conceal their identities, exploit legal entities such as non-profit organisations (NPOs) for fundraising, and even leverage crowdfunding platforms to move illicit funds. To mitigate these risks, financial institutions should implement comprehensive screening measures at multiple stages.
For example, customer onboarding, periodic reviews, and transaction initiation should all include screening against global and local sanctions lists, and broad data sources should be utilised to ensure screening is as extensive as possible. Also, Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) should incorporate adverse media checks, web searches, and private-sector blacklists to identify hidden risks. By adopting a risk-based, multi-layered approach, financial institutions can strengthen their defences against financial crime while enabling the efficiency of modern payment systems
How do global sanctions regimes, including those from the US and the EU, impact Israeli companies and banks, and what best practices can organisations implement to ensure effective and up-to-date sanctions screening processes while maintaining operational efficiency?
The Israeli banking system adheres to all major global sanctions programmes, including those imposed by the UN, EU, OFAC (U.S.), UK, and others. As a result, if an Israeli citizen or entity is designated by OFAC, for example, this designation will also impact their financial activities within Israel. However, Israel’s own sanctions lists are not always reciprocally recognised by all jurisdictions, though this is gradually evolving.
To ensure effective and efficient sanctions screening, organisations should implement the following best practices: automated, real-time screening of customers and transactions against global and local sanctions lists; periodic re-screening to capture updated designations and avoid compliance gaps; enhanced due diligence (EDD) for high-risk clients, including beneficial ownership checks and adverse media screening; and a risk-based approach to sanctions compliance, balancing operational efficiency with regulatory obligations.
By staying ahead of evolving sanctions requirements and leveraging technology-driven compliance solutions, Israeli companies and banks can mitigate risks while ensuring seamless operations.
Israel’s business and banking sectors are heavily integrated into global markets. What key compliance risks should foreign companies be aware of when doing business in Israel, and how can they ensure adherence to local AML and regulatory standards?
Israel is a FATF-compliant jurisdiction with a modern and highly regulated financial market. All financial services providers are subject to strict AML/CTF regulations, aligning with global compliance standards.
Foreign companies or individuals looking to do business in Israel should take the following key compliance considerations into account:
Counter-Terrorist Financing (CTF) Risks:
· Israel faces a high-risk geopolitical environment, and terrorist organisations may attempt to misuse NPOs and legal entities for illicit financing.
· Companies should conduct enhanced due diligence (EDD) on business partners, charitable organisations, and financial transactions to mitigate CTF exposure.
Local Regulatory Requirements:
· While Israel follows international AML/CTF frameworks, there are local regulatory nuances that businesses must comply with.
· Foreign entities should consult with local regulatory experts to ensure adherence to Israeli-specific laws, reporting obligations, and compliance expectations.
Sanctions Compliance:
· Israeli financial institutions comply with global sanctions programmes (UN, EU, OFAC, UK, etc.), and businesses operating in Israel must ensure they do not engage with sanctioned entities.
By adopting a risk-based approach, leveraging comprehensive due diligence, and seeking local compliance expertise, foreign companies can navigate Israel’s regulatory landscape effectively while minimising compliance risks.
How has the wider Israeli compliance community evolved, and what local initiatives are helping professionals to collaborate and stay ahead of regulatory and operational challenges?
Six years ago, after more than a decade in the banking sector handling compliance responsibilities and earning a master’s degree in regulation law, I had the honour of establishing Israel’s first compliance officer training programme. I also founded the Israeli Compliance Community, which has grown into the largest network of compliance professionals in Israel today. In our community, we serve as a ‘town hall’, providing a platform for professionals to exchange insights and learn from their peers. Additionally, we organise regular events such as webinars and live conventions in Tel Aviv.
Your company, MitigateCRM, is the training partner in Israel for the Association of Governance, Risk & Compliance (AGRC). How do you see this partnership enhancing the expertise of local professionals and contributing to the overall strengthening of Israel’s compliance and risk management landscape?
I am a passionate advocate for continuous learning and education, particularly in the highly complex field of financial-crimes compliance. Ongoing learning is crucial for compliance professionals to stay updated on the latest regulatory trends and developments in AML/CTF, enabling them to perform their roles more effectively. I believe that our community members in Israel will greatly benefit from these online training courses, using our platform to broaden their knowledge in related subjects and gain a more comprehensive understanding of the fascinating world of combating financial crimes.
Idan Levy (Adv. LL.B., LL.M.) is a financial crime and regulation expert with over 20 years of experience, Idan has held numerous managerial compliance roles in both local and international banks. He is the founder and head of Israel’s largest compliance community, dedicated to training compliance professionals, advising legal counsels on compliance matters, and serving on advisory boards for cyber and startup companies. Idan is also the co-founder of Advanscreen.com, a leading sanctions-screening solution, and Wecard.co.il, an innovative Israeli fintech company.
