General Overview
On August 2, 2000 the Israeli Knesset enacted the Prohibition on Money Laundering Law (hereinafter: the ”PMLL” or “the Law”). The law establishes The Israel Money Laundering Prohibition Authority (hereinafter “IMPA” or “The Authority”) Functioning as Israel’s FIU, its main goal is to manage, process and secure a Data warehouse, which will accumulate reports received in accordance with the provisions of the law, and upon suspicion of money laundering activity, will disseminate the said reports to the competent authorities. By doing so, IMPA assists the worldwide combat against money laundering and terror financing. IMPA became operational on January 2002 and began receiving reports in February 2002.
On August 1st, 2005 the Prohibition on Terror financing Law came into force. This new law includes several provisions regarding the criminalization of terror financing and reporting duties of financial institutions with regard to suspected terror financing. In addition the name of the authority was changed to "The Israel Money Laundering and Terror Financing Prohibition Authority ".
The enactment of the PMLL represents the significant reforms Israel has undergone in the last years, the purpose of which are the establishment of the necessary legislative tools and enforcement mechanisms needed to effectively fight money laundering and terror financing. These reforms were, among other things, designed to address all the criteria identified by the Financial Action Task Force (FATF), with respect to the cooperation of Israel in the fight against money laundering and terror financing.
The Law proscribes money laundering as a criminal offense, punishable by up to ten-year imprisonment and heavy fines. Sections 3 and 4 of the Law create the two main offenses of money laundering: Prohibition on money laundering and Prohibition of performing a prohibited transaction with property. The law specifies a list of predicate offenses (offenses that are specified in the first schedule and which may be deemed offenses even if committed in another state), and a list of categories of property that the law applies to. According to sections 3 and 4 of the Law, one commits an offense if he performs a prohibited transaction. The term: "prohibited transaction" refers to proceeds of offenses specified in the first schedule, herein: predicate offenses.
In accordance with international standards, The law determined that various financial institutions (Banks, Portfolio managers, Insurers and Insurer agents, Members of the stock exchange market, Provident funds and companies managing provident funds, Providers of currency services and The postal bank), are required to identify their clients before performing a financial transaction, to report certain financial transactions to the database established by the Law, and to maintain records of such transactions. The reports received from the various financial institutions are divided into two types: the first consists of reports of certain transactions specified by size and type (CTRs). The second type consists of reports perceived by the financial institutions as unusual (UTRs).
The date determined to begin reporting was 17/2/2002 and from this date on, reporting is obligatory according to the law.
According to the law, IMPA is authorized to manage the database in which the reports will be gathered as stated above, as well as process and secure the information accumulated within. The head of the authority is certified to transfer the information, to the authorities certified to receive it, in order to implement the law. The information can be transferred in two ways: by the initiative of the authority or as a reply to a detailed request received from enforcement authorities. The authorities certified to request information accumulated at the authority and receive it are: the Israeli Police and the Israeli Security Service. In addition to the institutions stated, the authority can transfer information to parallel FIU’s abroad, and can fulfill information requests initiated by these institutions (The directions of the International Legal Assistance Law 1998 shall apply on actions such as these).
The database consists of sensitive details regarding the privacy of the Israeli citizens and inhabitants. IMPA manages the information and secures it according to strict rules and procedures. Dissemination of information from the database is permitted only according to the directions of the law, and only with the permission of the head of the authority for an intended purpose by law.
IMPA was established in January 2002, has successfully accomplished the recruitment of staff and purchasing of computer equipment in order to establish the database. IMPA consists of 4 different divisions: a collection and compliance division, a research and analysis division, a legal division and a division of information technology and communication. The role of the collection division is to contact all of the reporting institutions, receive the reports, sort and load them into the computerized system. The role of the research and analysis division is to process the information in order to detect both general patterns of money laundering as well as suspicious specific cases justifying the initiation of an investigation.
One of the important roles of IMPA is to keep contact with parallel financial intelligence unit’s abroad – FIU(s). Cooperation is achieved within the framework of an organization called “The Egmont group” which IMPA joined in June 2002 or on a bilateral basis according to signed agreements. IMPA is also engaged in co-operation with international organizations (IMF, FATF) responsible for monitoring money laundering trends and insuring the creation of an adequate AML regime. By strengthening International co-operation, IMPA whishes to reinforce Israel’s commitment to its international counterparts in the struggle against money laundering and terror financing.
IMPA assists the Ministry of Justice with preparation of proposals for legislation amendments resulting from the accumulative experience in implementing the directions of the law, as well as the initialization of legislation amendments, as needed.
The authority is part of the Ministry of Justice and is budgeted within it.