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, IMPA's main goal is to manage, process and secure a database, which will accumulate reports received under the provisions of the law, and upon suspicion of money laundering activity, will disseminate said reports to the competent authorities. By doing so, IMPA assists in 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 the 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 to establish 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 a ten-year imprisonment and heavy fines. Sections 3 and 4 of the Law create the two main offenses of money laundering: the prohibition on money laundering and the 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 to which the law applies. 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 mandatory under 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 to process and secure the information accumulated. 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: at the initiative of the authority or in reply to a detailed request received from enforcement authorities. The authorities authorized to request and receive information accumulated at the authority 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 provisions of the International Legal Assistance Law 1998 apply to such actions).
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 a purpose intended by law.
IMPA was established in January 2002, has successfully recruited staff and purchased computer equipment 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 them 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 specific suspicious 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). Co-operation is achieved through 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 wishes to reinforce Israel’s commitment to its international counterparts in the struggle against money laundering and terror financing.
IMPA assists the Ministry of Justice in preparing proposals for legislation amendments, based on its accumulated experience in implementing the directions of the law, as well initializing legislative amendments, as needed.
The authority is part of the Ministry of Justice and is budgeted within it.