Israel’s New AML Rules May Help Banks Onboard Crypto Clients
Read the full article by Sandali Handagama
Regulators still need to issue guidance for banks on how to deal with crypto-related transactions
Key points:
This week Israel has implemented a new anti-money laundering(AML) and anti-terrorist financing rules for crypto asset service providers take effect this week. Which in turn make it a lot easier for local banks to begin accepting clients from the cryptocurrency sector.
“We hope that this order will significantly reduce transfer blocks and the denial of banking services experienced by crypto users and investors, and create a better atmosphere for investors, users and companies in the field,” said Youval Rouach, CEO of Israeli crypto exchange Bits of Gold, in a written statement.
This was not the first policy change this year Israel has changed in regards to cryptocurrency, from proposing strict reporting requirements on crypto transactions for tax purposes to ordering insurance and investment houses in the country to justify any investments linked to bitcoin.
The country’s Capital Market, Insurance and Savings Authority and the Ministry of Justice, and follow guidelines set for crypto assets by the Financial Action Task Force( FATF).
“It is a milestone in transforming crypto into a solid-steel financial tool that can be used by citizens and businesses of all types. Once digital currencies become regulated, the opportunities will be endless,” said Eli Bejerano, CEO and cofounder of Israeli cryptocurrency exchange Bit2C, referring to the AML enforcement order.
The identification and verification of crypto recipients are covered under the newly implemented requirements for crypto firms, it also lays out a risk-based approach to dealing with money laundering.
Israel’s Capital Market Authority published a draft circular about how all financial service providers including banks should go about enforcing the AML rules.
“This provision, which complements the provisions of the [AML order], is intended to guide the supervised bodies in the implementation of a risk-based approach to dealing with money laundering risks and terrorist financing,” according to Sunday’s statement by Israel’s Ministry of Justice.
How Israeli Banks deal or will deal with crypto
On Sunday, one local media outlet reported that the new AML rules will allow Israeli banks to accept deposits or profits from crypto trading without “falling [afoul] of anti-money laundering legislation.” However Accordiing to Ilan Sterk, chief executive officer of Altshuler Shaham Horizon, the digital asset arm of one of Israel’s largest investment houses said the new rules only apply to crypto service providers.
“On the other hand, the banks are subject to supervision by the bank overseer in the Bank of Israel and so the new regulations do not automatically apply to them,” Sterk said in a written statement.
Ben Samocha, founder of Israeli crypto media platform CryptoJungle, went so far as to say that the local banking system has become an “enormous liability” for the growing Israeli crypto market.
“The banks’ policies have essentially made every crypto holder a suspect of wrongdoing, despite almost all of them being honest taxpayers with clean records,” Samocha said.
“That is no less than outrageous in my view,” Samocha said. “I personally know honest people who cannot sell cryptocurrencies back to Israeli shekels because the banks wouldn’t accept it – even if it’s to pay taxes.”
But Samocha, Bejerano, Sterk and Rouach all confirmed that the Bank of Israel has said by the end of the year it will be publishing guidelines for banks on how they should deal with cryptocurrencies.
“As such, crypto players will need to wait a little longer in order to understand how they can deposit profits from their investments in local Israeli banks,” Sterk said.