The Israel Securities Authority’s Financial Sanctions Committee recently issued two different decisions to impose financial sanctions on companies. These sanctions were for financial activities violating provisions of the Prohibition of Money Laundering Law related to the handling and management of money laundering risks.
The committee issued one decision within the framework of an agreed enforcement settlement. It was the highest sanction under the Prohibition of Money Laundering Law for an Israel Securities Authority-supervised entity recently.
The sanction, totaling ILS 700,000, came in respect of digital currency conversions and deposits that lacked adequate handling of the associated money laundering risks. The company failed to exercise extreme caution when its system issued alerts. In its second decision, the committee imposed a sanction totaling ILS 170,000. This was due to a company’s failure to implement required policies, risk management tools, controls, and reporting under the law.
In both cases, the committee showed some leniency, since the companies were in the process of implementing AML procedures.
International Anti-Money Laundering Enforcement Trends
The Israel Securities Authority’s enforcement efforts are consistent with similar anti-money laundering enforcement trends in the United States on companies providing financial services. For example, at the end of November 2023, Binance, the world’s largest cryptocurrency exchange, reached a settlement with federal prosecutors. It admitted to committing money laundering offenses reaching billions of dollars and agreed to pay an enormous fine of USD 4.3 billion.
The enforcement rulings spotlight the considerable importance of identifying and mitigating money laundering risks. Financial activities involving virtual currencies are considered to entail particularly high money laundering risks.
What to Do to Mitigate Money Laundering Risks?
- Map the obligations imposed on the company in relation to anti-money laundering and counter-terrorism financing (AML/CTF). This includes reporting obligations in particular circumstances, according to the company’s operating field and scope.
- Perform a risk assessment, including mapping the risk levels in the company’s activities.
- Adopt an orderly and clear AML/CTF policy in the company.
- Implement clear work procedures, including KYC (know your client) for customers and other parties with whom the company engages. Also implement procedures for identifying and defining the degree of risk involved in engaging with such parties and for acting accordingly.
- Appoint an officer to be responsible for AML/CTF and for the company’s compliance with the relevant statutory provisions. This officer may be, for example, an internal or external legal counsel of the company or a senior officer of the company.
- Train company employees in the policies and procedures, especially employees involved in receiving and transferring funds, such as bookkeeping department employees.
- Implement adequate internal controls to ensure optimal implementation of policies and procedures and to detect potential failures and violations. In addition, conduct independent audits. Implement adequate procedures for handling violations or conduct that could lead to a violation.
- Ensure the company’s management and board of directors consistently oversee the assimilation and implementation of the company’s AML/CTF policy.
- Be sure to carry out the process for each new activity of the company and for every use of new technologies.
