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Israel: Anti-Money Laundering Law Amended

(Oct. 7, 2014) On July 30, 2014, the Knesset (Israel’s parliament) passed the Prohibition on Money Laundering (Amendment No. 13) Law, 5774-2014 (Amendment Law [in Hebrew], Knesset website [scroll down to appropriate link on the right]), amending the 2000 law on the subject. (Prohibition on Money Laundering Law, 5760-2000, SEFER HAHUKIM 5760 No. 1753 p. 293, as amended (the Law).)

The Amendment Law extends the obligation to identify and keep client information, previously applicable to “a major part of the financial bodies in the [Israeli] market,” to lawyers and certified public accountants (CPAs). (Summary of the Amendment Law, Knesset website (last visited Oct. 6, 2014) [scroll down to appropriate link on the left].) The duty to identify and register applies to information regarding clients that seek any of the following services:

1. acquisition, sale, or long time lease of real estate assets;
2. acquisition or sale of a business; or
3. management of a client’s assets, including money, stock, and real estate property, and management of a client’s accounts in a bank corporation, brokerage, and other specified bodies. (Amendment Law § 2, adding § 8B to the Law.)

Lawyers and CPAs, however, are exempted from the obligation to report to authorities on such activities, “in order to prevent harm to the lawyer-client privilege and the special relationships of trust that exist between clients and lawyers and CPAs.” (Summary of Amendment Law, supra.) Lawyers and CPAs will instead be subject to professional ethics rules by the Bar and the CPA Associations, respectively. These rules will require them to refrain from executing transactions that raise a “high level of suspicion” of intended money laundering. (Amendment Law § 4C & Summary of the Amendment Law, supra.)

Officials responsible for implementation of the Law (e.g., the Chair of the Stock Exchange, the Superintendent of Banks, and others; a list is provided at § 11M(a) of the Law) who suspect that a lawyer or a CPA has provided a service in contradiction of the rules may request the establishment of disciplinary proceedings against those service providers by their respective associations. Requests for disciplinary proceedings must be accompanied by details of the information that raised suspicion of alleged violation of the money laundering prohibitions. (Id. § 4C.)