28.12.2005
 
Decisions of the Anti-Money-Laundering Banking Corporations Sanctions Committee regarding Banks' Trust Companies
 
On 25 December 2005 the Banking Corporations Sanctions Committee regarding the prohibition on money laundering issued its decisions concerning three banking corporation trust companies. The requests to impose sanctions resulted from comprehensive inspections carried out by on site examination units of the Banking Supervision Department of the Bank of Israel that examined the implementation by trust companies of the legal provisions regarding the prohibition on money laundering. The committee decided to impose financial sanctions on two trust companies: NIS 500,000 on the Mizrahi Bank Trust Company, and NIS 350,000 on the Union Bank Trust Company. In the case of Israel Discount Bank Trust Company the committee decided not to impose a financial sanction but to just issue a written warning. The trust companies may appeal to a magistrates court against the committee's decisions within thirty days of receipt of the decision.
The major infringements and faults related to the process of identification and authentication of particulars at the stage of new accounts being opened, including receipt of the declaration regarding beneficiaries and controllers of holding interest, and retaining identification documents. Faults were also discovered in the process of submitting reports to the Israel Money Laundering Prohibition Authority (IMPA), in the "cash transaction" report, and the "unusual activities" report. The Committee found that the trust companies acted swiftly to correct the faults revealed during the inspections.
It should be stressed that the nature of trust funds' activity represents a high risk of money laundering, and the Banking Supervision Department does not ease up on its requirements that these companies comply with the legislation relating to the prohibition on money laundering, even if they perform relatively little financial activity and employ only a few staff.
The Sanctions Committee of the banking corporations is a statutory committee set up under the Prohibition on Money Laundering Law, 5760–2000, which, as part of the means of enforcing the prohibition on money laundering, is empowered to impose financial sanctions (fines) on banking corporations for infringements of the legislation. The Committee is headed by the Supervisor of Banks, Mr. Y. Lehman; its other members are Mr. S. Albeck, IMPA’s Legal Counsel (during discussions and taking of decisions), and Mr. D. Zaken, Head of Prohibition on Money Laundering, Banking Supervision Department. The Committee’s function is to discuss apparent infringements of the legislative provisions regarding the prohibition on money laundering and, after hearing the claims of the banking corporation concerned, to decide if in fact an infringement has occurred. If the Committee finds that the banking corporation has breached its obligations, the Committee may send it a written warning or impose a fine of up to NIS 2 million.