Bank of Israel Issues Draft Regulations Regarding AML for Crypto Firms


The Bank of Israel has issued a new draft guideline to stakeholders in the cryptocurrency ecosystem concerning Anti-Money Laundering (AML) provisions.


According to the press release published by the bank, the new guideline becomes necessitated with the growing number of funds flowing into the traditional banking system through the crypto ecosystem.

According to the new guideline, the Bank of Israel will mandate financial institutions operating in the country to “conduct a risk assessment and set out policy and procedures for the transfer of money that originates in or is destined for virtual currencies, taking a risk-based approach and identifying the virtual currency service provider.”

The apex bank will not give financial institutions the power to refuse any virtual asset service operator who has a license with a recognized regulator in the country, including the Supervisor of the Capital Market, Insurance and Savings Authority, and is subject to the Money Laundering Prohibition Order. The new guideline will give banks the leverage to analyze each crypto startup on case-by-case basis.

Crypto Funds Monitoring to be Activated

The digital currency ecosystem is replete with many bad actors, as digital currencies make it easy to shield transactions from authorities through their cryptographic nature. The new guideline will give banks the power to clarify the origin of any funds involved in a digital currency transaction and their purported destination until they finally enter the crypto ecosystem.

“The Banking Supervision Department is monitoring activity in virtual currencies as well as domestic and international regulation being developed in this field. In view of the increase in customers’ activity volumes in such currencies, and due to the potential for streamlining payments and international transfers, this draft regulation was formulated,” said Yair Avidan, Supervisor of Banks, adding that;

“Activity in virtual currencies comes with high risk in terms of the money laundering prohibition and the prohibition against the financing of terrorism. As such, this draft regulation sets out a number of principles for managing such risks, which will help banking corporation customers who wish to realize the money that originates in virtual currency activity while managing the risks inherent to the banking system as part of such activity.”

The bank said these new guidelines are up for public opinion comments and that it has been sent out to the Advisory Council on Banking Matters. This new guideline cements Israel’s engagement with digital assets, a push that has made the bank accelerate its Central Bank Digital Currency (CBDC) or Digital Shekel research strides.

Image source: Shutterstock


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