To the paper
In view of the increasing risks to the banking corporations concerning exploitation of the banks in order for customers to evade taxes, as well as the entry into force of the legislative amendment to the Prohibition of Money Laundering Law, which adds serious tax offenses to the list of predicate offenses, the Banking Supervision Department today published a draft letter to the banking system regarding “Preparedness for Compliance Risk Management in View of the Determination of Tax Offenses as Predicate Offenses”.
This letter comes in addition to the Supervisor of Banks’ letter regarding “Management of Risks Derived from Cross-Border Activities of Customers”, which was published on March 16, 2015, and which emphasized tax liabilities outside the country in which the account was opened.
The draft letter instructs the banking corporations to examine the changes required in policy and in risk assessment, to update the controls and the training programme, and more. In addition, the letter sets out a list of “red flags”—activity patterns that may indicate the commission of a tax offense by customers, which the bank must identify, and for which the bank must ask customers for an explanation.
Supervisor of Banks Dr. Hedva Ber said, “The legal reality in which the banking corporations in Israel and abroad currently operate places tremendous responsibility on the banking corporations concerning the identification and reporting of unusual activity by its customers, and increases the compliance risk to which the banking corporations are exposed. The amendment, which gives the banks tools to reduce that risk, will require understanding and cooperation on the part of customers, who may feel that the information required interferes with their privacy of their freedom of occupation. The clarifications provided in this letter to the banking system and to the public will assist in minimizing the tension between the banks and their customers in this context.”
The Banking Supervision Department consulted with the Israel Tax Authority and with the Israel Money Laundering and Terror Financing Prohibition Authority in formulating the letter.