General

According to the Prohibition of Money Laundering Law, 2000, and the Regulations on Prohibition of Money Laundering (Methods of Reporting Funds when Entering or Leaving Israel 2001), starting from Sunday February 17, 2002, reporting of transfer of money into or out of the country is required by law, as described below.
For the purpose of reporting, "money" refers to cash, bank checks and travelers' checks.

1. The amount of money that must be reported is 80,000 New Israeli Shekels (NIS) or higher (combined sum in reporting party's possession, whether entering or leaving the country).
   
2. For a new immigrant first entering the country the sum that must be reported is NIS 1,000,000 or higher (combined sum in the reporting party's possession)

Background ¹

The fight against international crime, especially in the fields of illegal drugs and other serious crime, has focused in the last decade on the phenomenon of money laundering. These offenses are mostly conducted by drug dealers and criminals belonging to organized crime, working at an ever-growing sophistication, as a means to keep the profits of their criminal activities.

Money laundering is a felony against property, usually using an existing financial system, with the intent of hiding illegally obtained property in legal property by obscuring the illegal source of the property.

The methods of money laundering are numerous and varied, however, the common denominator among these methods is the misuse of the efficiency, computerization and globalization of the world financial systems for the purposes of depositing funds and transferring from place to place by disguising the identities of the owners and the sources of the money.

The process includes, among other things "placing" money (mostly cash with a high value) in legitimate financial systems in such a way that significantly conceals the illegal source of the money and makes locating the money difficult. In addition, the process includes additional legitimate transactions that are conducted between the local authorities in various countries. These transactions are done by "hiding" the property in the legitimate financial systems, in order that the criminal source of the money can not be located.

Typical methods of money laundering are:

1. Smuggling money into countries in which the supervision of currency is lax, confidentiality laws in the banks are strict and there is no obligation to report suspicious bank transactions;
   
2. Counterfeit electronic transfer of money, as a first step in placing the property in a legitimate financial system;
   
3. "Formulation" or splitting of deposits and transfers into a series of transactions which are exempt from the obligation to report and document, where such obligations exist, on bank transactions for certain sums;
   
4. Use of fictitious companies as a vessel for money transfer, and the use of a frontal companies which engage in legitimate business, usually companies which have a high cash flow, which is hard to assess, by manipulating the business documentation of that company;.
   
5. Exaggerating profits in reporting to authorities;.
   
6. Importation and exportation of goods with fictitious invoices at a heightened price;
   
7. Establishing underground banking systems, which enables international electronic transfer of money;
   
8. Use of money changers for conversion and transfer of large sums of money;
   
9. Fictitious "lending" transactions;
   
10. Purchasing of valuable assets (diamonds, gold, art, real-estate);
    
11. Investing cash in companies with high business capital (contracting companies, insurance companies and investment companies);
    
12. Use of a "cover company" and "cover men" for the purpose of conducting laundering transactions.
    

These methods are conducted by misuse of the banks' confidentiality laws and by exploitation of the countries interests in financial and economic investments in these fields, including their readiness to look the other way as to the source of the investigated capital.

The awareness to fight against the phenomenon of money laundering as a main strategy in the fight against drugs, and organized crime, with international cooperation, is considered important by most countries.

Investing efforts into neutralizing the basis of profits from illegal transactions have a twofold result: first this money is taken out of the fiscal turnover and thus can not be re-introduced to fund further illegal transactions, and secondly, preventing the criminal from making a profit from these business dealings eliminates the incentive to commit the crime.

The international awareness as to the new strategy in the fight against drugs and organized crime is expressed by a number of steps that have been taken on the international level, with common standards and adoption of legislation which enables the implementation of those standards. This international awareness, together with the concern that the State of Israel is beings used as a base for money laundering and that the lack of organized, practical steps to deal with this phenomenon, Israel is in the danger of being used as a widespread base for money laundering, which might damage the reputation of the financial and bank systems of Israel, and the publics' trust in these systems in Israel- these brought forth the Prohibition on Money Laundering Law² (hereinafter "The Law").

The deployment model which was chosen, suited with certain changes, was the European Union's model. Which is based on the obligation to report suspicious transactions and limited reporting of transactions bearing certain characteristics, unlike the American model, which requires an all-encompassing and general obligation to report.

The Department of Customs and VAT has taken upon itself to handle the physical transfer of money into Israel, and out of Israel, by creating a wide reporting system using legal regulations³, according to them, people who must report the transfer of money will report to the Customs Authorities using a reporting form, which will be transferred to a data base located at the Ministry of Justice.

Obligation to Report

The law obligates every person entering Israel or leaving Israel who carries with him money ("money" here refers to cash. Bank and traveler's checks), must report these upon entering to Israel or exiting from Israel, if the combined sum is 80,000 New Israeli Shekels (NIS) or higher (If the person entering the country is a new immigrant, according to the law of Return 1950⁴, he/she must report if the individual or combined sum exceeds 1,000,000) NIS.

Violation to Report

Violation of the obligation to report is an offense for which the penalty is 6 months imprisonment or a fine as stated in Paragraph 61(A)(4) to the Penal Law, or ten times the amount which was not declared, whichever sum is higher. In addition the law authorizes police officers and customs officials to seize the money exceeding the exempted sum, and authorizes the Director General of Customs and VAT to create a committee for imposing monetary sanction for the said violation.

Method of Reporting

1. Reporting shall be done on Customs Form 84 "Declaration on the Report of Monetary Transportation". The form is available at all customs houses and at border stations. In addition the form may be mailed or faxed to persons contacting the "National Center" at |phone number 02-666 4000.
The form may also be downloaded from this website.

2. In instances where money is taken into or out of the country as accompanying luggage: Upon leaving Israel, the traveler must complete the reporting form and submit it to a Customs official in the exit lounge, In exits where there is no customs post, the form must be completed and submitted to the Customs official upon located at the entry point into the country. In entrances where the dual "Red/Green" channel exists - the traveler must contact a customs official in the red channel, complete and submit the reporting form. In other entrances - the traveler must complete the form and submit it to the customs official stationed on site.

Travelers must submit the form to the Border Control Official in the following Locations: Sde-Dov Air Port, Asheklon Marina, Hertzelia Marina and Tel-Aviv Marina.

3. In instances where money is brought in or taken out of Israel by post or dispatched by any other delivery method: The form must be submitted to the Customs official at the postal/delivery receipt site. If there is no Customs official on site, the completed form must be sent by registered mail with a delivery confirmation before the sending of the shipment for a delivery exiting Israel, and for a delivery which is entering Israel within 72 hours from reception, to the following address:
The National Center for the Prevention of Money Laundering
Customs and VAT Directorate
|5 Bank of Israel St., The New Government Complex, Jerusalem