Israel: New Law Restricts Use of Cash

(Mar. 27, 2018) On March 12, 2018, the Knesset (Israel’s Parliament) gave final approval for the Minimizing Use of Cash Bill, 5778-2018. The bill provides a monetary ceiling above which dealing in Israeli legal tender or in foreign currency in cash is prohibited. The restrictions will generally enter into effect on January 1, 2019. (Minimizing Use of Cash Bill, 5778-2018 (Bill), Knesset website (in Hebrew); see also Final Approval: Restricting Use of Cash (Knesset Announcement 3/12/18) (in Hebrew).)

The ceiling for giving or receiving cash payments for a transaction by “a person who sells an asset or provides a service in the course of the person’s business, including a nonprofit body” (a practitioner) is 11,000 Israeli Shekels (IS) (about US$3,191). (Bill §§ 1 & 2(a); 1st app. (1).) The ceiling for cash transactions by a nonpractitioner is IS50,000 (about US$14,505). (Id. § 2(b) & 1st app. (2).) The bill introduces higher ceilings (five times the ceiling assigned otherwise for transactions involving practitioners) for cash transactions involving tourists. (Id. § 2(e).) It further subjects payment of labor wages, donations, and loan amounts to the same ceilings that apply to practitioners. (Id. § 2(g).) Cash exchanges among family members are usually not subject to the ceiling limitations. (Id. § 3.)

In addition to restrictions on cash, practitioners may not receive payments for transactions, wages, donations, loans, or gifts by check without specification of the payee’s name on the check. Nonpractitioners, however, may accept such payments for amounts that do not exceed IS5,000 (about US$1,450). (Id. §§ 4(a) & (b).) The bill also prohibits giving or receiving a check that does not specify the identity of the check’s transferor. (Id. § 4(e).)

The bill imposes monetary liens on practitioners (id. § 6-19) and criminal fines on nonpractitioners that violate its requirements (id. § 20-22).

The bill also imposes temporary general reporting requirements on transactions involving residents of areas governed by the Palestinian Authority that exceed IS50,000. (Id. § 11 L 1.)

According to the explanatory notes of the initial Government Bill for Minimizing Use of Cash 5775-2015, HATSAOT HOK HAMEMSHALA [GOVERNMENT BILLS] No. 945 p. 961, the use of cash has been globally identified as a facilitator of the shadow economy that is not reflected in countries’ gross domestic product (GDP). There is a direct link, the explanatory notes add, between shadow economies and money laundering. This link similarly applies to the transfer of blank checks, which enables the anonymity of transferors and transferees. The bill intends to introduce gradual restrictions on the use of cash and blank checks. (Id. pp. 962–3.)

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