On November 14, 2021, an anti-money laundering order regulating transactions in digital currencies went into effect in Israel. According to a commentator the new order “opens the door to granting a permanent operating license to entities dealing in digital currencies.” (Anti-Money Laundering Order (Credit Service Providers’ Duties of Identification, Reporting and Registration for the Prevention of Money Laundering and Terrorist Financing (AMLO) (Amendment), 5781-2021, § 3(8), amending AMLO 5778-2018.)
The AMLO was issued by the minister of the treasury in accordance with the authority provided in the Prevention of Money Laundering Law, 5760-2000, and the Fight Against Terrorism Law, 5776-2017, and following consultation with the ministers of justice and of public security, under conditions enumerated.
The AMLO defines “a provider of financial services” as “a person who is required to have a license to provide a service regarding financial assets in accordance with the Supervision of Regulated Financial Services Law, except for those who provide ATM services.” Under sections 11 & 12 of the Financial Services Supervision (Regulated Financial Services) Law, 5776-2016, for purpose of a license, a “financial asset” includes “a virtual currency.”
According to the law, any act other than extending credit, which is done in the course of practicing a vocation, and constitutes either a replacement of one financial asset with another or managing or securing a financial asset requires a license. The law authorizes the minister of the treasury to establish a Supervising Authority in accordance with section 29 of the Prevention of Money Laundering Law for the purpose of managing, processing, and safeguarding security information obtained from reports received under the Prevention of Money Laundering Law and the Fight Against Terrorism Law.
The AMLO defines “virtual currency” as “a digital value unit that can be traded or transferred digitally and used for payment or investment purposes.” It requires providers of financial services in “virtual currency” to identify, register, and report to the Supervising Authority on both routine and “occasional activities.” Such activities involve the receipt of services in amounts up to 5,000 Israeli shekels (about US$1,615) from the same service provider over a six-month period, or up to 50,000 Israeli shekels for the purpose of requiring service providers to ensure receipt of original signatures from recipients acting on behalf of others, as well as for in-person identification of first-time service recipients under conditions enumerated.
The AMLO provides a detailed list of reportable data regarding the identity of service providers and recipients, as well as particulars of transactions that involve cryptocurrency services. The AMLO also contains instructions on records management and preservation of documents. In addition to in-person identification, the AMLO enables identification by remote visual-identification technology.