On Thursday (March 10, 2022), the Banking Supervision Department (“BSD”) of the Bank of Israel, issued the “Anti-Money-Laundering and Combatting the Financing of Terrorism” regulation draft addressing risk management for the banks facilitating crypto-to-fiat transactions.
The new issued draft includes major changes based on the high potential risk of anti-money laundering due to the anonymity of the digital wallets. The new regulations include:
- Conduct a risk assessment and set out policy and procedures for the transfer of money that originates from or is destined for virtual currencies, taking a risk-based approach and identifying the virtual currency service provider. In cases where the service provider has received a license for providing financial asset services from the Supervisor of the Capital Market, Insurance and Savings Authority, and is subject to the Money Laundering Prohibition Order, the banking corporations will be required to examine each case on its own and will not be allowed to issue a sweeping refusal to the service provider.
- Clarify the source of the money used in the purchase of the virtual currency and the path through which the virtual currency passed from the time of its purchase until its conversion to fiat currency and deposit into an account with the banking corporation.
The draft is not final and was sent to the Advisory Council on Banking Matters for further input and will be considered by the Bank of Israel in the process of finalizing the guidelines. We will keep you posted!