Against the background of the increase in the volume of activity of customers in virtual currencies and as a result of the increase in customer requests to transfer the funds arising from this activity to payment accounts managed in the banking system, the Supervisor of Banks published a draft circular today. Originating in virtual currencies.
Virtual currency activity has a high risk potential for money laundering and terrorist financing. In virtual currency activities, the anonymity built into the currency itself can be used, or digital wallets that are opened without any customer holding them being identified. Also, in this way significant amounts may be transferred between countries, without supervision or regulation. At the same time, virtual currency activity also has the potential to streamline payments and international transfers.
At present, regulation and supervision of virtual currency service providers are still in the making in most countries around the world, as well as in Israel.
In accordance with this draft regulation, the banking corporations:
Risk assessment will be required to establish policies and procedures for transfers of funds originating or their destination related to virtual currencies, taking into account the risk-based approach and identifying the service provider in the virtual currency. In cases where the service provider has received a license to provide service in a financial asset from the Commissioner of the Capital Market, Insurance and Savings and has been subject to a money laundering order, the banking corporations will be required to examine each case on its own merits.
The banking corporations are required to find out the source of the funds used to purchase the virtual currency and the path taken by the virtual currency from the date of its acquisition until its conversion into Fiat currency and its deposit in an account with the banking corporation.
The proposed draft amendment was circulated today to the Banking Advisory Committee and Public Comments. A final directive will be formulated after discussion of the comments of the Banking Advisory Committee and the comments of the public.
The Supervisor of Banks, Yair Avidan: “The Supervisor of Banks monitors activity in virtual currencies and local and international regulation developing in the field. Against the background of the increase in the volume of activity of customers in these currencies In the aspects of the prohibition of money laundering and the prohibition of terrorist financing.
“As a result, the draft regulation sets out a number of principles for risk management, anti-money laundering and non-terrorist financing inherent in this activity, which will assist customers of banking corporations seeking to realize funds originating from virtual currency activity, while managing the risks inherent in the banking system.”
For official publication.