The Bank of Israel today distributed a draft to the banking system with a new addition to the Proper Banking Procedure (PSA) 411, which deals with money laundering, which broadly lists the obligations that apply to the banking system when operating in the crypto world.
The PSA is intended to complete the anti-money laundering order that applies to the crypto bodies themselves, and to be a benchmark for banking corporations when they manage risks in the transfer and receipt of digital currencies.
The PSA lists a long list of issues that the bank should address when a customer carries out crypto activity such as activity identification, scope, and risk classification.
The PSA is a direct directive to banks, which will no longer be able to refuse to operate in the field.
“High-risk activity for which increased monitoring measures should be applied”
“At present, regulation and supervision of virtual currency service providers are still in the making in most countries in the world, as well as in Israel. In view of the above, the Supervisor of Banks considers payment services provided by banking corporations Terrorism, and as such, increased means of monitoring and control must be used for it, “writes the Supervisor of Banks, Yair Avidan, in the explanatory memorandum to the NABAT.
Avidan added that “against the background of the increase in the volume of activity of customers in virtual currencies and as a result of the increase in the number of requests from customers to transfer funds from this activity to payment accounts managed in the banking system or transfer funds from these accounts for such activity, I found it appropriate to amend this provision Banking in risk management Prohibition of money laundering and prohibition of terrorist financing involving the provision of payment services in connection with activity in virtual currencies. “
According to the provisions of the PSA, the banking corporations will have to conduct a risk assessment regarding remittances originating or their destination is related to virtual currencies, and on this basis determine policies and procedures. The said policies and procedures will address at least the following A service that has been licensed to operate in Israel, service providers that operate under a continuing employment permit and virtual currency service providers that are incorporated or operate outside Israel; the virtual currency routes in which the banking corporation will allow payment services; Make a direct transfer from wallet to wallet.
The directive stipulates that a banking corporation will not refuse to provide payment services in connection with activity in virtual currency only because the service is linked to virtual currencies, if the service provider of virtual currencies that is a party to the transaction has received a license to provide the service in Israel.
In addition, the directive stipulates that the banking corporation must find out the source of the funds used to purchase the virtual currency and the path the funds took from the date of acquisition of the virtual currency to the deposit of funds originating from the virtual currency in the banking corporation’s customer account.
The market welcomes the draft
The draft was received with positive reactions among crypto market activists. Advocate and CPA Ron Tzarfati, VP of Finance and Regulation at the Israeli crypto exchange Bit2C, notes: On the one hand, the Bank of Israel finally recognizes the obligation of banks to perform risk assessment and management and not to refuse in a sweeping manner the transfer of funds by the Bank’s customers in connection with digital currency activities. On the other hand, the bank leaves broad discretion to banks to continue to refuse in many cases, which do not really create a real risk of money laundering. “
French added that as long as the Capital Market Authority does not grant licenses to entities engaged in the field in Israel, “although they have been waiting for nearly four years for the long-awaited license and operate under conservative regulation in terms of providing financial services and banning money laundering and terrorist financing,” the banks may pursue strict And not allow them to act as generators of competition in the fintech market. “All this, when international and huge crypto companies such as Bainnes provide services to about 200,000 Israelis without a license and supervision, and skip the banks’ checkpoint through credit card payments and electronic means,” concluded Sarfati.
Advocate Uri Goldman, who specializes in crypto, added: “In the absence of a uniform directive from the regulator so far, there has been chaos in the market, which has manifested itself in the exclusion of funds originating in crypto from the bank. Every year the state has lost a lot of tax money due to lack of collection capacity. We hope that this provision will be the beginning of a solution. “
“The bottom line is not only that banks will not be able to refuse funds from cryptocurrencies in a sweeping way, but there is also a real possibility that banks will offer customers to buy cryptocurrencies soon. “Since this is an activity that includes different types of currencies both in the trading arenas and on the blockchain, technological means are required to carry out this type of surveillance. We are facing a new era in which cryptocurrencies will be a significant part of the financial system,” said Advocate Guy Seroussi of Serousi & Co. ‘.
Yuval Roash, CEO of Beats of Gold, adds that “the new procedure is what we believed was right since our establishment and to which we have pushed in a long struggle with the banks. Bitcoin, Etherium and other digital currencies are no different from any other asset. This is the future of the global financial world, but its mainstream activities currently depend on access to basic banking services. Those who want to invest, pay salaries and taxes, owe bank accounts. “For too long we have had to struggle for basic things, and this banking procedure will allow law-abiding customers who want to join this global revolution to act freely, for the benefit of users, investors, and the Israeli economy.”