Bank of Israel Issues New AML Guidelines for Cryptocurrency Firms

The Bank of Israel has published a new draft detailing some Anti-Money Laundering guidelines for firms operating in the crypto space. The new AML guidelines were issued to stakeholders in the sphere, explaining the roles of the top banks and financial entities to curb illicit crimes.

According to the apex regulator, the latest provisions became a necessity following the skyrocketing amount of funds inflows via digital currencies. The rules will serve as a constitution, empowering the top financial regulator and other financial bodies to act accordingly for the interest of all.

What the Draft Entails

The latest provisions empower financial bodies in Israel to carry out a risk validation and formulate policies for all outgoing and incoming money transfers in digital assets. In addition, the entities are mandated to adopt a risk-dependent approach to identify cryptocurrency service providers. 

Traditional banks will also have the power to monitor and check cryptocurrency startups meticulously. However, the BOI won’t empower institutions to decline the verification of any crypto service operator with an authorization from an approved regulator operating within its jurisdiction. All service operators must comply with the Money Laundering Prohibition Order.

Keeping a Close Eye on Digital Asset Funds in the Sector

The crypto sector is ridden with malicious players who leverage the cryptographic form of virtual currencies to evade law enforcement and authorities. Money laundering, terrorism financing, and fraud have become commonplace in the sector, with criminals using digital assets to bypass security protocols.

The new AML provisions will trace the source of transfers in cryptocurrency transactions and check the destination. Summarily, the provisions will manage the risks that come with crypto transactions.

Yair Avidan said the AML guidelines were drafted in light of the rising volume of crypto transactions, especially for cross-border payments. The Supervisor of Banks said his department is constantly observing financial transactions in the niche. 

Avidan noted that digital asset activities are high risk based on money laundering and terrorism financing prohibitions. He’s positive that the draft will address the risks and those common in banking institutions in the best way as they partake in monitoring the source of funds in digital assets. 

The newly drafted rules haven’t been adopted yet, as they are open for some amendments. Public opinions are welcomed. Currently, the Advisory Council on financial matters have received the guidelines to further dissect them. 

Israel has joined other countries like Cyprus and Russia to draft their AML regulations. This huge step cements the country’s position in the crypto world as a digital currency-tolerant nation and accelerates their push for their CBDC Digital Shekel launch. 

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