Anti-terror banking rules now apply to cryptocurrency

The Authority for Combating Terror Financing and Money Laundering on Sunday announced that new regulations now apply to cryptocurrency, Bitcoin, Fintech and a range of other digital financial products which have been less regulated to date.Authority Director Shlomit Wegman said that the new rules were both an opportunity to start cracking down on criminal abuses of these new financial products more systematically as well as giving them greater support and predictability for legal uses.

In recent years, there have been a wide number of scandals and mega frauds perpetrated in the cryptocurrency realm where money could be moved around much faster than with traditional banks, but there was also little oversight.

According to Wegman, the new regulations are designed to step into that space to establish order and clear standards.

If before the Authority had to invest serious resources to uncover fraud in an area where there was no official reporting, now all of the new financial products companies will need to make reports just like banks.

Bitcoin, the world’s most famous cryptocurrency (credit: BENOIT TESSIER /REUTERS)

For example, certain transactions over NIS 50,000 will always require a series of reports, and in countries considered high risk for terror financing, even transactions over NIS 5,000 will require reports.

If one of the benefits of new financial products like Fintech has been that clients do not need to physically meet with the financial institution who is providing a loan or transferring their funds, now there will be higher and more set standards for clients to identify themselves.  

The goal is to make it harder for terrorists and other criminals to hide behind forged documents and create greater digital paper trails that can more easily expose bad actors.

Another feature of the new regulations is a special focus on any funding being used by actors suspected of committing crimes against humanity.

All of the regulations are based on a new set of standards established in 2018 by the Financial Action Task Force (FATF), a global group that sets financial standards to avoid and catch criminal abuses.

Wegman said that one-third of the world’s countries have already started to apply the new FATF standards for digital transactions and that Israel is joining this group.

She added that an additional one-third of the world’s countries are also in the process of coming up to speed with the new FATF rules.

Besides deterring terror and criminal financing and making it easier to catch such individuals, Wegman said that the new rules should help law-abiding digital companies by giving clients greater confidence in the safety of their products.

Moreover, if before such companies had to go guesswork to come up with oversight methods, now oversight and reporting should be easier and more streamlined.

Wegman said, “The application of the regulations constitute real progress for the Israeli economy, the Fintech industry and for improving financial competition” to provide the public better services.