Legal Updates

A bank may close an account of a client that was entered into the American “black list”

January 5, 2020
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An Israeli businessman operating in South Sudan through his owned and controlled companies held an account with an Israeli bank for him and the companies. Following the US Treasury Office of Foreign Assets Control announcement of the inclusion of the businessman and his companies in the "black list" of money laundering or terrorist financing suspects, the bank froze the accounts and finally sought to close them.
The Supreme Court held that despite the freezing of the account, funds may be transferred from it for payment of legal fees for the appeal. The Israeli Banking Law prohibits a banking corporation from making an "unreasonable refusal" to provide essential banking services to the public, but the directives of the Banking Supervisor stipulate that a refusal will be considered reasonable if a client refuses to disclose details required by the money laundering rules or when there is a reasonable basis for concern that money laundering or terrorism financing exist. Thus, when a person is included in the blacklist of money laundering or terrorist financing suspects, it is reasonable for a bank to refuse service. However, Israeli lawyers are subject to anti-money laundering rules and therefore transfer of funds to such to finance the legal representation is reasonable. Moreover, the US Treasury regulations contain a specific chapter dealing with a series of sanctions related to South Sudan which states that legal fees or emergency medical expenses may be paid and from this also one may infer that such transfer is reasonable.

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