The combating of money laundering and terrorist financing is not a new campaign of law enforcement agencies. Since the dawn of mankind law enforcement agencies have tried to tackle low tax collection due to concealment of property and today tax offenders are trying to “launder” funds in order to avoid tax payments. In comparison, when discussing terrorist financing the opposite is the case, “clean” funds are utilized for to fund terrorist activity. Thus, law enforcement agencies work countlessly around the clock to prevent such activity. Naturally, the easiest way to combat terrorist financing and money laundering is to search "under the streetlight", and as such the war is actually waged against bank account opening of law abiding people.
Banks and financial institutions are transfer agents of funds and thus the law set a liability for those with regards to transfer of money. As such, banks tend to rate the risk of their clients in order to decide which clients are a higher risk with respect to money laundering or terrorist financing. Due to the new rules of prevention of money laundering and terrorist financing, many banks take measures to freeze or close banks accounts for clients who do not have a steady correspondence with the bank, have changed domicile from the origin state of the bank or received funds that have popped up in indication for money laundering or terrorist financing. The lack of attention of the banks when it comes to keeping accounts open and zero tolerance policy for indicated transfers cause massive account blocking, whether for private or corporate clients.
Lately, many Israelis whose domicile is in Israel but hold accounts in the EU or the UK, were notified that their accounts will be closed or frozen due to one of the aforedescribed indications, unless they provide documentary evidence showing that the source of funds is free from money laundering, and additional documents to prove the current domicile of the bank account owner. In these cases it is recommended to submit the documents that the bank requests in order for the compliance and risk departments in the bank to release the frozen account, although in some cases accounts enter into a spiraling mode and there is no choice but to close the account and transfer the remaining funds to a different account of the account holder. There are certain banks that allow direct access to transfer of the documents (for instance, as is customary in the Netherlands), and there are banks that demand unlocking of the accounts or un-freezing of the accounts by using a third party, such as an auditing company.
It is important to note that banks are held hostage by the local regulator, because every bank receives their banking license (and the operations license) from the local authorities. If the bank wishes to continue working it has no option but to fully cooperate with the law enforcement agencies. Thus, banks are obligated to inform their clients in case they pop up in a high risk indication, for no reason. Be that as it may, information requested by the bank, or freezing of the account, is not necessarily the end of the road and in certain cases may be battled, except that in such cases it is recommended to be accompanies by a regulatory expert that knows how to manage such negotiations. Poor management of such an event might not only cause the locking of the account and indication of the client as a problematic one, but may also lead to freezing of the account and locking the funds in the account for months and even for longer periods and might cause significant damages and additional costs.