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- In the Toledano case, the Supreme Court further explained the manner in which the banking corporation must make its decision in this matter and on what evidence it must rely (ibid., paragraphs 24-28 and the references that can be found in the source):
"24. It therefore follows that if it is proven, at the required level, that there is a reasonable basis to assume that an action was taken in the account related to money laundering or terrorist financing, this will constitute a reasonable reason for refusing to open and manage a bank account. In addition , a customer's failure to comply with the bank's requirements in his requests, which are intended to prevent money laundering or terrorist financing, when these are requested in accordance with the provisions that apply to a banking corporation, may also constitute a reasonable reason for refusing to provide banking services in the circumstances. This is due both to the importance of the banks' activity in clarifying the integrity of the activity in the accounts, and because the lack of cooperation constitutes a "red flag" for improper activity.
- According to the case law, the burden of proving the reasonableness of the refusal is on the bank, when it must point to concrete acts and actions that establish the existence of a real fear of improper conduct. However, the level of proof required of the bank in this type of decision is lower than the level required in civil law, when it is not required to conduct an "investigation", and the type of evidence required of it to substantiate its decision is similar to the type of evidence required in administrative proceedings ... In this regard, in order to learn which situations may raise "red flags" for money laundering or terrorist financing, which may even justify refusing to open an account or continue to manage it, it is necessary to refer to the Anti-Money Laundering Order and the Supervisor of Banks' Procedure 411.
- According to Sections 8 and 9 of the Anti-Money Laundering Order, a corporation is obligated to report, inter alia, ... On transfers of large sums of money between abroad and Israel...
- Another source that indicates "red flags" for bank account activity is a letter from the Supervisor of Banks on the subject of "Preparedness for Compliance Risk Management in View of the Determination of Tax Offenses as Source Offenses" dated November 23, 2016, issued by virtue of the General Supervision Authority set forth in Section 5(a) of the Banking Ordinance ... As mentioned in the letter, a number of "red flags" were listed, including: ... Funds are reinvested in the country of origin after being deposited in a foreign country... The client is unable or refuses to disclose the source of his wealth or income; ... And more.
- It should be emphasized that these actions and situations do not constitute a closed list of "red flags" that raise concerns about money laundering. A banking corporation can consider and attribute suspicion to various facts and situations that, in the circumstances of the case, in accordance with the legislation and guidelines that apply to it, and in accordance with its experience and common sense, arouse its suspicion of improper activity."
(Regarding the fact that there is a suspicion of money laundering, there is a reasonable reason to refrain from opening an account, see also Civil Appeals Authority 6685/17 Mountain of Success and Blessing in Tax Appeal v. Bank Hapoalim in Tax Appeal (September 10, 2017), para. 17; Civil Appeal Authority 2407/19 Israel Ziv v. Bank Leumi Le-Israel (May 14, 2019) paragraphs 17-20 and more)
- Another source that indicates situations that constitute "red flags" for a bank, which give rise to a reasonable suspicion of money laundering that could lead to refraining from opening an account under appropriate circumstances, is found in a document distributed by the Authority on September 2, 2015, in which it is explicitly stated that it does not constitute a closed or exhaustive list, but rather includes common examples that may give rise to suspicion, some of which were taken from a report published by the FATF in June 2013.
This document includes, inter alia, cases in which –
- The client behaves secretly or evades providing the details required in the addendum to the order.
- It is known that the client has been convicted of money laundering offenses or source offenses or is under investigation in relation to them or is connected to the parties involved in them.
- Receive/transfer funds for a customer when the source of funds or the reason for the transfer is unknown.
- The customer provides conflicting or unreliable versions with respect to the source and/or destination of the funds.
- The source of funds in a corporation established in a country at risk or an offshore country.
- It appears that a registered shareholder is not the controlling shareholder of the corporation.
- The customer turns to a business service provider in order to represent him before the bank in his request to open an account.
- After I have presented the general procedural framework, the time has come for a decision, and therefore – from the point of view to strike.
Discussion and Decision
- I will begin by saying that after reviewing the arguments of the parties and carefully examining the evidence material, I have come to the conclusion that the claim should be dismissed and that there was no mistake in the bank's conduct that justifies judicial intervention, and the decision to refrain from opening the account in the circumstances of the case is a reasonable and even necessary decision, and I will explain.
- As we have seen above, the legislature, the subordinate legislature and the regulatory body responsible for regulating the activity of banks in Israel imposed on the defendant, like all banks, a heavy burden to serve as a kind of administrative body to enforce various requirements stemming from the need to combat money laundering and terrorist financing.
This is a struggle that is not unique to the State of Israel and is being waged at the global level, and if the State of Israel and the financial institutions operating in it do not meet international standards in this regard, their status as potential partners in economic activity with the civilized and developed countries will deteriorate significantly.
- In this case, the plaintiff approached the defendant with a request to open a bank account in order to transfer to him a substantial sum of approximately USD 1.2 million from an account owned by a company registered in Panama (hereinafter: the "Panamanian Company") that is managed in a Swiss bank with a branch located in Singapore.
The plaintiff herself has no direct connection to the Singaporean branch or the Panamanian company, but she claims that she is entitled to the funds by virtue of the deceased's inheritance order.