After reviewing the flags as aforesaid, the regulators emphasize that the existence of a red flag, and even the accumulation of a number of red flags, does not automatically indicate that the account should be classified as a high-risk account, and this certainly does not indicate that various actions should be taken, including preventing the execution of certain actions or closing the account. However, the existence of red flags, especially those that are clear, justifies the additional inquiries made by the bank, in order to clarify details regarding the ownership structure of the companies, their activities and the source of the funds.
According to the position, insofar as on the basis of the additional details provided or when insufficient details were not provided: "The bank has reached the conclusion that this is a high-risk account, it must report to the Money Laundering Prohibition Authority and take various measures to reduce the risk, as detailed in Provision 411, including the imposition of restrictions, including limitation of activity. In addition, even if the circumstances ostensibly require the imposition of restrictions, the restrictions must be relevant to the risk they are intended to prevent. "
In the concluding line, the regulators note that this is a dispute between the parties as to the nature of the explanations and references provided, when the factual framework is complex and controversial, and therefore the determination of whether the cessation of activity and the closure of the accounts is a reasonable step, depends on the decision on whether the plaintiffs provided sufficient explanations and references to the bank's requests or not.
Discussion and Decision;
- In the framework of evidentiary hearings that took place before me on May 15, 2018, May 24, 2018, and June 12, 2018, Mr. Amos Lotem, who serves as the Compliance Controller for the Central Region of the Bank, and whose role is to assist in managing the compliance risk of the Region, and who is an advisor to the manager in the Region, on the subject of compliance; and Mr. Moshe Shaulson, the manager of the bank branch where the plaintiffs' accounts were managed; On behalf of the plaintiffs, they testified - Mr. Michal Alon (who testified on May 24, 2018) - who serves as the plaintiffs' VP, who began his work at the plaintiffs in 2012 and who, as a result of the company's options program, owns shares of Paragon EX at a rate of 0.5%; Mr. Haim Toledano (who testified on May 24, 2018); and Mr. Yoav Shinitsky (who testified on 12/16/18) who serves as the plaintiffs' VP of marketing and is engaged in marketing the plaintiffs' clients.
- At the end of the evidentiary hearings, dates were set for the submission of the bank's summaries, the plaintiffs' summaries and the bank's response summaries. After reviewing the summaries that were submitted, as well as all the evidence as presented in the framework of the legal proceeding, this judgment was rendered.
the obligation of the banking corporation to provide service - in accordance with section 2(a) of the Banking Law (Service to the Customer);
- At the center of the hearing before us is a notice of closure that was given by the bank to the plaintiffs' accounts, a notice the meaning of which derives from the bank's refusal to provide service to the plaintiffs. As such, the starting point for clarifying the dispute in this case is found in the provision of section 2(a) of the Banking Law (Customer Service), 5741-1981 (hereinafter: "the Banking Law"), which states that a banking corporation shall not refuse, unreasonably, to provide services of the following types:
"1) Receipt of a monetary deposit in Israeli currency or foreign currency;