This policy of the Bank was determined by virtue of a duty which was imposed on him by the Supervisor of Banks in the Proper Conduct of Banking Conduct Directives Nos. 310 and 411, which deal, respectively, with "risk management" and "risk management of the prohibition of money laundering and the prohibition of the financing of terrorism". These Instructions Instruct the banking corporations to establish policies and procedures in the field of money laundering risks and terrorist financing risks that will prevent the misuse of the banking corporation, according to a risk assessment to be conducted by the bank. Among other things, the Bank is required to address in this framework the manner in which sanctions lists imposed by international bodies and foreign countries on organizations and individuals declared in these lists will be used (see, for example, section 10(k) of the Proper Conduct of Banking Conduct Directive 411). The Bank's policy was also determined on the basis of an explicit demand of the Supervisor of Banks, In a letter he sent to the CEOs of the banking corporations on June 8, 2022 (hereinafter: Supervisor's Letter), Dealing with "Risks Involved in Engaging with Entities Declared in International Sanctions Lists and National Sanctions Lists of Foreign Countries". In this letter, the Supervisor noted that "The exploitation of the banking system to circumvent sanctions regimes imposed by foreign countries and international organizations exposes banking corporations to significant risks, including compliance risks, money laundering and terrorist financing risks, legal risks, and reputational risks." The letter also noted that the refusal to provide service as a result of the implementation of the risk management policy set by a banking corporation in connection with international sanctions regimes - "A reasonable refusal to provide service will be considered, to the point of Banking Law (Customer Service), 588"A-1981".
- In other words, the bank's risk management policy is the result of a duty imposed on the bank by the Supervisor of Banks, by virtue of Nevat 310 and 4111. In paragraph 19 of the judgment, the Supreme Court noted that the bank's risk management policy is not a voluntary decision, and that the bank is obligated to adopt and implement the instructions of the Supervisor of Banks. The Supreme Court further ruled that the bank's conduct in accordance with the normative framework described above does not establish a cause of action based on an unreasonable refusal to provide service, namely:
"19. In light of the above, the presentation of the risk management policy set by the Bank by the District Court as a "voluntary" application of the sanctions, such that "it is the bank that prohibits, and it is the bank that can permit" (see paragraph 73 of its decision), raises a difficulty. This presentation may not adequately reflect that this is a risk management policy that the bank is obligated to adopt and implement by virtue of the instructions of the Supervisor of Banks, who is authorized to give instructions to the bank, as the entity entrusted with the public interest in maintaining the stability of the banking corporations and the manner in which they conduct themselves (see: High Court of Justice 5048/07 Arbel v. Bank of Israel - Supervisor of Banks, para. 6 [published in Nevo] (October 9, 2007)). In accordance with the normative framework described, as long as the bank operates in accordance with the risk management policy it established in accordance with the Supervisor's directives, the respondents do not prima facie have a cause of action based on an argument of unreasonable refusal to provide banking service."
- In paragraph 22 of the Supreme Court's ruling, the Supreme Court noted that the Supervisor of Banks is the professional body in charge of the banks' activities and has expertise in the matter. The Supreme Court also noted the interests of "maintaining the Bank's ties with banking corporations and financial institutions around the world, maintaining the Bank's stability and the proper functioning of the entire banking system, and maintaining Israel's economic and trade ties."
- This recent ruling of the Supreme Court (from 2024), which was also given in the case of the defendant in the present proceeding, is, of course, binding in our case as well.
D.3. Implementation of the remarks and an interim summary:
- This lawsuit concerns the two bank transfers, each in the amount of $5,000, that were made from banks in Russia to the plaintiff's account and which were not received in his account at the end of the day. The funds are held by the bank in a designated transfer account.
- THIS IS A SVETLANA TRANSFER MADE THROUGH SBERBANK ON MARCH 15, 2022, AS WELL AS A GREGORY TRANSFER MADE THROUGH ALFA BANK ON MARCH 25, 2022.
- It becomes clear (and this is not contradicted by the plaintiff, who even confirms this, for example, in para. 26 of the statement of claim; see also Appendix "4" to the statement of defense), that the two banks mentioned above entered the British sanctions list even before the transfer was made (March 1, 2022 and March 24, 2022, respectively).
- The bank's decision not to transfer money to the plaintiff, which came from banks in Russia that have been subject to international sanctions, is therefore not a whim of the bank or an attempt to harm the plaintiff.
- The Bank is obligated to act actively in accordance with the directives of the Supervisor of Banks, who has outlined risk management mechanisms, regarding compliance with international sanctions.
- This means that as part of the management of international financial activity and in order not to be exposed to risks, the Bank operates in accordance with international sanctions imposed by international bodies. The bank is acting in accordance with the instructions of the Supervisor of Banks, and if it does not comply with its instructions, the bank and its managers may be exposed to sanctions.
- Therefore, a refusal to provide a service to a customer, including the transfer of funds received for him from a bank that has been imposed on him by international sanctions, will be considered a reasonable refusal to provide service, for the purposes of the Banking Law.
- In paragraph 50 of the statement of claim, the plaintiff also confirms the following: "There is no dispute that the defendant has the right to adopt a strict policy, which establishes a duty to comply with a variety of international sanctions."
- It is important to clarify that the risk management policy, which the Bank is obligated to adopt and act upon, is a result of the instructions of the Supervisor of Banks, who is the body responsible for the public interest in maintaining the stability and conduct of the banks.
- The conclusion of the matter is that the adoption of the sanctions policy in our case was lawful, without it being attributed to the bank's obligation.
D.4. The plaintiff's claim raises difficulties in light of the plaintiff's personal knowledge - the bank made it clear to the plaintiff in writing, and even before the transfer of the funds, that it is not possible to give prior approval for the financial transfers from Russia to Israel:
- As it appears from Appendix "3" to the statement of claim, the plaintiff contacted the bank in writing at the end of February 2022 - the beginning of March 2022 and expressed concern that in light of the situation in the banking system in Russia, "it is not clear in what form and from where my daughter's mother will be able to transfer the money."
- On March 8, 2023, the bank's representative replied in writing to the plaintiff, writing: "Regarding the transfers from your plot [sic], I received an answer that we did not allow them to give prior approval. If the receipts section has questions, they will contact them to comply."
- In other words, the plaintiff, who is a businessman (the request was made through Mr. Rotem, the plaintiff's representative and on behalf of the plaintiff), knew very well that there was a problem with the banking system in Russia and that it was not clear how it would be possible to transfer funds from Russia to Israel. He was the one who put the matter in writing on his own initiative.
- In response, the bank replied to the plaintiff that it would not be possible to obtain prior approval, and that there should be an application to the Compliance Department.
- This means that the plaintiff therefore knew even before he transferred the funds that there was no certainty that they would be received in Israel and that they could be transferred to his account. Therefore, his claims against the bank that are currently being raised and his demands from the bank to receive compensation for the two transfers that are delayed in a designated account are very difficult claims that cannot be accepted. In my opinion, the same correspondence with the bank establishes an estoppel that applies to the plaintiff from raising his claims that are currently being alleged.
- Hence, the plaintiff's arguments (for example, in paragraph 51 of the statement of claim) that the bank should have informed him of the sanctions policy are also grounded. In light of the correspondence, it appears that the plaintiff knew that there was difficulty in transferring funds from banks in Russia, and it was even made clear to him that it was not possible to give prior approval for the transfer of funds. The plaintiff therefore knew that the bank's compliance department might enter the picture, and that the transfer of the funds was not guaranteed to him.
- However, despite the aforesaid, and despite the fact that the plaintiff knew that it was not possible to give him prior approval, as well as that there was a possibility that the funds would not be transferred to him in light of the situation in Russia, he saw fit to allow the transfer of funds from various accounts in Russia. Out of four transfers, two reached his account. Two did not arrive (the funds are in a designated transfer account and are waiting at this stage until further instructions) but this is a calculated, clear and known risk that the plaintiff has taken upon himself. Certainly, the bank is not supposed to compensate the plaintiff or return the money to him or be his insurer in the event of a difficulty that arises. Hence, even in the concrete factual aspect of this claim, there is a difficulty for the plaintiff who has a material impact on his claim, which should also be rejected in view of the above.
D.5. The plaintiff's arguments are inconsistent with the representations he made to the bank:
- The plaintiff argues (paragraph 6) of the statement of claim that: "If the bank had taken the trouble to inform the plaintiff in real time about those 'restrictions'/'sanctions' by virtue of which it is now withholding the plaintiff's funds, then the plaintiff could have acted through other channels to receive the funds held by the bank."
- These claims of the plaintiff are very difficult ones. From Appendix "3" to the statement of claim, it turns out that on February 28, 2022, the plaintiff contacted the bank and announced that he would receive alimony payments for the years 2021 and 2022 in his account.
- The plaintiff noted that the transfer would be made "from Raiffeisen Bank." At the evidentiary hearing, it turned out (and there was no dispute) that it was an Austrian bank and not a Russian bank, and that no sanctions were imposed on it. See also p. 13 of the transcript, paras. 1-2.
- In other words, the representations made by the plaintiff to the bank were regarding funds that were to be received by him from a bank in Austria and not from banks in Russia.
- Rotem, the plaintiff's representative, confirmed in his testimony that prior to the transfer of the disputed funds from banks in Russia, no preliminary application was made to the bank in this matter. See p. 15, paras. 17-27; p. 17, s. 32-33, p. 18, s. 5-9.
- Hence, the argument that the bank should have informed the plaintiff of the sanctions policy in light of the plaintiff's presentation of this representation is grounded.
- When the plaintiff wrote another email to the bank on March 2, 2022, he himself noted that: "In light of the current situation in the banking system in Russia, it is not clear in what form and from where my daughter's mother will be able to transfer the money" - that is, the plaintiff himself knew about the difficulties in the banking system in Russia, and did not inform the bank, that he would be making money transfers from the banks from Sberbank or from Alfa Bank.
D.6. The plaintiff's claims that the bank was negligent or acted unlawfully should be rejected:
- The bank, as is well known, is obligated to adopt and implement the instructions of the Supervisor of Banks (see the ruling in Other Municipality Applications 1052/24 in the case of Mizrahi Bank mentioned above).
- See also in this context the provisions of Section 5 of the Banking Ordinance, 1941 (hereinafter: the "Banking Ordinance"), which authorizes the Supervisor to give instructions relating to the methods of operation and management of a banking corporation, whereas according to the provisions of the Ordinance there is no need to publish the instructions for proper banking management in the Official Gazette:
“)C1) The Supervisor may, for the purpose of supervision as stated in subsection (a), after consultation with the Committee and with the approval of the Governor, give instructions relating to the methods of operation and management of a banking corporation, of an officer thereof and of any person employed by him, all in order to ensure its proper management and the preservation of the interest of its customers, in order to prevent impairment of its ability to fulfill its obligations and to support the stability of the financial system and its regular activity (in this Ordinance - the provisions of proper banking management); Such instructions may be given to all banking corporations or to a specific type of banking corporation.