Civil Case (Tel Aviv) 34153-02-24 Al-Aqsa Association for the Development of Islamic Endowment Assets v. Bank Leumi Le-Israel Ltd. - part 2

29. Banking corporations in this context are dual-nature entities, and therefore the principles of public law apply to them, including duties of fairness, reasonableness and the rules of natural justice. Therefore, judicial review of the Bank's decisions is in essence an administrative review, while giving weight to the quality of the administrative evidence on which the Bank relied.  Within the framework of this area, the banking corporation has relatively broad discretion, relying on its professional factors, in assessing the nature of the risk and in identifying high-risk factors and activities, in connection with the provisions of the law, orders and guidelines of the Banking Supervision Department (Top Investments, paragraphs 42-43; Civil Case (Hai District) 39074-12-23   A.H.  Lighting in Tax Appeal v.  Bank Hapoalim Ltd., para.  40 (January 24, 2024)).  The bank's decisions are subject to judicial review by filing an action in the civil court.
30. The aforementioned discretion was granted to the bank due to its unique role in combating money laundering and terrorist financing, and its exposure to criminal or civil sanctions if it fulfills this role properly (criminal liability towards the bank or its employees under section 7(c) of the Banking Law; financial sanction under section 14 of the Prohibition of Money Laundering Law). It has often been determined that the court will not replace the bank's professional judgment with its own, but will examine whether the bank's decision exceeds the realm of reasonableness.  In cases where an evidentiary basis for unreasonableness has been laid, the judicial instance will intervene in the bank's decision (Top Investments, paragraph 42; Opening Motion (District Attorney) 11043-12-08 Kaplan Meat Marketing inTax Appeal v.  Union Bank of Israel Ltd., para.  3(d) (April 23, 2009); Opening Motion (District Court) 20680-02-13 Tsker Boneh HaShamal for Construction and Renovation Works inTax Appeal v.  Bank Hapoalim inTax Appeal (February 21, 2013); Toiga Case, para.  76; Chodin Case, paragraphs 34 and 47; Civil Case (Be'er Sheva District) 40435-04-22 Sirius Network Services B Tax Appeal v.  Discount Israel Ltd., para.  29 (October 26, 2023); Civil Case (Shalom Tel Aviv) 45290-04-22 Nevo-Raphael v.  Bank Leumi Le-Israel Ltd., para.  24 (June 4, 2026)).
31. In a judgment in which the position of the regulator (the Supervisor of Banks) was asked, Hela expressed his opinion that high-risk activity does not necessarily lead to the closure of an existing account, which is considered the last and most extreme step. High-risk activity sharpens the need for it to be managed by the banking corporation.  In this context, the Supervisor detailed the actions that a banking corporation must take in order to reduce the risk associated with this activity, including: taking increased steps to get to know the customer; increased monitoring of activity and controls; restricting the client's activity; reporting to the Money Laundering and Terrorist Financing Prohibition Authority on unusual activity; and closing an existing account in a situation where the customer refuses to cooperate with the banking corporation.  The last step, which concerns the closure of an existing account, was described by the Supervisor as the "most extreme step", while it was clarified that the lack of cooperation on the part of a customer may be expressed in the failure to provide the necessary references and explanations for the activity or in an attempt to circumvent restrictions imposed by the banking corporation (Civil Appeal 6389/17 Bits of Gold inTax Appeal v.  Bank Leumi Le-Israel Ltd., para.  6 (February 25, 2018); Civil Case (Tel Aviv District) 62322-11-23 Gisha - Center for the Protection of the Right to Move v.  Bank Leumi Le-Israel Ltd., para.  47 (December 11, 2023)).
32. In addition to the aforementioned duties of the bank, it is obligated to act fairly towards the customer even if there is a suspicion of illegal activity in his account. As part of this obligation, the bank must clarify to the customer the basis of his suspicions and give him a reasonable opportunity to dispel the suspicions or correct his ways.  Only after this opportunity has been given and the bank's concerns have not been removed, is the bank entitled to take action to close the account.  This obligation derives from a bank's increased duty of care towards its customers (Opening Stimulus (Tel Aviv District) 24089-02-17 MLGI Finance and Investments in Tax Appeal v.  Bank Hapoalim Ltd., para.  86 (December 9, 2020); (Civil Case (Hai District) 40765-05-18 Schwartz v.  Israel Discount Bank Ltd., para.  36 (December 26, 2020)).  This normative basis requires implementation in our case.

Analysis of the Evidence at the Interim Relief Stage

33. At the stage of the interim relief, the evidence material was analyzed and the following findings were determined by dividing them into "red flags" that the Bank pointed to, as follows:
34. Extensive cash activity without the ability to identify the source of the funds: The first and main "red flag" noted by the bank is a significant increase in the volume of cash activity in the association's account in 2023, alongside the fact that the association does not know the source of the funds. According to the bank, from September 2022 to September 2023, a large sum of ILS 2.13 million was deposited in the account.  The deposits were made once every few days, in sums ranging from a few thousand to tens of thousands of shekels a day in cash.  According to the bank, this conduct bypassed the bank's monitoring system regarding the sources of funds, in contravention of the regulatory guidelines to which it is obligated by the Bank of Israel.  The bank claimed that it could not verify that the source of the funds was not in prohibited activity, including money laundering or terrorist financing.  The bank allowed the association to provide an explanation of the source of the funds before blocking the activity, but did not receive a satisfactory response.  According to the bank, this is a significant red flag, as was determined, among other things, in the Al-Rahmon
35. Yazid Jaber ("Jaber"), the organization's administrative director, testified that the funds were collected in cash at the mosques in small amounts (a few shekels to hundreds of shekels from a donor), and that he estimated that no more than 5,000 shekels were donated. The money is donated after the prayers in the mosques (there are about 100 mosques) and receipts are issued in the name of the mosques for follow-up.  Jaber confirmed what was not in dispute: the association does not know how to identify the source of the cash funds and cannot point to the identity of the donors (pp.  5-6 of the minutes of May 6, 2024).
36. The evidentiary basis presented included 253 receipts issued by the association for cash payments in 2023. Of these, the bank indicated a duplication of 48 receipts.  93% of the receipts, totaling ILS 1.6 million, were not directed to a specific beneficiary.  Twenty-eight receipts, totaling about ILS 278,000, were issued in the name of a specific mosque in certain localities.  Sixty-four receipts, for a cumulative sum of ILS 571,000, were designated for the beneficiary in the name of "Quafil al-Aqsa" (Al-Aqsa convoys) with the name of a locality.  In 21 receipts, for a total amount of ILS 294,000, "donations" were specified along with the name of the locality, without specifying a specific beneficiary or mosque.  In 11 receipts, for a total amount of about ILS 53,000, the "fund" of a particular locality was specified without specifying a beneficiary or a mosque.  Four receipts, totaling ILS 78,000, were issued in the name of the person who made the donation (Fa'el Khir) without the name of the locality.  12 receipts, totaling about ILS 13,000, were issued in the name of the "Highway 6 Fund"; A number of receipts were issued in the name of "Yazid".
37. The bank claimed that there was no match between the amounts of receipts received each month in 2023 and the amounts of cash deposited in that month into the plaintiff's account. For example, in June 2023, cash in the amount of ILS 121,500 was deposited, and receipts in the amount of ILS 36,450 were attached to Jaber's affidavit.  In July 2023, cash was deposited in the sum of ILS 221,862, and receipts in the amount of ILS 306,602 were attached to his affidavit.  The bank concluded from this that the receipts did not match the amounts received.
38. In response, the association claimed that sometimes a receipt is generated in a certain month and the funds are deposited in the following month. For example, Eid al-Adha falls from June 27, 2023 to July 1, 2023, and for the money received on the eve of the holiday, receipts were issued after the holiday.  The total amount of money deposited in June and July was ILS 343,362, and the total receipts issued during these months was ILS 343,052.  The difference is negligible.  The amount of cash deposited during the entire year 2023 according to receipts was ILS 1,769,569 and the amount of cash according to the statements of account was ILS 1,745,948.  Again, a negligible difference of ILS 23,621, which is explained by the fact that this sum was deposited in 2022 and the receipts for it were deposited at the beginning of 2023.
39. Considering the association's method of collecting money - collecting cash in mosques without identifying donors, issuing a receipt to a mosque or community, and making a late deposit - I determined that the association's explanation for the discrepancies in cash amounts between receipts and deposits is not unreasonable. Despite monthly gaps, in the absence of a legal obligation to make an immediate deposit, and given the negligible gap in the bi-monthly and yearly perspectives, this red flag is considered to be of low intensity and severity in relation to the fear of money laundering.
40. The bank claimed that the double addition of many receipts (48 in number) to the affidavit indicates financial irregularities. The association replied that it was only a technical malfunction, that the same receipt was attached twice, and not that different receipts were issued for the same amount (as detailed in the "Short Notice and Request on behalf of the Bank" submitted on May 5, 2024).  I determined that the claim of the technical malfunction was not contradicted, and that it is difficult to draw a significant conclusion from a double combination of the same document.  At most, this is a particularly low weight "red flag" that indicates a fear of money laundering.
41. The association explained that "Quapel Al-Aqsa" is its flagship project for transportation to Jerusalem, and that these receipts are not intended for a specific donor, but rather serve as an internal monitoring tool from which mosque or locality the money came from, and what amount was received. She confirmed that the receipts in the name of Fa'el Khir or Yazid (referring to Yazid Jaber) were in the name of the money collectors and not in the name of the donors.  As for the funds collected at the "Highway 6 fund": The association explained that these were donations collected in a mobile prayer room on Route 6 near Baqa al-Gharbiya.  The association did not deny that the receipts were not intended to indicate the identity of the donor.
42. Three receipts with consecutive numbers for the same date and the same amount were presented (August 29, 2023, for a total of ILS 12,000, for a total of ILS 36,000); Two receipts were issued day after day for the same amount (ILS 6,600). As for the sum of ILS 36,000: The association explained that its representative in Sakhnin informed the director of the association, without elaborating and in an exceptional manner, the division between three different mosques.  Therefore, the administrator attributed the same amount to each mosque.  As for the double receipt for the same amount, the association claims that this is an unusual malfunction: apparently the secretary of the association and its manager both issued a receipt for the same amount.
43. On the basis of this evidentiary basis and the arguments of the parties, I determined in the decision in the interim relief, and it was in fact not in dispute, that the association could not point to the source of the money that was donated in cash. I determined that the manner in which the donations were collected in cash, without the ability to identify the donor, together with irregularities in the management of the receipt books, raise a "red flag" that raises a concern of money laundering, due to extensive cash activity on a significant scale of unknown origin.  The association did claim that collecting donations in small sums without identifying the donor is a common and legal practice that has been practiced by it for years, and that there is an internal "order" in the correspondence between the sums received and the depositors.  However, this order does not relate to the identity of the donors.  I also raised a question about the amounts of receipts and "round" deposits, which are not necessarily consistent with the claim of small donations.  Jaber confirmed in his interrogation that he was not in the mosques collecting donations and did not know the source of the money, which raises the possibility of receiving sums of money derived from illegal activity, including "black money." This significant "red flag" has not been addressed.  I also referred to the difficulty of the association in proving the source of the money in light of the lack of documentation.
44. In summary, this "red flag": It was determined that the collection of unidentified donations amounting to approximately ILS 2.13 million per year (about ILS 177,000 per month), without knowing the source of the money, formulates a "red flag" that raises concerns that the source of the money is illegal activity and money laundering. Therefore, the bank's decision to prohibit the association from operating in cash in an account is expected to be reasonable at that time.
45. Arrest of Daoud activist and opening of a criminal investigation: Daoud, an activist of the organization, was arrested at the entrance to the Al-Aqsa Mosque with cash (14,500 shekels and $1,500) and other belongings, including receipts, deposit certificates, checks, an ATM card, and a mobile phone. He was taken to the police station, interrogated and released.  The association filed a request for the release of the seized persons, which was abandoned.  Eventually, the money was returned to Daoud, who deposited them in the association's account at the bank.

The bank claimed that this arrest indicated Daoud's involvement in criminal activity in a way that raises a "red flag." The association, on the other hand, claimed that this was "a great commotion for nothing," since Daoud was released, no indictment was filed against him, and the money and property seized were returned to him.

46. I determined that the weight of this red flag as an indication of the association's involvement in illegal activity, or a fear of money laundering, is prima facie not great. In the absence of an indictment and in view of the return of the seized persons, it is difficult to attribute the arrest and interrogation to an indication of illegal activity by the association.
47. Media reports regarding investigations opened against the association: The bank claimed that during 2023 it learned of various media reports attributing illegal activity to the association as follows (Appendix C to the first request for temporary relief):

(a)        Three articles from November 2, 2021 on the websites "Ynet"Israel Hayom" and "Maariv": The articles reported that the Israeli police are investigating the association on suspicion of raising donations and using them to pay fines imposed for illegal structures in the Beit Safafa neighborhood of Jerusalem.  The reports were based on a complaint filed by right-wing organizations (Im Tirtzu and Lech Jerusalem) and a query by Knesset member Orit Struk.  The articles claim that the Ad Kan movement claims that the association is connected to the Ra'am party; that received funds from a terrorist organization; whose funds were confiscated by the Shin Bet after the signature of the Minister of Defense; And the association conducts conferences with radical elements.