In its 2018 Mutual Evaluation Report (MER), Israel was rated Partially Compliant (PC) with Recommendation 16 of the FATF standards, which covers the regulation of wire transfers. At the time, Israel’s framework was overly reliant on general customer due diligence (CDD) rules rather than the specific requirements mandated by R.16. In particular, gaps existed regarding originator and beneficiary information obligations, especially in relation to money service businesses (MSBs), and verification procedures were inadequate.

Key Reforms

To address these issues, Israel undertook legislative amendments focused on MSBs and credit service providers, including those offering money or value transfer services (MVTS). The updated framework introduced detailed obligations aligned with R.16, ensuring that specific originator and beneficiary information is required for wire transfers. These obligations are designed to cover higher-risk sectors and bring Israel into closer alignment with international expectations.

A significant improvement is that information related to wire transfers is now made immediately available to competent authorities, such as law enforcement, enhancing the system’s responsiveness and transparency.

Despite these advances, the FATF noted one principal deficiency remains. Israel’s threshold for identifying and verifying information on cross-border wire transfers is set at NIS 5,000, which is slightly above the FATF-recommended threshold of USD/EUR 1,000. This discrepancy, while minor and subject to currency fluctuations, means that certain lower-value transfers fall outside full compliance. In addition, obligations related to transfers below the de minimis threshold and specific recordkeeping duties have not been fully addressed.

Re-Rating Outcome

Following these reforms, Israel’s compliance rating for Recommendation 16 was upgraded from Partially Compliant (PC) to Largely Compliant (LC). The FATF acknowledged the substantial progress made, particularly the introduction of a specific legal framework for wire transfers within the MSB sector and the improved availability of transactional data to authorities. However, the slightly elevated threshold and limited enhancements for sub-threshold transfers were factors that prevented a higher rating.

Conclusion

Israel has made substantial progress in strengthening its wire transfer regime to align more closely with FATF Recommendation 16. The introduction of sector-specific legal requirements, particularly for MSBs and MVTS providers, marks a shift from general CDD reliance to a more targeted approach. While a few minor gaps remain, primarily around the de minimis threshold and recordkeeping for small transactions, the overall improvements provide a stronger legal and operational basis for monitoring and responding to illicit financial activity. The upgraded rating of Largely Compliant reflects Israel’s commitment to aligning with global AML/CFT standards.