A foreign-owned company operating in Israel receives a letter from its banking partner. The bank requires updated KYC documentation and a full beneficial owner disclosure – within 30 days. Companies that fail to respond on time risk account suspension. This scenario is now common across Israel's financial sector, driven by a significant tightening of the country's anti-money laundering rules.
Israel has strengthened its AML legislative regime, with updated obligations effective from early 2025. The changes expand Know Your Customer requirements, tighten beneficial owner identification rules, and impose stricter reporting duties on a broad range of business entities. Companies with Israeli bank accounts, credit facilities, or correspondent banking relationships must review their compliance posture without delay.
This alert covers what changed, which businesses are affected, and the five immediate steps international companies should take now.
What changed – the regulatory development and effective date
Israel's anti-money laundering legislative regime has undergone a material update. The revisions entered into force in stages during 2024 and early 2025. The central thrust of the changes is threefold.
First, the threshold criteria for customer due diligence have been lowered. Transactions and business relationships that previously fell below the reporting threshold now require full KYC documentation. This applies to both new and existing customer relationships at regulated financial institutions.
Second, the definition of beneficial owner has been broadened. Under Israel's updated financial crime prevention legislation, any individual who holds or controls a significant interest in a legal entity – directly or through a chain of intermediaries – must now be identified and verified. The threshold for mandatory disclosure has been reduced from the prior level, capturing a wider pool of ownership structures.
Third, reporting obligations for designated non-financial businesses and professions have been expanded. Law firms, accountants, real estate agents, and corporate service providers that facilitate company formation or manage client funds are now subject to the same core AML duties as banks. This aligns Israel's system more closely with the standards promoted by the Financial Action Task Force.
The Rashut HaLeumi LeHalbant Hon (Israel Money Laundering and Terror Financing Prohibition Authority) has issued updated supervisory guidance clarifying these obligations. Regulated entities that have not yet reviewed their internal procedures against the new guidance are at risk of supervisory examination findings.
For companies navigating these changes in Israel's banking sector, our dedicated banking and finance legal services in Israel provide tailored support across all regulated activity.
Who is affected – business categories and threshold criteria
The updated rules apply to a wide range of entities operating in or through Israel. International companies should assess whether they fall into one or more of the following categories.
- Companies with Israeli bank accounts – all legal entities maintaining accounts with Israeli-licensed banks must now provide updated KYC documentation, including beneficial owner disclosure to the bank's satisfaction.
- Companies with outstanding credit facilities – lenders are required to re-verify customer identity and ownership on an ongoing basis. Drawdowns or renewals may be suspended pending compliance.
- Businesses engaged in correspondent banking arrangements – Israeli banks acting as correspondents are applying enhanced due diligence to foreign financial institutions and their customers, creating upstream compliance demands.
- Corporate service providers and intermediaries – entities that form companies, provide registered offices, or manage nominee arrangements in Israel are now directly regulated and must register with the relevant supervisory authority.
- High-value transaction participants – any party to a transaction above the revised monetary threshold in real estate, securities, or financial services triggers mandatory AML reporting obligations.
Companies that hold minority stakes in Israeli entities are not automatically exempt. Where the updated beneficial owner rules capture an indirect controlling interest, full disclosure remains mandatory regardless of the formal ownership percentage.
The compliance deadline for updating existing customer files at most regulated institutions is ongoing. Banks have been issuing individual notice periods – typically 30 to 60 days – for existing customers to submit updated documentation. Failure to respond within the bank's specified window can result in account restrictions or termination.
To discuss how these thresholds apply to your specific ownership structure in Israel, contact us at info@ferrazwhitmore.com.
What to do now – immediate actions for international companies
International companies with Israeli connections should treat this alert as a prompt for immediate internal review. The following five actions are recommended.
1. Map your Israeli exposure. Identify every Israeli bank account, credit facility, and financial relationship held by your group, including subsidiaries and special purpose vehicles. Companies with layered ownership structures should confirm which entities fall within the updated beneficial owner definition under Israeli financial crime prevention legislation.
2. Update your KYC documentation file. Prepare a current, certified set of corporate documents for each entity in the chain. This typically includes certificates of incorporation, registers of directors and shareholders, and certified identification documents for each beneficial owner. Many Israeli banks now require notarised translations of foreign-language documents.
3. Review your AML internal policy. If your company falls within the newly designated non-financial business and profession categories, you are now legally required to maintain an internal AML compliance programme. This must include customer due diligence procedures, a mechanism for reporting suspicious transactions, and a nominated compliance officer.
4. Respond promptly to bank requests. If you have received a KYC or beneficial owner update request from an Israeli bank, treat it as time-critical. Missing the bank's deadline – even by a short margin – can trigger account restrictions that affect operational cash flow and access to credit.
5. Assess correspondent banking risk. If your business routes payments through Israeli correspondent banks. Consult with a lawyer in Israel to confirm that your counterparties and transaction flows do not trigger enhanced due diligence flags under the updated rules. Correspondent banking relationships are subject to heightened scrutiny and can be terminated without extended notice where AML concerns are identified.
Companies with exposure to Israel's capital markets should also review their obligations under securities legislation. Our analysis of capital markets legal services in Israel covers the intersection of AML rules and securities compliance in detail.
For a parallel perspective on AML developments in a related jurisdiction, our alert on AML updates in the UAE addresses comparable regulatory tightening across the region.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in banking, finance, and AML compliance. We regularly advise international companies on KYC and beneficial owner obligations in Israel and across the Middle East and Asia-Pacific region. Our attorneys have supported clients through regulatory examinations, bank account opening procedures, and the design of internal AML compliance programmes in both civil law and common law systems. Engaging a lawyer in Israel with cross-border financial crime expertise is particularly valuable when group structures span multiple jurisdictions and ownership chains are complex. As an international law firm with presence across high-growth markets, Ferraz & Whitmore provides results-oriented counsel to entrepreneurs, institutional investors, and in-house legal teams. To discuss how the updated AML rules apply to your operations in Israel, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.