preface

9. FOREIGN EXCHANGE CONTROL AND
PREVENTION OF MONEY LAUNDERING
9.1. FOREIGN EXCHANGE CONTROL
In May 1998 the currency control policy was changed and, for all intents and
purposes, restrictions on activities and transactions of Israelis abroad and
transactions in foreign currency, both in Israel and abroad, were abolished.
As part of the liberalization program, the Controller of Foreign Currency at the
Bank of Israel issued a general permit whereby an Israeli resident is free to
engage in foreign currency transactions and in transactions with foreign
residents, which otherwise required a permit.
The last restriction remaining under the Foreign Exchange Control Law until
recently, forbade Israeli institutional investors from holding foreign currency
and investing abroad amounts exceeding 20% of their total assets. This
restriction was removed in January 2003.
Under the general permit, some reporting restrictions are imposed on banks,
financial brokers, and institutional investors.
Since March 1999, additional reporting requirements have been imposed on
individuals and the private sector. These requirements include the furnishing of
information to the financial broker executing the transaction and reporting
directly to the Controller of Foreign Currency, as outlined below.
An Israeli resident engaging with a foreign resident using a financial broker is
required to report to the financial broker on the nature of the engagement.
In the event that Israeli currency is transferred to the account of a foreign
resident, it is the foreign resident's responsibility to inform the financial broker
regarding the residency of the other party and, if this concerns an Israeli
resident, the nature of the transaction should be reported as well.
A financial broker is required to report to the Controller of Foreign Currency
several kinds of events, including the following ones:
� An engagement between an Israeli resident and a foreign resident carried
out with his involvement.
� A transaction made by a foreign resident in Israeli currency in excess of a
certain amount.
� A holding of listed Israeli securites by a foreign residet in excess of a certain
amount.
BDO Israel
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