Starting last Friday, lawyers and accountants granting business service to clients are exposed to sanctions if they provide service to a client suspected of being involved in money laundering, or if they have not yet completely fulfilled their duty to identify their clients in compliance with the amendment passed last year to the Prohibition on Money Laundering Law.
Last September, the rules applying to lawyers and accountants changed when the amendment took effect - an amendment aimed at making it difficult for lawyers and accountants to serve clients "suspected" of money laundering.
The amendment requires providers of business services lawyers and accountants in the commercial field to conduct an "identification and acquaintance with the client" proceeding in order to make sure that the client is not part of activity involving money laundering.
The definition of a "business service" includes the purchase or sale of a property or business; managing the client's assets, including managing money, securities, property, bank accounts, accounts at the stock exchange, with an insurance company, or the Postal Bank; receiving, holding, or transferring money for the purpose of founding or managing a corporation; and founding or managing a corporation, business or trust for another party. The list is comprehensive, and includes most of a lawyer's commercial business.
The relevant forms and papers, including records kept by services providers in the framework of conducting the procedure, must be kept in a special folder in the service provider's office for five years for auditing purposes. The agency responsible for monitoring is the official responsible for business service providers in the Ministry of Justice.
Last Friday marked the anniversary of the date on which the amendment took effect. According to the provisions of the order applying to business service providers, during the year ending on September 1, 2016, all business service providers were obligated to implement the new regime for all the clients to whom they provide service.
The legislator gave lawyers and accountants a year to complete their implementation of the regime for their veteran clients (those to whom a business service was provided before the order took effect). Now, starting, on Friday, September 2, 2016, a business service provider who has not completed the client acquaintance and receipt of the necessary forms from that client, including a "know the client" form legally filled out and signed, will be exposed to sanctions from the official responsible for providers of business services in the Ministry of Justice. It could also be ruled that he has committed an ethical violation.
This deadline, which has been known for some time, is now arousing anxiety among lawyers and accountants, and criticism to the effect that one year is not enough time to prepare for such a substantial change in work methods that have been practiced for many years. The law is also expected to cause disputes between the official responsible for business service providers and lawyers and accountants concerning what constitutes a "business service."
Zysman, Aharoni, Gayer, & Co. partner and Tax and Money Laundering Prohibition Department head Adv. Boaz Feinberg said, "There is concern that the year given is not enough, and it appears that the business service providers will need a delay in order to complete their preparations, including with respect to their veteran clients."
From now on, the Ministry of Justice can impose monetary sanctions amounting to hundreds of thousands of shekels on those service providers, and to transfer the information to the lawyers ethics committee or the Israel Bar Association Ethics Council, which can contribute to imposing penalties ranging from rebukes to suspension of those engaging in the profession.
The question is even liable to lead to service providers being accused of crimes. "If the official responsible for business services suspects that a business service provider is refraining from identifying his client in order to assist the client in avoiding the reporting of transactions or the commission of crimes, he can give the information to the police or the Israel Tax Authority, and that business service provider is liable to be subjected to a criminal investigation," Feinberg said.
"In these circumstances," Feinberg says, "before the official responsible starts to impose monetary sanctions on lawyers and accountants, it would have proper for the correct interpretation to be made much clearer. The perception is that at this stage, things are not adequately coherent."
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2016
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