The review at the bank and in other channels

Proper Conduct of Banking Business Directive 411, issued by the Supervisor of Banks, governs how Israeli banks manage money laundering and terrorist financing risk. It requires the bank to assess the risk posed by each customer and by the activity in the account, and to set the depth of its review accordingly. The directive distinguishes between source of funds, meaning where the money deposited in the account came from, and source of wealth, meaning how the money was accumulated. Where a customer or an activity is classified as high risk, the bank takes one or more of the measures in section 30 of the directive, including inquiring into the source of wealth and the source of funds and obtaining explanations and, where necessary, written supporting documents.

Section 28 of the directive lists among the risk factors private banking, payments or transfers from unknown third parties or third parties with no connection to the customer, and a foreign-resident customer with no connection to Israel. Sections 53 to 57 require the bank to take reasonable measures to understand the structure of a trust and to record the settlor, the trustee, the beneficiaries and anyone who controls it, and they apply to arrangements similar to a trust as well. The bank may ask for similar details about an escrow or client account held by a lawyer or notary abroad from which the money is sent, in which the lawyer or notary holds money for others. Section 10 and Appendix C of the directive deal with customers’ cross-border activity, with emphasis on tax liabilities outside the country in which the account is opened. On this basis the bank may ask for a confirmation of tax compliance abroad, in a wording it sets.

Section 2 of the Banking (Customer Service) Law, 1981, provides that a bank may not unreasonably refuse to accept a deposit in Israeli or foreign currency, or to open and operate a current account in Israeli currency. Section 50 of Directive 411 lists, among other grounds, when there is reason for a reasonable refusal: where the customer does not provide details required under the Prohibition on Money Laundering Order, the directive and the bank’s procedures, or where there are reasonable grounds to suspect that the transaction is connected to money laundering or terrorist financing. Proper Conduct of Banking Business Directive 422 gives protections to anyone applying to open a current account in credit: a bank that does not give its decision when the application is submitted provides a written confirmation listing the required documents, and gives its decision in writing, with reasons, within 10 business days. The directive applies to an Israeli resident within the meaning of the Population Registry Law and to a foreign worker lawfully living in Israel, and not to a foreign resident.

Money changers and other financial service providers are subject to the Prohibition on Money Laundering (Identification, Reporting and Record-Keeping Obligations of Financial Asset Service Providers and Credit Service Providers) Order, 2021. The order requires them to identify the customer and verify the customer’s details, to carry out a know-your-customer procedure, to keep records and to report to the Israel Money Laundering and Terror Financing Prohibition Authority. A transfer that passes through a money changer or a money transfer company is reviewed there, and again at the bank that receives the money.

A person entering or leaving Israel with funds worth NIS 50,000 or more must declare them under section 9 of the Prohibition on Money Laundering Law, 2000. On entry or exit through a land crossing the amount is NIS 12,000 or more (fourth schedule to the Law). “Funds” under section 1 of the Law are cash, bank cheques, travellers’ cheques, bearer securities, negotiable bills, and a payment card on which monetary value can be stored.

Automatic exchange of information between tax authorities

Amendment 227 to the Income Tax Ordinance, approved in July 2016, created the legal basis for automatic exchange of information under the OECD Common Reporting Standard (CRS). On 6 February 2019 the Income Tax (Implementation of a Uniform Standard for Reporting and Due Diligence of Information on Financial Accounts) Regulations, 2019 were published. Under them, a financial institution in Israel identifies customers who are tax residents of another country and reports information on their accounts to the Israel Tax Authority, which passes it on to the country of residence. The Tax Authority publishes each year the list of participating jurisdictions and of the jurisdictions to which Israel sends information. The most recent list was published on 28 December 2025.

Under the same mechanism, an account that an Israeli resident holds at a bank in a participating jurisdiction is reported to the Israel Tax Authority. Israel and Switzerland, for example, agreed on collecting data from 2018 and exchanging it from 2019. When an account is opened, and sometimes also on a transfer from or to abroad, the bank asks for a self-certification of the countries of tax residence and of citizenship.

In June 2014 Israel signed an agreement with the United States to implement FATCA. Under it, financial institutions in Israel report accounts of US citizens and of others liable to US tax, even when they are Israeli residents. A US citizen living in Israel is asked to declare this when opening an account.

The bank in Israel may ask whether the account abroad from which the money is sent is subject to information exchange. The tax adviser abroad can confirm that the income was reported and that the account is subject to automatic exchange of information, and the foreign bank can confirm the type of account and when it was opened. In the case of a German resident who bought property in Tel Aviv, the tax adviser in Germany replied that she could confirm that the income had been reported, and could confirm nothing about reporting of the account itself.

Buying property in Israel

Opening an account and reviewing the source of a large sum can take weeks, and a delay at the bank after signing can turn into a breach of the payment dates in the agreement. The amount transferred to Israel includes, in addition to the price, purchase tax and expenses. Purchase tax on property that is not a residential apartment is 6%. On a residential apartment the tax is calculated in brackets, and a foreign resident pays under different brackets from an Israeli resident.

The lawyer handling the transaction is subject to the Prohibition on Money Laundering (Identification and Record-Keeping Obligations of a Business Service Provider) Order, 2014 (the “Business Service Provider Order”). The obligations apply to lawyers and accountants who provide a business service within the meaning of section 8B of the Prohibition on Money Laundering Law, including buying, selling or a long-term lease of real estate. Before providing the service, the lawyer identifies the client, completes a know-your-customer form with the client, and obtains a declaration that the client acts on its own behalf, or the details of any other beneficiary. Under section 2(c) of the order, the risk assessment is based, among other things, on the client’s characteristics, the type of service and the source of the funds for the service.

Identification is face to face, against an identity document, by the lawyer or the lawyer’s staff, by another lawyer licensed in Israel, by an Israeli diplomatic or consular representative abroad, or by the authority competent to issue an apostille. Where face-to-face identification is not possible, section 7 of the order permits identification by video conference together with a copy of a passport or identity card. A foreign resident is identified by a foreign passport. The lawyer keeps the documents for at least five years after providing the service. Where the buyer is a foreign company, the lawyer obtains a registration document from the country of incorporation and a declaration of the beneficiaries and the controlling persons.

The article Moving money from abroad to buy property in Israel, and the bank’s compliance review describes a case of money from the sale of a building in Germany that passed through a notary’s escrow account and a private bank in Switzerland, and was received in a new account in Israel in the wife’s name.

Olim and returning residents

An oleh who has received an Israeli identity card is an Israeli resident within the meaning of the Population Registry Law. When applying to open a current account in credit, the oleh has the protections of Directive 422: a written list of documents, and a reasoned decision within 10 business days. The directive does not change the review the bank carries out under Directive 411 on the transfer itself.

The money an oleh transfers in the first years may be capital accumulated before aliyah: savings, the proceeds of selling a home, pension funds, or the proceeds of a business that was sold. The bank wants to understand how the money was accumulated, so the documents are statements from the banks abroad, tax returns from the previous country, and the sale agreement where the money came from selling an asset.

Section 14(a) of the Income Tax Ordinance exempts a new immigrant and a senior returning resident from tax on income produced or derived outside Israel, for ten years from the date they became Israeli residents. Amendment 272 to the Income Tax Ordinance, 2024, does not affect the tax exemption. It cancelled the exemption from filing an annual return and the exemption from filing a wealth declaration on assets outside Israel, for anyone who acquires the status from 1 January 2026 onwards. The details are in the article Amendment 272: the reporting exemptions for olim and senior returning residents.

The exemption under the Encouragement of Aliyah and Return to Israel Law (Temporary Provision), 2026, applies to personal-exertion income produced in Israel, and not to money arriving from abroad. Its conditions and ceilings are set out in the guide to the tax exemption for new immigrants and veteran returning residents.

An inheritance from abroad

Israel has no inheritance tax and no estate tax. The tax was abolished in 1981, and an heir who is an Israeli resident pays no tax in Israel on receiving an inheritance. In the country where the deceased died, or where the assets are located, estate tax or inheritance tax may apply under the law of that country.

Money from an inheritance comes from an account that is not the heir’s: the estate account, an account of the executor or administrator, or the client account of the lawyer who handled the estate. The bank may ask who the beneficiaries of the account that sent the money are, in line with the review that sections 53 to 57 of Directive 411 set for trusts and similar arrangements. The documents are the death certificate, the order under which the executor or administrator acts in the foreign country, such as a grant of probate or letters of administration, an Israeli inheritance order or probate order where one was issued, and a letter from the executor or the lawyer on the distribution of the estate and the heir’s share. A document in a foreign language is translated, and a foreign public document carries an apostille.

An heir who inherits an asset and later sells it is liable to tax on the gain under the law that applies at the time of sale. For property in Israel, inheritance is not a sale under section 4 of the Real Estate Taxation Law, and the tax is examined on the sale. The details are in the article Inheritance law in Israel when the heir lives abroad.

A gift from a family member abroad

Israel has no gift tax. In some countries a gift tax applies to the donor, under the law of that country.

A transfer from a family member’s account is a payment from a third party, and section 28 of Directive 411 lists a transfer from an unknown third party or a third party with no connection to the customer among the risk factors. The connection is documented: a gift letter signed by the donor, with the donor’s name, the family relationship, the amount and a statement that there is no obligation to repay. With it, a statement of the donor’s account from which the transfer was made, and depending on the amount, an explanation of the source of the money in the donor’s hands. Where the donor is a parent, a birth certificate proves the relationship.

Where the gift is intended for buying an apartment, the source of funds for the transaction includes the gift, and the lawyer handling the purchase documents it as part of the know-your-customer procedure.

Savings, pensions and retirement funds abroad

A one-off withdrawal from a foreign pension fund, a retirement savings account or an insurance policy arrives as one sum. The bank compares it with the customer’s profile, so the documents are a notice from the paying institution on the withdrawal, showing the type of product, the gross amount, the tax withheld abroad and the net amount, and the statement of the account abroad into which the money was paid before the transfer to Israel.

A new immigrant or a senior returning resident within the ten years is exempt under section 14(a) from tax on income produced or derived outside Israel. Another Israeli resident who withdraws from a foreign pension fund is liable to tax under the Income Tax Ordinance and under the tax treaty with the paying country, where there is one. The treaty determines which country has the right to tax a pension and a lump sum, and tax withheld abroad is examined for credit in Israel.

Money that comes from an investment account abroad, after securities are sold, is documented by the broker’s transaction report and the account statement. For a new immigrant or a senior returning resident, the gain on selling an asset outside Israel within ten years of becoming an Israeli resident is exempt from tax under section 97(b) of the Income Tax Ordinance, subject to exceptions, including an asset that is mainly a right in property in Israel and an asset received as a gift after becoming resident.

Investing in Israel

A foreign investor who transfers money to an Israeli company, as an equity investment or as a shareholder loan, appears in the company’s account as the payer. The company’s bank asks to identify the investor, to understand the investor’s connection to the company, and to see the source of the funds. The documents are the investment agreement or the loan agreement, the board resolution on the allotment of shares, and the investor’s identification documents. In an equity investment, the allotment of shares is recorded with the Registrar of Companies.

Where the investment is made through a foreign company, the review extends to the controlling persons. The Business Service Provider Order requires the lawyer to obtain a registration document from the country of incorporation and, where an identifying detail is missing from it, a lawyer’s confirmation. That lawyer may be licensed in Israel, or licensed in an OECD member state or in the company’s country of incorporation, provided that the country of incorporation is not listed in the second schedule to the order. The client declares the beneficiaries and the controlling persons. The fourth schedule to the order lists circumstances that may be regarded as high risk, including a client from a country in the second schedule and a business service requested with no explanation or business rationale.

Investing in rental property through a company also involves corporate tax, tax on dividends, and purchase tax on acquiring shares in a real estate association. The legal structure is described in the article Investing in Israeli real estate: how the market is built.

Supporting a child who lives in Israel

Parents abroad sometimes support a child who studies in Israel, serves in the army or has started working. Regular monthly transfers from a parent’s account, of a similar amount, match the expected activity the bank records when the child’s account is opened. A single large transfer from the same source needs a separate explanation: a gift letter as in chapter 6, and the purpose of the money.

In a minor’s account the parents act as the minor’s natural guardians. Where a lawyer handles a transaction for a minor under 16, identification under the Business Service Provider Order is by the identity document of one of the minor’s guardians.

Where the parents fund an apartment that the child buys, the lawyer handling the purchase documents the gift letter and the source of the money in the parents’ hands as part of the know-your-customer procedure. The apartment is registered in the child’s name and is counted among the child’s apartments in the purchase tax and betterment tax tests. While the child is under 18 and unmarried, the law treats the child and the parents as a single buyer and a single seller.

Checklist before transferring the money

• The purpose of the transfer and a document that records it: a purchase agreement, an investment agreement, a gift letter, estate documents, a pension withdrawal notice.
• A map of the money chain: where it came from, into which account, in whose name, and by which route it will reach Israel.
• A match between the name of the sender, the holder of the account abroad and the holder of the account in Israel.
• A documented explanation from the tax adviser or lawyer abroad for money held in a country other than the country of residence.
• A confirmation of tax compliance worded so that the tax adviser abroad can sign it under that country’s tax system.
• A request to the bank for the full list of documents at once.
• No internal transfers between accounts abroad before the bank in Israel has approved the route.
• In a transaction with payment dates, the money in the account in Israel before signing.

Further reading

Sources

Proper Conduct of Banking Business Directive 411 and Supervisor of Banks Circular 2862, 7 October 2026 · Proper Conduct of Banking Business Directive 422 · Banking (Customer Service) Law, 1981, section 2 · Prohibition on Money Laundering Law, 2000, section 9 · Prohibition on Money Laundering (Identification and Record-Keeping Obligations of a Business Service Provider) Order, 2014 · Prohibition on Money Laundering (Identification, Reporting and Record-Keeping Obligations of Financial Asset Service Providers and Credit Service Providers) Order, 2021 · Income Tax (Implementation of a Uniform Standard for Reporting and Due Diligence of Information on Financial Accounts) Regulations, 2019 · Amendment 227 to the Income Tax Ordinance, 2016 · Israel-United States FATCA agreement, 30 June 2014 · Income Tax Ordinance, sections 14(a) and 97(b) · Amendment 272 to the Income Tax Ordinance, 2024 · Income Tax Circular 9/2011 (Hebrew) · Encouragement of Aliyah and Return to Israel Law (Temporary Provision), 2026 · Real Estate Taxation (Betterment and Purchase) Law, 1963 · Legal Capacity and Guardianship Law, 1962 · Swiss Federal Council announcement on automatic exchange of information with Israel