Fight Against Money Laundering: Guidelines for Oversight of Gemachim Tightened

The Capital Market Authority has published new directives for supervising financial gemachim (interest-free loan funds), aimed at preventing money laundering and terrorist financing. The directives require expanding periodic reporting, attaching an external expert opinion, formulating a risk management policy, and conducting additional checks on high-risk applicants. They will take effect in a year and a half and will bring the organizations in line with FATF standards.

The Capital Market Authority published yesterday (Sunday) new directives for financial gemachim (gemilut chasadim) organizations, aiming to maintain their financial stability and protect them from money laundering and terrorist financing. The directives require expanding periodic reporting, including financial reports, attaching an opinion of an external expert, formulating a risk management policy, and conducting additional checks on applicants with a high risk level, such as holders of public office abroad and non-residents of Israel. The directives will take effect in a year and a half, and upon their entry, the organizations will meet the FATF conditions, an intergovernmental body for combating money laundering and terrorist financing operating under the OECD. The purpose of financial gemachim organizations is to provide non-profit loans, and they serve as small social banks. This practice is rooted in the Haredi society, but these entities were not properly regulated until the recent process, among other things after evidence of money laundering and tax evasion was found. Their main activity is in the Haredi society, but the field is also gaining momentum in other communities. The 'Ogen' organization, which addresses the poor and the middle class, deals with non-profit loans and processes to become a social bank. Amit Gal, the Commissioner of the Capital Market Authority, said that the supervisory steps are intended to ensure compliance with a professional and transparent management standard. In the past, it was proposed to subject the gemachim to the Bank of Israel, but it was decided that the Capital Market Authority would be the supervisor. In 2019, a law regulating their status was passed.