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Anti Money Laundering Policies

PROHIBITION OF MONEY LAUNDERING AND FUNDING OF TERRORISM
BANK'S POLICIES AND PROCEDURES

Mizrahi Tefahot Bank Ltd. (the “Bank”) sees itself as a reliable partner in international efforts against money laundering and terror financing, complies with the legal authorities, and cooperates with the enforcement bodies, including the Israel Money Laundering and Terrorism Prohibition Authority.

Following is an overview of the anti money laundering (“AML”), prohibition of financing terrorism (“PFT”) and Know Your Customer (”KYC”) policies and procedures of the Bank, as of May 2015.

The Bank, together with all other banking corporations in Israel, act in accordance with the following anti money laundering and prohibition of financing terrorism laws and regulations that have been enacted in Israel:
1. Prohibition on Money Laundering Law, 5760-2000 (“The Law”) effective as of August 2000, as amended from time to time.
2. Prohibition On Money Laundering (Banking Corporations’ Requirement regarding Identification, Reporting, and Record-Keeping for the Prevention of Money Laundering and the Financing of Terrorism) Order, 5761-2000 (“The Order”) effective as of February 2002, as amended from time to time.
3. Prohibition of Financing Terrorism Law, 5765-2005, effective with respect to financial activities as of August 1st, 2005 ("The PFT Law") as amended from time to time.
4. Prohibition On Trading With The Enemy 1939 Ordinance, as amended from time to time.
5. Bank of Israel – Supervisor of Banks – Proper Conduct of Banking Business, Regulation 411 (Prevention of Money Laundering and Financing of Terror and Customer Identification), (“Regulation 411”) as amended from time to time.
6. Combating Iran's Nuclear Program Law 5772-2012, effective as of March 2014
7. Bank of Israel - Supervisor of Banks – Instructions and Clarifications regarding AML and PFT given from time to time.

The Law and the Order impose duties upon banking corporations to identify and authenticate particulars of customers and parties executing transactions, to identify the ultimate customer (such as  beneficiaries and holders of controlling interest/s), to enter their particulars in a computerized database, and report certain transactions and activity to the Prohibition on Money Laundering Authority (at the Ministry of Justice).
In addition, banking corporations are required to be acquainted with the customer's business, nature of his affairs, source of his capital and income and expected activity in the accounts (KYC duties),  perform continuous monitoring on customers' activity, detect high-risk factors/ customers (with respect to money laundering, financing of terrorism and trading with the enemy) and mark them for special surveillance (enhanced monitoring), and more.
 
For the purpose of preventing the bank from being exploited for terror funding or assisting the enemy, duties were imposed pursuant to the PFT Law, as well as laws with respect to assisting or trading with the enemy, to check names of customers and parties to transaction against official lists of terror activists, illegal associations, sanctioned entities etc.

The Bank has incorporated all the requirements determined in the above laws and regulations in specific procedures which stipulate, inter alia, the KYC and monitoring requirements for each particular type of customer and transaction. The Bank updates its procedures in accordance with new legislation and amendments and according to guidance and instructions from its regulator, the Bank of Israel.

The Bank's AML & PTF procedures include mainly the following four groups of procedures.
 
(A) The "Money Laundering Prohibition Procedure" which is divided into the following chapters:
Chapter 1 – Prohibition on money laundering – General explanation
Chapter 2 – Identifying the customer and authentication of his details
Chapter 3 – Declarations of Beneficiaries in Accounts and Controlling Owners
Chapter 4 – Detecting irregular activity and reporting duties
Chapter 5 – Special Monitoring Accounts
Chapter 6 – Blocked Accounts
Chapter 7 – Prohibition of Terrorist Financing
Chapter 8 – (Appointing) Anti-Money Laundering Trustee
Chapter 9 – Prohibition of Trading With The Enemy
Chapter 10 –Screening Against Lists 
Chapter 11 – Prohibition of Activity in Gambling Monies
Chapter 12 – Refugees
 (B) Basic Account Opening procedures, which include (inter alia) Basic Guidelines to open accounts and the "Know Your Customer Conversation and Documentation" Procedure ("KYC Procedure"). Also relevant is part of Closing Account Procedure with respect to closing account due to prohibition on money laundering reasons.
(C) Many detailed account opening procedures for the different types of customers (private, corporate etc.) such as: Private Account for a Foreign Resident Procedure, Corporate Account for a Foreign Corporation Procedure, Opening of a Trust Account Procedure and more.
(D) In addition, and with regard to the different aspects of banking activity - credit services, foreign trade, funds receipts and transfers, correspondent banks, safe deposit banks etc… – all relevant bank procedures have been incorporated with appropriate Prohibition of Money Laundering (AML) and Prohibition of Terror Financing (PTF) provisions and are updated regularly in the framework of the Bank's compliance regime.

The Bank’s procedures with Respect to AML and PFT, which implement the above mentioned laws and regulations, relate mainly to the following matters:
1. Customer Identification, Authentication Of Identity Details, And Record Keeping.
(a) In Accounts
In accordance with our strict AML& PFT policy, the Bank accepts a customer only after taking due steps to ascertain the true identity of the account owner, the ultimate beneficial owner, the authorized signatories and power of attorney, and after a proper acquaintance with the customer (KYC) is performed, the scope of which is determined by the type of the account and the degree of risk [in respect of money laundering/terror financing].
 
An account is opened only in cases where after due KYC checks, the Bank is convinced, that the potential customer has a legitimiate source of funds, the bank has identified the beneficiaries to the account or controlling owners (as relevant), and there's no reasonable ground to assume that the customer's activity is related to money laundering or terror financing.
When using new technology - especially technology that enables opening an account not "face-to-face," - procedures of identification and confirmations are strictly applied, and steps are taken to prevent any abuse for the purposes of money laundering and terror financing.

The Bank's procedures stipulate requirements regarding the identification of customers, the verification and the recording of particulars, of:
Account holders, Joint owners and Parties opening the account,  Authorized signatories/ POA, Parties effecting transactions in accounts, and parties who perform transactions which are not recorded in any account.

The identification particulars are authenticated against appropriate ID documents, as specified by the law in respect of each type of customer, copies of which are kept at the Bank for a period of seven years after the account is closed.

The Bank obtains and records as required by law, identifying particulars of the ultimate beneficiaries in accounts:
"Beneficiary in an account" is a person on whose behalf or in whose favour property is held or a transaction is effected in the property, or a person who has the ability to make a disposition with respect to property, either directly or indirectly. And if the beneficiary is a corporation – both the corporation and its controlling shareholders shall be considered the beneficiaries in the account.

The Bank obtains the information of the beneficiaries in the accounts on the basis of declarations required from all account owners and openers of the account;  Such declaration is required (a) When an account is opened (b) When a joint owner is added to an account (c) From all account owners when a beneficiary is added/ changed (d) From all account owners when a controlling owner of a corporation that is a beneficiary is added / changed.

The Bank also obtains and records identifying particulars of holders of the controlling interest of a corporation -  on the basis of a declaration of the corporation;  Such declaration is required (a) When an account is opened for a corporation (b) When a corporation is added to an account (c) When a controlling owner is added or the controlling owners have changed.

“Holder of Controlling Interests” is defined by the Law as either:  a person who has the power to direct the activity of a corporation, with the exception of power derived exclusively from filling the position of director or of any other office in the corporation, and/or: a person that holds one half or more of a certain class of the corporation’s means of control; “Means of Control” are any one of the following:  (1) The right to vote in the General Meeting of a company or in a parallel body of different type of corporation; (2) The right to appoint directors of a corporation or its general manager.
"Holding" in the above definition is either alone or together with others, whether directly or indirectly, through a trustee, trust company, nominee company or in any other way;  With regard to a holding by a company -  this also means by its subsidiary or its associated company. With regard to a holding by an individual -  the individual and his/her family members who live with him/her or are financially dependent on one another, shall be regarded as one person.

Only in exceptional cases (at the bank's discretion and subject to a lawyer's confirmation) the Bank shall accept declarations stating that "there is no holder of controlling interests".

Due diligence is performed to ascertain that the information declared by the customers in both declarations (with respect to beneficiaries and holders of controlling interest) is reasonable and compatible to the information which was achieved during KYC process). In addition, the particulars of the declared persons are authenticated to the Bank's satisfaction (For example against a population registrar or against a copy of a passport) and then recorded.

The bank will not open nor maintain an account if the declaration of holder/s of the controlling interests or the declaration of beneficiaries is not reasonable on the basis of information known to the bank.
The Bank performs face to face identification, against appropriate ID documents, of all account holders, openers of accounts, and: authorized signatories/POAs prior to the execution of their first transaction in the account.
Copies of the identification documents are kept at the Bank for seven years from the date the account is closed.
(b) In Transactions Which Are Not Recorded In Accounts
A banking corporation is required to identify and keep records of the identification particulars of persons executing transactions (from ILS 50,000 ; in cash from ILS 10,000) that are not recorded in any account of a customer, or are recorded in an account in which that person is not an account holder/authorized signatory/ attorney/ guarantor.
Copies of the identification documents are kept at the Bank for seven years after the date of the transaction.
Furthermore - if a transaction is not recorded in any account - the person executing the transaction must declare if the transaction is being executed for his own benefit or for the benefit of someone else.

Maintaining Updated Information
Continuous reviewing and monitoring of the documented customer's information (including beneficiaries and holders of controlling interest) is conducted: So long as an account is maintained, the Bank ascertains the existence of adequate and updated and current information in circumstances set forth in the procedures, such as when a significant transaction is about to take place, or when the requirements relating to customer documentation change, or when the way the account is managed alters significantly.
Updated declarations regarding beneficial owners and holders of controlling interest in corporations is required upon any change or addition of account owners/controlling shareholders or beneficiaries to an account.

Management And Retention of Records
As explained above, the Bank has established detailed procedures for retaining, reviewing and up-dating of essential information regarding customers.
The bank maintains a computerized database containing information on account numbers, identification details of account holders, authorized signatories, beneficiaries and holders of controlling interest, and information essential to define the customer's nature, determine "risk" category for due monitoring, and understand the foreseeable account activity.  In accordance with the 2014 amendment of the Order, the Bank also maintains a computerised database of transactions which are not recorded in an account.
Identification documents are kept for seven years after the account is closed or after execution of the transaction requiring identification of the person executing the transaction.

With respect to transactions, the Bank keeps as required the document containing the instruction to execute a transaction that was reported to I.M.P.A. for seven years from the date on which the transaction was recorded in the Bank’s books.

2. "Know Your Customer": Customer Due Diligence And Documentation Of Acquaintance Information
The Bank complies with the requirement imposed by the Order and Regulation 411, to get acquainted with the customer, including examination of the customer's background, the nature and area of his business affairs, the sources of his capital and income and expected account activity, the customer's connection to Israel and location of the branch, the reason for opening the account, wether the customer holds a senior public position, or whether he was refused services before for reasons related to AML or PFT , Business due diligence includes understanding profiles of customers and suppliers, and any other detail needed in order to understand the intended activity - before opening the account as well as before any significant transaction is effected in the account. (Significant transactions include, for example: an application for credit, a transfer of large sums of money , effecting a back-to- back transaction etc.).
A customer who requests to open an account or to be added to an existing account is interviewed by a senior Bank employee (especially trained for this important task), even if that customer already has an account with the Bank (with respect to which an interview has already been conducted). The Bank employee conducting the Acquaintance Conversation may, at his discretion, decide whether to is prudent to obtain additional information, or verify any information received with external sources or information data banks.  In accordance with a risk based approach, accounts/ customers with risk/ high risk factors (as explained below) are subject to enhanced due dilligence and stricter verification of the information obtained from the customer;  All in order to ensure that the Bank is familiar to its satisfaction with the customer, his affairs and the expected operation of the account, and no concern arises with respect to AML or PFT.  The Bank conducts enhanced monitoring of "risk" and “high risk” accounts.
The scope of the acquaintance with the customer is determined by the type of the account and the degree of risk (in respect of money laundering/terror financing/Trade with Enemy Entities), with the purpose to acquire adequate information to reasonably conclude that the customer's business and source of funds are legitimate, and the objective of the account is not contrary to the Bank's policy, and: Understanding the nature of the account will enable the Bank to dedect unusual transactions when monitoring the account activity.
The Bank maintains on its computerized system all information collected relating to the customer during the acquaintance process: The information is documented and is available to (a) all bank employees who will be involved with the account (b) to the AML Officer and his employees, and (c) to the internal audit. Key Documents used for the acquaintance with the customer are required to be maintained in records for seven years after closure of the account.

Corporate Customers
Account opening corporations are required to detail their entire control structure up to the ultimate share holders, in addition to signing a declaration with respect of the ultimate holders of controlling interests. (Except for exempted customers such as companies whose securities are traded on a Stock Exchange in an OECD member country). Off Shore corporations are required to further confirm this information by a lawyer's certificate. The Bank operates in accordance with the corporate transparency standards and is very srict about identifying all the individuals and factors behind a corporate customer, including: main shareholders, beneficiaries and settlors of trusts which hold any of the controlling shares, general and limited partners in partnerships, investors in accounts for hedge funds, etc.
Non Profit Organizations and charity corporations which the majority of their income is from donations or loans from diverse sources, are required to provide further information including details of their main doners.

Trust Accounts
The Bank performs accustomed and enhanced due diligence in accounts maintained for third parties (beneficiaries), as detailed below in Section 7.
Transactions Not Recorded In Accounts
In complianace with the 2014 amendment of the Order, the Bank performs accustomed KYC procedures to parties performing transactions which are not recorded in any account; The extent of the KYC procedure is in accordance to the level of risk (with respect to AML/ PTF) that each transaction raises as per type and amount. 
Reviewing and Updating Acquaintance Information
The bank diligently updates the Acquaintance (KYC) information during the entire period that the account is maintained; The Bank monitors the account, and in times and circumstances described in the procedures, like in the event of a significant transaction or significant change in the account (in its operation, in the identity of holders of controlling interests, etc.) and every one to three years (depends on the risk category of the account) – a revised acquaintance conversation is performed, to make sure that the KYC information of the customer's affairs, source of income, beneficial owners, expected transactions etc. is up to date, and monitoring is performed based on current data.
Reluctance on the part of the customer to provide information and documents as required by the Bank, whether before the account is opened or during the banking relationship, for the purpose of understanding the customer's business affairs or transactions, - is deemed to be a sufficient reason for refusing to open or manage an account.

3. Customer Acceptance Policies And High Risk Accounts
Pursuant to Regulation 411, the board of directors of the Bank established a group-wide policy regarding KYC, AML and PFT: The policy applies to our overseas branches and subsidiaries to the extent consistent with the local law of their host countries.  (The Bank's Policy Document is available in English)
The Bank's policy for customers's acceptance has defined three “risk” categories (relating to the prohibition on money laundering and prevention of financing of terror), based on factors such as the customer’s background, his public status, areas of business or residence, type of business and extent of his business activity, activities associated with financing terror, and more.

"High Risk" Customers/ accounts, are:
- An account where one of the owners/signatories is suspected of being a terror activist or trading with enemy entities.
- A customer where there is reason to believe that that he was refused banking services at another bank due to reasons associated with the prohibition on money laundering, funding terrorism or trading with enemy entities.
- A customer who has exceptional activity in the account and there is no reasonable explanation, or the activity does not match the nature of the activity expected of an account of this type.
- Currency services provider
- Corporation, organization, institution, body or individual operating for the community welfare cause, charity, welfare and the like, where the majority of its income is from donations or loans from diverse sources.
- Ties with a foreign resident holding a senior public position abroad.
- A customer whose place of business, residential address or country of citizenship/ incorporation is in a country defined as high risk.
- An account in which there are multiple international transfers of large amounts that are not in the foreign trade system.
- An account in which an attempt was made to transfer or receive monies (including but not limited to through the foreign trading system) against account numbers (iban) appearing in the list of gambling accounts or the account manager has reasonable grounds to assume that a transaction was executed associated with illegal gambling activity.

"Risk" Customers/ accounts, are:
- Customer opening an account in Israel without any clear nexus to Israel
- Israeli resident holding a senior public position
- Corporation incorporated in a country defined as "Off Shore".
- Foreign corporation that has a complex structure making it difficult to locate the controlling shareholders therein (even if the bank knows the identity of the controlling shareholder) or that is controlled by a Trust.
- Account owner or beneficiary in an account that is a corporation where most of its capital is issued in bearer shares
- Diamond dealer
- Trust account in favor of unknown beneficiaries
- Amutah whose activity is not recognized by the bank and most of its income is from donations.
- An account where most of its activity is in cash of large amounts (turnover of ILS 500,000 per month where 60% thereof is in cash(
- Customer, whose account in branches abroad reported irregular activity and in accordance with the AML officer, requires special monitoring of the account
- Customer who for some other reason according to the AML officer's discretion, should be under enhanced  monitoring in respect to the prohibition on money laundering/ funding terrorism/ trading with enemy entities.
- A customer whose place of business, place of residence or passport country or incorporation is in a country defined as at risk.
Strict scrutiny is performed when opening "risk/high risk" accounts. For example, the opening of such an account and each transaction is approved only after satisfactory verification of the source of funds to be deposited in the account, approval of a senior manager is required for significant transactions, and only after diligent appropriate checks and the removal of any doubt regarding money laundering or terror financing.
Furthermore: Opening a "risk" account is subject to approval of the branch manager and opening an "high risk" account (as well as account with no clear nexus to Israel) is subject to approval of the district manager .
The Bank conducts enhanced monitoring of "risk" and “high risk” accounts (computerised and procedural).
According to the Bank's policy, the bank will not open an account and will not manage an account for any party whose activities or income related to illegal gambling.
The bank refrains from trading with Syria, Lebanon and Iran which are considered "Enemy States", and is part of the international battle against the Iranian nuclear program, therefore complies accordingly with the applicable Israeli and international sanctions (Detailed information in Section 12 below).
According to the Bank's policy, the bank will not open or keep accounts for entities that are suspected of Trade with Enemy Entities or that appear in lists of entities that assist the Iranian Nuclear Program or for anyone suspected of assisting the Iranian Nuclear Program.
Private Banking
The opening of private banking accounts must be approved by a senior officer of the Bank and requires intensified monitoring on an on-going basis.
Anonymous Accounts
No anonymous accounts are maintained at the Bank.
Foreign Currency Trading Platform
Forex accounts/trading floors accounts (which are not banks or supervised financial institutions), in which the customer receives proceeds from their clients and in return for these proceeds provides its clients with a foreign currency trading platform, constitute activity at risk in terms of money laundering which has not yet been regulated by law, and therefore the activity in such account shall be strictly monitored.
Virtual Currencies
The Bank will neither open nor manage an account for any person who engages in trade in virtual currency, and no activity which originates in trade in this currency is allowed, as long as such activity is not regulated by law.

4. Automatic Reporting Of Transactions
Pursuant to Section 8 of the Order, automatic reporting of stipulated transactions (as to size and type) is performed. For example, cash transactions above ILS 50,000 (approximately US$12,500) are automatically reported. The reports are sent to the Israeli Money Laundering Prohibition Authority (“I.M.P.A.”). The Bank has submitted such weekly reports since February 2002.  I.M.P.A. is the Israeli Financial Investigation Unit and a member of the Egmont Group.
The transactions that must automatically be reported to I.M.P.A. are listed in the Order and apply to all bank accounts, save for accounts maintained by exempted entities, such as Israeli public institutions or Israeli regulated banks. Examples for transactions which are reported automatically:
- A cash deposit/ withdrawal in the sum of ILS 50,000 and above (approximately US$12,500).
- An international cash transfer, other than through the customer’s account, in an amount equal to ILS 50,000 and above (other than a transfer from/to a country or territory defined as high-risk - which is reported from amount of ILS 5,000 and above)!
- Exchanging of bills or coins and the conversion from one currency to another in an amount of ILS 50,000 and above.
- The issue of a bank check in an amount of ILS 200,000 and above (save for a bank check in a sum of up to ILS 1,000,000, that was issued against a housing loan).
- The purchase of travellers’ checks in an amount equal to ILS 50,000 and above.
- The deposit of a check drawn on a financial institution outside Israel, in an amount from ILS  1,000,000 (unless the financial institution is from a country or territory defined as high-risk - whereupon it is reported from amount of ILS  5,000).
- A international transfer from abroad, or from Israel abroad, through a customer’s account, in an amount equal to ILS  1,000,000 and above (other than a transfer from/to a country or territory defined as high-risk - which is reported from amount of ILS  5,000 ).
- The payment of checks presented for collection by a financial institution outside Israel, in an amount equal to ILS  1,000,000 and above (unless the financial institution is from a country or territory defined as high-risk – which is reported from amount of ILS  5,000).

5. Monitoring, Detection and Reporting of Unusual Activity
The Bank conducts on-going monitoring of account activity to assess conformity to the documented acquaintance with the customer and the account’s expectations, and in order to detect unusual activity which might be an "irregular transaction" pursuant to the Order and therefore must be reported to I.M.P.A.:
- Activity that seem unusual for the account, in view of the routine activity characterizing the relevant account, on the basis of past experience and the nature of the customer’s business;
- Activity that seem unusual for that type of account based on the experience in the Bank;
- Activity which appears to have been performed in order to circumvent the automatic reporting requirements;
- When it appears that the account holder is operating the account on behalf of someone else, without having made the appropriate declaration;
*    "Activity" in the above paragraphs: including attempt to perform transaction/s. All which in the Bank's opinion raises concern that the activity might be connected to forbidden activity according to the AML and PFT laws.
 
For example:
- A number of transactions in an account in which, for no apparent reason, monies and securities are withdrawn close to the time they are deposited, other than in the ordinary course of business;
- Transfers of substantial amounts from Israel abroad and vice versa, where the counterparty to the transaction, whether the source or recipient, is not identified by name or account number;
- A declaration of beneficiaries or of holders of controlling interest appears to be incorrect.
- Transactions that have no economic or business logic or complex transactions without satisfactory reasons.
- Activity of a nonprofit organization that is not consistent with the declared activities of the organization
- Action with the apparent purpose to avoid identification 
The Bank is further required to report any instance where a suspicion arises that a transaction is being performed with terror assets or for the purpose of terror, or in violation of the Combating Iran's Nuclear Program Law.
The duty to report applies to every employee of the Bank who, within the scope of his position, encounters unusual activity. The report is made at the discretion of the employee.
The bank stresses employee alertness and due diligence in monitoring transactions in customer accounts, in order to identify transactions, which do not conform to expected account activity, or transaction that raises suspicions of connection to money laundering/ financing of terror / assisting the enemy/ illegal gambling/ proceeds of crime etc.
Accordingly, the Bank’s AML procedures stipulate the responsibility of each employee to scrutinize all transactions that appear to be unusual to the activity in the account or to accounts of its type, and report such transactions on the Bank's Subjective Report System (along with all relevant data and information received from the customer) to the Bank’s Compliance Officer. The Bank’s Compliance Officer then examins the activity and reports the appropriate cases to I.M.P.A.
Documents relating to the execution of a reported transaction are retained for a minimum period of seven years.
Sections 14 and 15 of Regulation 411 have supplemented the already stringent reporting requirements stipulated in Sections 9 and 10 of the Order, by requiring that banks operate a computerized system to detect unusual activities in all its customers’ accounts. Accordingly, the Bank operates a computerized monitoring system to detect unusual activity (i.e. multiplicity of cash transactions, splitting of deposits, etc.)
Closing Accounts And Refusing Transactions Due To AML/PTF Concerns
When the Bank detects an activity which raises concern of connection to prohibited activity, and after due examination the concern remains -  In addition to reporting as "unusual activity", the Bank exercises its power to close the account/ refuse the transaction due to AML reasons; At every stage in the life of an account, any customer reluctance to provide the information required by bank procedures, and any reasonable basis to assume that transactions of the customer are related to money laundering or terror financing - said will serve as justifiable reason for refusing to maintain the account;

6. International transfers And Payments
Movement of funds is monitored by central units which centralize all receipts of funds from abroad and verify compliance with prohibition/sanctions lists (as detailed in Paragraph 12) before distributing the funds to their destinations. An international transfer in a substantial amount which is not identified by account name or number is considered unusual and is scrutinized as above explained.
Upon the receipt of any sums of money from abroad vigilance is exercised in order to identify unusual activity that is likely to be connected with money laundering or terror financing. For any receipt that is not compatible with the account's expected ("usual") activity, the Bank clarifies with the recipient customer the nature of the transaction and the purpose of the money that has been received. Sums received without a satisfying explanation from the customer (and/or without adequate suppporting documentation) are considered unusual transaction and are reported in the Subjective Report System, as above explained. In certain circumstances when a concern remains that a transaction is related to forbidden activity, the Bank returns the funds to the remitting bank in addition to reporting.

Funds transferred by the Bank (from Israel abroad) are identified by account number of both the transferor and transferee, full names of the parties, and in accordance with 2014 amendment of the Order: the address of the transferor is also recorded, and when obtainable: the name of the initiator of the transfer.
Transfers which are not originated from the transferor's account, or when the destination is not the transferee's account: The Bank records additionally the identification numbers of the parties. 

Transfers to and from countries and territories designated as "high risk" are personally supervised and monitored by the Bank's Compliance Officer.

 
Furthermore, the Bank has incorporated rules in its procedures for dealing with the risk related to the prohibition of money laundering and financing of terror inherent in the depositing of checks, especially with regard to endorsed checks, numerous deposits of checks inconsistent with the activity in a customer’s account, and with respect to checks drawn on a bank outside Israel (in such cases the Bank must ascertain whether there is a link between the depositing of the check and the implementation of the transaction in a banking corporation in Israel).
Stricter rules apply to checks and transfers involving the Palestinian Authority. For example:
The acceptance of checks presented for collection by the Palestinian Authority is subject to first receiving particulars of all account owners of the account in which the check was endorsed; negotiated checks are not accepted; transfers from the Palestinian Authority (above ILS 5,000- equal to approximately USD 1,250) are subject to receiving the transferor account number and particulars of all account owners; all such particulars are filtered through lists. Furthermore, the Bank permits the endorsement of checks only when they contain the particulars of the drawer in letters and numerals customarily known in Israel, to enable screening through lists (including OFAC) of persons and entities and for reporting purposes when required.
Special due diligence is conducted with respect to monies received from a bank in a country in which there is no regulated system for preventing money laundering, or from a high risk country (including contacting the remitting bank and obtaining information regarding the transferor).

7. Trust Accounts
Special scrutiny is conducted when opening and monitoring accounts in favor of beneficiaries. The senior employee conducting an acquaintance conversation is required to: (a) record the particulars of the initiator (creator) of the trust/ fiduciary relationship, except in a trust established by law (b) understand and document the reason and the need for opening a trust account instead of an ordinary account in the beneficiary's name. (c) understand and document the relationship between the related parties (trustees, beneficiaries and settlor; an estate executor and heirs; a lawyer and his client etc.) (d) understand the essence of the trust, the sources of capital and income; and (e) receive the particulars of the third parties for whom the account will be managed (in declarations as detailed in Section 1 above), excluding in cases exempted by law . When a beneficiary is not an individual, the bank obtains and scrutinizes information regarding the individual/groups of individuals that are the ultimate beneficial owners of such beneficiary, as well as clarifies whether its shares are issued to bearer (and marks for enhanced monitoring).
Furthermore, as above indicated: Enhanced due diligence and strict monitoring is applied to certain trusts in favor of unknown beneficiaries, and to foreign entities controlled by a trust, and: The bank will not open and will not maintain an account if the declaration of holder/s of the controlling interests or the declaration of beneficiaries is not reasonable, in its opinion, on the basis of information known to the Bank.

8. Correspondent Accounts
When opening correspondent accounts, banks are obliged to examine and understand the nature of a correspondent bank’s business activities, the condition of banking supervision and regulation in the respondent's country with special reference to AML and PFT, and its efforts to prevent money laundering and the financing of terror etc. (Section 22 of Regulation 411). The above requirements are in addition to detailed information that is required from such customers according to Section 5A of the Order. Supplementary documentation is required from banks incorporated in non OECD countries, such as particulars of persons holding 20 percent or more of means of control of the corporation, a license from the supervisory authority, the incorporation documents, letters of reference from banks in OECD member countries (or a document certifying that the corporation applying to open an account manages a correspondent account in OECD banks, and a declaration by the corporation that legal provisions or provisions of a competent authority that require identification of its customers for purposes of the prevention of money laundering and the prevention of financing terrorism apply to it).
Our bank strictly and thoroughly examines as required the condition of banking supervision and regulation in the respondent's country with special reference to AML and PFT, and the bank's efforts to prevent money laundering and financing of terror before opening a correspondent account.
The bank will not maintain any accounts for banks or financial institutions, which are not supervised vis-à-vis the prohibition on money laundering and terror financing.
The decision on opening a correspondent account is made by a senior manager, in coordination with the Compliance Officer.

Shell Banks
Regulation 411 prohibits conducting correspondent banking business with a bank that is registered in a place where it has no physical presence (shell bank) unless it is connected to a supervised banking group. The Bank does not maintain accounts for offshore banks or shell banks. Furthermore, before opening a correspondent account the bank ascertains that the applying bank does not provide correspondent services to any of its customers that is a shell bank.

9. Compliance And Internal Business Control
The Bank is regulated and supervised by the Bank of Israel – Supervisor of Banks.
Pursuant to the Law the Bank has appointed a Compliance and AML Officer, who is responsible for ensuring compliance of Bank procedures with the Laws, Orders and Regulations, formulating a compliance plan and supervising its implementation, co-ordinating between different Bank units to assure compliance and reporting to the Bank’s management and Board of Directors. The Compliance Officer reports directly to the Chief Legal Adviser.

Moreover, the Compliance/AML Officer is responsible by law for the Bank’s fulfillment of all requirements relating to the prohibition of money laundering and the prevention of financing of terror and KYC and is subject to audit by the Internal Audit Division of the Bank, which also audits the Bank’s compliance with all other legislation. In addition, the Bank of Israel conducts regular audits to ensure the Bank's compliance with all the above mentioned Laws, Orders and Regulations.
Since  the requirements described herein also apply to the Bank's Israeli subsidiaries and auxiliary corporations and to its foreign affiliates, the AML Officer is responsible for applying the principles of the prohibition on money laundering and terror financing, on a group-wide basis, with adjustments as required.
The AML Officer reports to the bank management and/or to the Board of Directors, directly, regarding implementation of the bank's AML and PFT policy and procedures, adoption of all legal, regulatory and procedural requirements, and with reference to all risks and exposures faced by the bank.

Compliance Regime
The Bank’s management places extreme importance to the compliance with the obligations pursuant of the provision of the anti-money laundering law and the law prohibiting terror financing. To incorporate and strengthen compliance and tighten the controls over the implementation of the law and procedures, - a skilled "Anti-Money Laundering Trustee" has been appointed in each branch; The anti-money laundering trustee serves as an intermediary between the compliance and anti-money laundering  department and all of the branch employees that come into constant contact with the customers.
The Bank’s AML & Compliance Officer:
Mr. Kaufman Moshe
Mizrahi Tefahot Bank Limited
7 Jabotinsky St.,
Ramat Gan, 52136, Israel.
Telephone No. 972-3-7552148; Facsimile No. 972-3- 5656618
Bank's Personnel Training
The Bank has formulated an extensive training program which includes thorough AML and KYC guidance to all new and present employees and ensures annual refresher courses in accordance with employees' level. Additionally, a personal training program by Intranet has been developed (E-learning), through which Bank employees are required to train themselves and pass an exam to test their knowledge. Both the employees and management are informed of the test results. Furthermore, all Bank employees receive updated self-training and guidance books. Bank Procedures and AML and PFT guidance are also available on the Bank Intranet website accessible to all employees.

10. International Branches and Subsidiaries 
The Bank’s international branches in London and Los Angeles and its banking subsidiary in Switzerland, act in compliance with their respective local AML, PFT and KYC legislation. The head office oversees their activities both through the Bank’s Internal Audit Division and by its external auditors. Regulation 411, which also relates to consolidated KYC Risk Management, requires establishing a centralised process for co-ordinating and promulgating policies and procedures on a groupwide basis. Accordingly, the Bank's policies detailed in Section 3 above, apply to its overseas branches and subsidiaries to the extent consistent with the local law of their host countries. [According to Regulation 411, if provisions regarding the prohibition on money laundering and terror financing, in a country where a foreign entity or branch operates, differ from these provisions, the more stringent provisions will be adopted, as long as they do not conflict with local laws].
Furthermore, in the event that an unusual transactions for which there is no reasonable explanation has been detected in the account of a customer of one the Bank’s international branches abroad, the account maintained by such customer in Israel (if such account exists) is examined by the AML Officer  and may be marked as "risk customer" for stricter monitoring.

11. Further Controls
 
According to Regulation 411 the Bank authenticates the identities of parties to a transaction which is likely to constitute a significant risk to the banking corporation.

12. Screening Against Lists Of Declared Entities And Intrnational Sanctions
The State of Israel has been at the forefront of the war against terrorism and has been one of its principal victims, since its establishment in 1948. Prior to the promulgation of the Prohibition of Financing Terrorism Law, 5765-2005, which determines offences related to the financing of terrorism and provides administrative and judicial tools to wage the war against the financing of terrorism, various laws relating to the war against terrorism - as well as prohibiting trading with the enemy - had been already in effect; International terrorism and the Iranian Nuclear threat required the State of Israel to update its legislation by promulgating the Prohibition of Financing Terrorism Law, 5765-2005, which complies with global standards on this subject, improve laws which cope with the Iranian nuclear threat,  and impose further duties on citizens and financial institutions.
 
Accordingly, the Israeli government has published (and constantly updates) lists of: (a) individuals and entities suspected of terrorism (b) companies and individuals declared as enemy factors (c) entities declared to be assisting the Iranian nuclear Program or having business conections to Iran. (Hereinafter: "Declared Entities")
The Bank has checked all names in its data base against the above lists, and continuously checking new/ potential  customers, beneficiaries and controlling owners, authorized signatories, parties performing transactions (transferee/ payee/issuer of a note/drawer of a check/payee of a note or a check etc.…) to ascertain that none of the Declared Entities is operating with or trough the Bank.
 Whenever filtering against the Lists is required - the Bank also filters such entities through the OFAC lists (SDN and SSI) and the list of organizations/activists that are involved in terror activity published by the European Union.

 
13. Further Information and Websites 
Further information regarding AML and PTF can be found on the website of I.M.P.A and of the the State of Israel – Ministry of Justice: at:
www.IMPA.justice.gov.il/MOJEng/HalbanatHon/Legislation (which contains English translations of most of the Laws, Regulations, Orders and Notices pertaining to anti money laundering and the prohibition of terrorism financing: www.justice.gov.il/MOJEng/HalbanaHon/TerroristFinancing (which includes the English translation of Statutes and the names of “Persons Who Engage in Terror” or a “Declared Terrorist Organization” appear on the Ministry of Defence website.
Likewise, the Bank of Israel website publishes the Regulations and Orders issued by it at www.boi.gov.il
The above are regularly up-dated on the respective websites by the relevant competent authority.
 
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