What the receiving bank sees
A bank receiving an incoming payment sees an amount, a sender, a route and a short payment reference. Against that it holds its own file on the client. Its obligations under anti-money-laundering (AML) rules — the duties imposed on financial institutions to prevent criminal proceeds from moving through the banking system — require it to be satisfied that the payment is consistent with what it already knows.
Three things are being compared. Whether the amount matches the activity the account was opened for. Whether the sender is a party the bank expected to see. And whether the stated purpose is supported by a document the bank can read. Where one of the three does not fit, the payment is held while the bank asks. It is not an accusation; it is the point at which the bank's question has to be answered in writing.
What is prepared before the money moves
Preparation means putting the answer in the bank's hands before the question arises. In practice that is a short file: the transaction documents that explain why the payment is being made, evidence of the source of funds — the origin of this specific money — and, where the amount is large relative to what the bank already knows about the client, evidence of the source of wealth, meaning how the client's overall wealth was accumulated.
It also means agreeing what the payment reference will say. A reference that names the underlying transaction, and that matches the documents already with the bank, does more to move a transfer along than any amount of correspondence afterwards.
Where the transfer is expected to be the first of several, it is worth telling the bank that at the outset, with the framework that explains the series. A pattern the bank has seen described in advance reads differently from the same pattern discovered transaction by transaction.
Documents by the origin of the money
What supports a transfer depends on where the money came from.
- Sale of a business or of shares. The sale agreement, evidence of completion, and the buyer's payment instruction.
- Dividends or profit distributions. The resolution that declared them and the financial statements of the company that paid them.
- Sale of property abroad. The sale contract, the closing statement and the statement of the account that received the proceeds.
- Inheritance. The grant or equivalent instrument, and documents identifying the estate assets from which the payment comes.
- Loans, whether from a bank or between related parties. The loan agreement and evidence that the lender had the funds it advanced.
- Investment into an Israeli company or project. The investment documents, and the corporate resolutions authorising the receiving company to take the money.
- Proceeds of employment or professional activity. A history rather than a single document: statements, contracts, tax filings.
The list is not exhaustive, and no item on it is a form to be filled in. The purpose is that a reader inside the bank can follow the money from where it was earned to the account receiving it, without having to assume anything.
The route the money takes
An international transfer usually passes through correspondent banks, and each of them applies its own screening. A payment can be examined, delayed or returned by an intermediary institution rather than by the Israeli bank at the end of the chain, and the sending bank is often the only party that can find out where the money currently sits.
Two consequences follow. The sending bank should be given the same explanation as the receiving bank, so that a question at either end meets the same answer. And where the currency, the sending country or the corridor is unusual for the client, that is worth discussing before the instruction is given rather than after the payment stops.
When a transfer is held
If a payment is held, the bank will usually ask for documents and an explanation. The useful response is a complete one: the transaction documents, the connection between sender and recipient, and the origin of the money, presented together rather than in instalments. Partial answers extend the review, because each one generates the next question.
There is no timetable to promise here and we do not offer one. What can be influenced is the quality and completeness of what the bank receives, and how quickly it arrives.
It is also worth knowing what a hold is not. A payment held for review has not been taken by anyone and has not disappeared: it is either with the receiving bank pending a decision, with an intermediary institution, or on its way back to the sender. Establishing which of the three is the first useful step, and it usually requires the sending bank as well as the receiving one, because each sees only its own leg of the journey.
Keeping the transfer and the account file consistent
Most difficulties with incoming transfers are not about the transfer at all. They arise because the account file describes one business and the payment reflects another: a new line of activity, a new country, a new counterparty, a change of ownership. Where the account file has been kept current, an unusual payment is read against an accurate background. Where it has not, an ordinary payment can look like a departure from it.
How the firm works on this
We prepare the documentary file for a planned transfer, put the source of funds and source of wealth evidence into a form a compliance officer can follow, coordinate with the sending bank and the client's foreign advisers, correspond with the Israeli bank in Hebrew and report in English, and act where a payment has been delayed, returned or frozen. Where a transfer is part of a transaction we are handling — an investment, a purchase of property, a distribution — the banking work is prepared alongside the transaction rather than after it.
This article is general information about procedure in Israel. It is not legal advice, and it does not describe the outcome of any particular matter.