Anyone who has used the banking system here knows how very different it can be from what they’re “used to back home.”
Why won’t my bank accept MY money?” This is an increasingly common question we receive from clients sending money to Israel. If there is one thing Israel banks are not short on when it comes international currency transfers, it's aggravations. They charge a receiving fee on currency transfers, they require documents to be faxed (do fax machines still exist??), and of course one of the the biggest problems for many people at the moment: getting the banks to actually let you have and receive YOUR money.
Let’s take the simplest of examples involving a currency transfer to Israel of $50,000 USD
From YOUR bank account in the US you wire dollars to YOUR bank account in Israel. It arrives at your Israeli bank after a couple of days, although they probably received it the day after it was transferred and just didn’t tell you. You go into the branch and ask if the money was received? They tell you “Yes, we have the money.” You say “Great, now I want to convert it to Shekalim.” They say “No you can’t do that at the moment” and at this point the interrogation begins…
Where is the money from?
How did you get to have so much money?
Prove to us how you obtained the money.
Why do you need the money in Israel? Prove it!
And of course, prove to us you have paid tax on the money.
Now, in this simple example of you sending money from YOUR account in the US to YOUR account in Israel, you could probably answer the questions and get the paperwork to the bank within a day or two. However, what if you were receiving money from your parents? Or, what if you are sending money to a third party in Israel from the US? Now things become even more difficult. By the way, the same occurs if you send shekels from overseas to an Israeli bank account. They can still ask the same questions.
In fact, we heard an unbelievable story recently about a major shareholder in an Israeli company that sold for billions of dollars, who received a seven figure sum into his Israeli bank account in US dollars. The bank refused to accept the money into his account unless he showed them proof of how he had obtained such a large amount of money. He explained and proved he had a shareholding in the company. The bank then asked to see a copy of the sale contract. That document was and is confidential and so he could not give it to the bank. The bank refused to accept the money and it was returned to the sender!
The reason the banks are asking these questions is twofold:
They are scared that they may be helping someone launder money.
They are even more scared that they may be helping someone avoid paying tax.
If someone cannot satisfy them that neither of the two may be possible, then they can freeze the money or return it. From our experience, it seems every bank is a little different in how strict they are and what paperwork they require when sending money to Israel, so it is always wise to plan ahead and gather supporting documentation before making such transfers.
While the situations we explained in this blog happen mostly for transfers in excess of $50,000 USD (or equivalent currency), but can happen for much smaller amounts. It may be the case that even for amounts much greater than this you don’t encounter these problems…..but it is becoming an exception.