GafniFlash 90

Israel could face international sanctions for failure to comply with an OECD anti-corruption agreement, Israeli news outlets reported Thursday.

Israel was supposed to implement the OECD Common Reporting Standard (CRS) agreement by September, which it has failed to do.

A further issue is the State's efforts to comply with the 2010 Foreign Account Tax Compliance Act (FATCA), which was passed by the US Congress to require US citizens living abroad to report any assets in foreign banks, as well as to require the banks to report any accounts held by US citizens.

The measures are designed to prevent money laundering and tax evasion.

Knesset Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) has refused to allow the advancement of the CRS agreement until regulations protecting certain haredi charities from FATCA are passed, even though the issues are separate.

Haredi and Orthodox free-loan associations, known as "gemachs", can be affected by FATCA regulations. Gemachs allow members of the community to freely donate items such as clothing or furniture and for less well-off members of the community to receive those items for free.

Israel’s anti-money laundering authority has warned that such institutions can be used for money-laundering and tax evasion schemes, though such occurrences have decreased in the past decade.

US authorities agreed to exclude gemachs that hold less than $50,000 from FATCA regulations. However, the Justice Ministry gave the Knesset two years to pass regulations grounding the exemption for small gemachs in law. The deadline to pass the regulations ended in August.

MK Gafni refuses to allow the CRS regulations to advance for a vote in the Knesset until the FATCA issue is resolved and the gemachs are protected.

Failure to abide by the CRS could subject Israel to sanctions from the European Union, which could affect the ability of Israeli banks to transfer money abroad on behalf of their clients.