Israeli Court Upholds Bank's Refusal to Accept Returned 3.4 Million Shekels Over Money Laundering Concerns
The Nazareth Magistrate's Court recently rejected a business owner's request to compel Bank Hapoalim to credit his account with approximately 3.4 million shekels returned by the police following the closure of a criminal investigation against him. Judge Ofer Haim Shorak ruled that the closure of the case and the return of funds do not grant automatic immunity or authorization against the bank, which must exercise independent judgment in combating money laundering.
In September 2023, police raided the business owner's home and seized about 2.98 million shekels in cash, along with 21,000 euros and 4,900 dollars. These funds were deposited into the General Custodian's confiscation fund. The investigation was later closed by the prosecution without indictment. In May, the police transferred 3.4 million shekels to the man's private account at Bank Hapoalim, but the bank refused to accept the funds, citing insufficient documentation regarding the money's source, and ordered the money returned to the police.
After negotiations, the bank agreed to accept 1.05 million shekels, corresponding to documented cash withdrawals from the business account before the seizure. The business owner rejected splitting the sum and petitioned the court for a temporary order forcing the bank to accept the full amount. He argued the money originated from legal business withdrawals, was kept in the bank's original envelope, and that law enforcement had verified its source. He claimed the bank could not override enforcement authorities' decisions.
Bank Hapoalim, represented by attorney Meir Lafler, countered that holding such a large cash amount at home was economically illogical. They noted that in prior months, the business account saw check deposits of about 21.2 million shekels and cash withdrawals of roughly 21.1 million shekels. The bank also pointed out the absence of computerized exchange office records linking the seized cash to the business's books.
Judge Shorak sided with the bank, finding a solid evidentiary basis for its refusal. He highlighted the lack of documentation and the presence of millions in cash at home as clear red flags. The ruling emphasized the bank's quasi-regulatory role in anti-money laundering efforts and its independence from prosecutorial decisions. Forcing the bank to accept disputed funds could expose it to financial penalties and international sanctions, harming public interest in preventing money laundering over the client's private interests.
The court also rejected the business owner's proposal to deposit two million shekels in a sealed account pending final resolution, as accepting the funds requires ongoing monitoring. The request was denied, and the petitioner was ordered to pay the bank's legal fees of 5,000 shekels.
