Intercompany Loans: When Is a Credit License Required and What Are the Anti-Money Laundering Obligations

Generally, no. The identification and reporting obligations to the Anti-Money Laundering and Terror Financing Authority apply to credit service providers — that is, to those engaged in the business of extending credit — not to every company that lends money. Anyone who extends credit "by way of occupation" must obtain a license from the Capital Market, Insurance and Savings Authority under the Regulation of Financial Services (Regulated Financial Services) Law, 5776-2016, and is also subject to the Anti-Money Laundering Order of 2018. A single loan to a supplier or partner that is not part of a credit-granting activity will generally not be considered an occupation. A company that lends money repeatedly should examine whether it is already engaged in the business of extending credit.

Section 12(a) of the Law prohibits engaging in the extension of credit without a credit license. "Extension of credit" is defined in the Law as extending credit by way of occupation, including the provision of a credit facility, discounting of checks and promissory notes, credit against assignment of a right to receive funds from another, and providing a guarantee for another's obligation.

The Law does not define "by way of occupation." Therefore, a company whose primary business is different but that lends money on a regular basis — for example, to suppliers or customers — should examine whether its lending activity already constitutes an occupation. The determination is based on the actual activity, not on how the company presents it.

There are two types of licenses: a basic license, and an extended license for those whose aggregate outstanding credit exceeds NIS 25 million.

A supplier that allows a business customer to pay in installments or at a later date is generally not required to obtain a license. The statutory definition includes credit extended in connection with the financing of a purchase or lease of an asset or service, but excludes credit extended by the seller itself when one of the following conditions is met:

• The credit extended to a single customer is less than NIS 30,000.

• The seller is engaged in the sale of assets or the provision of non-financial services, and the customer is not a consumer as defined in the Consumer Protection Law.

The exception applies to the party selling the asset or providing the service. A third party financing the purchase does not benefit from this exception.

A credit provider is subject to the Anti-Money Laundering Order (Identification, Reporting and Record-Keeping Obligations of Financial Asset Service Providers and Credit Service Providers for the Prevention of Money Laundering and Terror Financing), 5778-2018. The Order came into effect on March 15, 2018 and was amended in 2021. Its principal obligations are as follows:

• Know Your Customer (KYC), recording and verifying identification details, and obtaining a declaration regarding the beneficiary and the controlling shareholder.

• Assessing the customer's risk level and conducting ongoing monitoring of the customer's transactions.

• Verifying identification details against designated persons lists.

• Reporting to the Anti-Money Laundering and Terror Financing Authority.

• Maintaining records of transactions.

The reporting obligation is set out in Section 11 of the Order. The credit provider must report any transfer of a financial asset between itself and the customer, in either direction, in an amount of NIS 50,000 or more. For credit extended in connection with the purchase of an asset or service, the threshold is NIS 150,000. In addition, the provider must report any transaction that appears unusual.

Engaging in the extension of credit without a license is an offense under Section 94(a)(1) of the Law, punishable by 18 months' imprisonment or a fine. The Supervisor of Financial Service Providers may also impose a financial sanction under Section 72: NIS 100,000 for an individual and NIS 250,000 for a corporation. These amounts are index-linked, and as of 2025 they stood at NIS 116,060 and NIS 290,140, respectively.

Suspicion of an offense under the Anti-Money Laundering Law is an entirely separate proceeding. For representation in such proceedings, see Anti-Money Laundering.

1. Whether it is a one-time loan or part of a recurring activity. A company planning to lend on a regular basis should address the licensing question before it begins.

2. Whether the loan is essentially supplier credit, and whether the customer is a business or a consumer.

3. A written loan agreement: amount, interest rate, repayment schedule, and collateral.

4. Bank transfer rather than cash. Cash Law also applies to a loan made by a business in the course of its operations: up to NIS 6,000 in cash, and for a larger loan, up to 10% of the loan amount or NIS 6,000, whichever is lower.

5. Board approval of the loan with the business rationale, and documentation of the source of funds.

For questions about licensing and obligations under the Anti-Money Laundering Law, see Anti-Money Laundering. This area is handled at the office of Adv. and CPA Shlomi Vaknin.