Proving the Source of Crypto Funds to the Bank

You submit a source-of-funds file to the bank: where the money used to purchase the coins came from, which wallets and exchanges they passed through, and how the gain was reported to the Israel Tax Authority. Today, the bank is required to verify the source of funds and the coin trail when transfers from crypto service providers to the account exceed NIS 100,000 per year (Proper Conduct of Banking Business Directive 411). From 1.5.2027, the scope of the review will be determined by the transaction's risk level. We build the file and accompany the submission to the compliance department. Send us the bank's letter and your transaction files.

• The bank held a transfer from a crypto exchange and requested documents proving the source of funds.

• The bank refused to accept the funds or notified you that it will not open an account for the transfer.

• The coins previously passed through a mixer, a decentralized exchange, or a P2P transaction, and you need to explain this to the bank.

• Your accountant prepared a confirmation, and the bank responded that it is insufficient.

• The police seized a hardware wallet, phone, or computer, or you were summoned for questioning on suspicion of money laundering.

The bank's obligations are set out in the Prohibition of Money Laundering Order (Identification, Reporting and Record-Keeping Obligations of Banking Corporations for the Prevention of Money Laundering and Terror Financing), 5761-2001, and in the Bank of Israel's Proper Conduct of Banking Business Directive 411.

Until 30.4.2027

When total transfers from crypto service providers to the account exceed NIS 100,000 per year, the bank must verify the source of funds and the coin trail. Consequently, smaller transfers may pass without review, while the transfer that crosses the threshold triggers the requirement.

From 1.5.2027

In October 2026, the Bank of Israel published the final version of the amendment to the Directive. The NIS 100,000 threshold is abolished, and the bank will determine the scope of its review based on the transaction's risk level. For funds originating from regulated entities, the bank may conduct a limited review, while funds that passed through mixers or anonymous wallets will undergo an in-depth examination. The Bank of Israel noted that the relaxed requirements do not guarantee that every deposit will be approved.

When the Bank Refuses

There is no way to compel a bank in advance to accept a transfer. An unexplained refusal should first be complained about to the bank's Public Complaints Commissioner, then to the Public Inquiries Unit of the Banking Supervision Department at the Bank of Israel, and in appropriate cases, to the court. The tax on the gain can be paid even when the bank refuses, through the Form 909 procedure, which is explained on the page Tax on Crypto and Bitcoin.

A screenshot of the wallet is not enough. A file that a compliance department can approve typically includes:

• Documentation of the fiat money you transferred to the exchange at the outset—such as bank statements and transfer confirmations—and proof of its origin: salary, sale of property, or inheritance.

• Transaction history files from all exchanges, and the wallet addresses where the coins were held.

• A mapping of the coin trail from purchase to sale. Blockchain transactions are public, so each transfer between wallets can be matched to the exchange files.

• Confirmation from the exchange that the sale proceeds were transferred to your account.

• Tax returns in which the gain was reported, and proof of tax payment.

• A written explanation for every irregularity, such as the use of a mixer, a P2P transaction, or an exchange that shut down.

The police may seize objects, including hardware wallets and digital media, under the Criminal Procedure (Arrest and Search) Ordinance, 5729-1969, when there is suspicion of an offense—including under the Prohibition of Money Laundering Law, 5760-2000. A request can be filed with the Magistrate's Court to order the return of the seized item (Section 34 of the Ordinance). The request may propose alternatives to seizure or demonstrate that the source of funds is lawful; accordingly, the source-of-funds file serves this purpose as well.

A tax offense can also give rise to suspicion of money laundering: an offense under Section 220 of the Income Tax Ordinance is a predicate offense, including when unreported income exceeds NIS 1,000,000 per year or NIS 2,500,000 over four years. For more on criminal proceedings, see Prohibition of Money Laundering, and for frozen accounts, see Release of Seized Bank Accounts.

1. You provide the bank's letter, transaction files, wallet addresses, and bank statements from the period in which you purchased the coins.

2. We reconstruct the coin trail from purchase to sale, flagging every segment the bank may question.

3. We verify that the gain was reported to the Israel Tax Authority. If not, we arrange the reporting first, because the bank will ask about this as well.

4. We submit the file to the bank's compliance officer with a letter explaining the findings, and respond to follow-up questions.

5. If the request is denied without explanation, we file a complaint with the bank and with the Bank of Israel, and consider applying to the court.

The cases are led by Adv. and CPA Shlomi Vaknin together with his firm's team. He spent nearly a decade as a national supervisor in the Professional Division of VAT at the Israel Tax Authority. His accounting background is particularly important here, because a source-of-funds file is essentially a reconciliation of documents: bank statements, exchange files, and tax returns.