French banks refuse to clear Israeli checks

The refusal is because of money laundering episodes.

Dafna Zucker  

Published by Globes [online] - on October 22, 2003

French bank Societe Generale informed the Israeli banks a few days ago that it would cease clearing checks received from Israel. Several other French banks have folowed suit with similar announcements, and it is believed among the Israeli banks that all banks in France will join the decision.

The move means that Israeli banks cannot clear checks presented by their customers that are drawn on French bank, sources inform "Globes".

As a result, Israeli bank customers, chiefly exporters with customers in France, will have to send their checks for collection, as opposed to the normal practice whereby the Israeli banks operate through a clearing bank.

Sending checks for collection is a lengthy and very costly process.

Bank sources said many Israeli exporters would have to request their customers to pay via bank transfer rather than by check. This is likely to cloud commercial relationships between Israeli and French companies. The sources estimated that some 10,000 checks were on their way to banks in France. These checks will not be able to undergo clearing procedures because of the French banks' decision. Tens of thousands of checks are sent for clearance via French banks every month.

The larger Israeli banks are now considering what to do. Some have already decided not to accept checks drawn on French banks for clearance, but only for collection.

The background to Societe General's decision is a money laundering affair in which eight banks in France were involved, including Leumi France. It is suspected that a large network used checks from Israel sent for clearance in France for money laundering purposes.

As previously reported in "Globes", the examining magistrate investigating the affair has decided to put the banks involved on trial. The French public prosecutor has appealed against the decision.