We would like to bring to your attention that on December 9, 2024, the Israeli Securities Authority (the “Authority“) published a staff legal position regarding the applicability of the Payment Services and Payment Initiation Law, 2023 (the “Law” and the “Staff Position” respectively) to trust activities.

The purpose of the Staff Position is to outline the criteria characterizing payment services requiring a license under the Law concerning payment services provided within trust relationships.

According to the Staff Position, in order to determine whether payment services provided within a trust relationship are conducted as part of a business activity or within the regular business operations of the service provider, and thus require a license, the following characteristics, inter alia, need to be examined:

• Distinct and independent payment service which is not within the core of activity: generally, payment services provided distinctly from other services in which the service provider is engaged by way of occupation require a license from the Authority. However, if the payment service is considered an integral part of another professional service provided within trust relationships, constituting the primary activity, no license is required under the Law. For example, trust services provided by a lawyer, including holding funds as part of a transaction until completion or until specified conditions are met, and subsequently transferring them to the counterparty under the terms of the transaction, are generally not regarded as requiring a license under the Law.
• Advertising and payment methods for the services: in general, advertising payment services as a standalone service within a trust relationship, or charging for such services separately and distinctly from the core service being provided, indicates that the payment services are offered independently and, therefore, require a license under the Law.
• Frequency and recipients of the service: payment services provided within trust relationships on a temporary and irregular basis to parties involved in a specific transaction generally do not require a license from the Authority. Conversely, recurring, periodic, and continuous payment services provided to numerous parties are more likely to be considered as requiring licensing. For instance, trust services aimed at facilitating monthly payments to authorities or employees are generally considered activities requiring a license under the Law.
• Payment services provided by court-appointed trustees: generally, payment services provided by an individual appointed under a court or tribunal order to manage third-party funds as part of their role, are not considered payment services requiring a license.

Following the publication of the Staff Position, the Authority calls on entities currently operating within trust relationships to examine the necessity of licensing concerning their activities and the criteria outlined in the Staff Position.

For entities that require additional time to examine whether the payment services they provide within their trust relationships require licensing under Section 2 of the Law, the deadline for submitting the license application will be extended until March 31, 2025. During this period, these entities will be subject to the provisions of Section 81(a) of the Law and the conditions stipulated therein regarding their eligibility to continue their activities.

It should be noted that the Authority has clarified that the criteria for payment services provided in other contexts may differ.

Additionally, the Authority clarified that it will re-examine its position in accordance with the evolving reality, additional activities, and changes in the payment services sector.

To view the Staff Position (in Hebrew) >> Click here

Our firm has extensive expertise and many years of experience in the financial services sector in all its aspects. We monitor and follow all regulatory developments in this field, assist, and advise leading financial entities in Israel and worldwide.

We would be happy to assist you with any issues in these areas, including in connection with the above publication, as well as any questions or clarifications.