Trade between Israel and the UAE in 2022 amounted to $2.6 billion compared with just over $1.2 billion in 2021 and $367 million in 2020 - the year in which the Abraham Accords were signed. For the sake of comparison, trade with Egypt, which has ten times the population of the UAE, amounts to just tens of millions annually. These figures include goods exported from Israel to other countries via the UAE, or imports to Israel via the UAE.
But Israeli businesspeople flying regularly between Israel and the UAE are not so optimistic about the situation. Yariv Fisher, chairman of the FlyEast tourism and aviation company and fintech company Global Remit. He told "Globes" that most of his current deals are with big organizations and connections have not trickled down to small and medium sized companies and businesses.
He claims that most contacts he makes in the UAE are met with indifference. "The main obstacle to trade with the UAE is the difficulty in transferring money to the UAE, mainly because of Israeli banks. Bank managers in Israel demand from me invasive details about the UAE companies and businesspeople that I am in contact with, even revealing their financial revenue and the ID numbers of the managers."
Fisher is not the only one. Other Israeli businesspeople, importer and exporters are confronted by similar problems and in some cases open bank accounts abroad to allow them to transfer money to their accounts.
"Globes" revealed last year that these restrictions stem from Bank of Israel instructions. In a letter sent by the Supervisor of Banks in April 2021 to the management of Israel's banks following the signing of the Abraham Accords, it was stressed that international standards on the prohibition of money laundering and terrorist financing must be applied in trade with the UAE. The Supervisor of Banks also cited a report from April 2020 by the FATCA organization, the body that sets the binding international standards in the field of combating money laundering and terrorist financing, in which a series of deficiencies in the supervision of banks in the UAE were noted. Since the report was published, a supervised procedure of correcting the deficiencies with the UAE has been established.
Fisher proposes a solution in the form of state guarantees for these kinds of transactions, and the Israel Government Company for Correspondent Services, which was established to facilitate the activity with the banks, could serve as the guarantor. The Company began operating in recent months after receiving a budget of more than NIS 70 million for engagements with banking information companies and management of banking services, and its stated field of activity is relationships with Palestinian banks, and transfers of funds to them.
Enquiries by "Globes" have revealed that talks on the matter have begun, and the hope is that the entry of this company and taking of risks by the government, will remove a significant barrier to small trade and business deals with the UAE.
Ministry of Economy: We know about the problem. A solution has not yet been found
The Ministry of Economy and Industry rejects some of fisher's claims. Sources in the ministry say that after the appointment of an economic attaché in the UAE, the number of businesspeople on both sides grew rapidly, even in comparison with other countries. "It's possible that expectations were sky high and although things progressed quickly it was not in line with the expectations that had risen beyond the actual situation and that led to disappointment."
The Ministry of Economy and Industry adds that the actual amount of trade rose above expectations prevailing with the signing of the agreements, and that in recent months more and more businesspeople from large companies in the UAE are coming to Israel.
At the same time, Ministry of Economy and Industry sources acknowledge that there is a problem for which a systematic solutions is yet to be found. Thus, in practice each bank branch manager behaves differently, interpreting the instructions and the degree of risk that they are willing to take. The result is real damage to trade volumes.
The Supervisor of Banks said, "The UAE is included in a list of countries and territories at risk of the anti-money laundering orders that apply to the activities of financial entities in Israel. This is in accordance with the publications of international bodies in the field of the prohibition of money laundering. Accordingly, the banking system is required to impose increased risk management processes.
"The Israel Government Company for Correspondent Services is expected to engage in correspondence activities only with the Palestinian Authority. Transfers to the UAE do not fall within the bounds of correspondence activities, so the company is not expected to be relevant to the issue."
Published by Globes, Israel business news - en.globes.co.il - on January 22, 2023.
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