Foreign Workers and the "Black Money" Pipeline: Israeli Staffing Companies Turn Their Fire on Banks and Money-Changers

A growing dispute over the employment of foreign workers without valid permits in Israel has moved into the financial system, with representatives of foreign-worker staffing corporations accusing banks and money-transfer businesses of failing to adequately scrutinize transfers made by workers who may not have legal status in the country.

Hila Ben Yitzhak, CEO of foreign manpower corporations operating in Israel's construction sector, has called on the banking system and financial regulators to introduce stricter controls on international money transfers by foreign workers whose Israeli residency or work permits have expired.

"The banks and money-changers are giving a hand to money transfers by illegal foreign workers and earning fees from black money, instead of doing what they can to stop the phenomenon," Ben Yitzhak said.

The allegation has also reached the Knesset's Special Committee on Foreign Workers, chaired by MK Hava Etty Atia, which has held discussions on the financial activity of foreign workers residing or working in Israel illegally.

An estimated 80,000 workers without legal authorization

According to figures presented by representatives of the foreign-worker staffing industry, Israel currently has approximately 80,000 foreign workers who are not legally authorized to work.

The industry breaks the figure down into approximately:

• 41,000 foreign workers without valid authorization across various sectors;
• approximately 14,000 of them in the construction industry;
• approximately 17,000 people from the West Bank described by the industry as infiltrators or unauthorized workers; and
• approximately 22,000 tourists allegedly working in Israel without a valid work permit.

These figures are industry estimates rather than an official government count.

The scale of unauthorized employment has nevertheless become a recurring subject of discussion in the Knesset, particularly as Israel seeks to balance its need for foreign labor with immigration enforcement and labor-market regulation. The Knesset's foreign-workers committee has held multiple discussions in 2026 on workers staying or working illegally in Israel.

NIS 450 million a month sent overseas

The staffing companies estimate that the approximately 41,000 foreign workers without legal authorization transfer around NIS 450 million every month to relatives or other recipients overseas.

That would amount to approximately NIS 5.4 billion a year.

Industry representatives argue that a substantial portion of this money originates from wages paid for unauthorized employment and is transferred through banks and licensed money-transfer businesses.

The companies contend that the financial system has the technological capability to identify whether a customer transferring money abroad holds a valid Israeli work or residency permit.

They argue that such verification could create an additional enforcement mechanism against illegal employment.

"The banks have the power to stop the phenomenon"

Ben Yitzhak argues that banks and money-transfer companies occupy a unique position in the enforcement chain.

"To the banks and money-changers belongs the greatest power to stop the phenomenon of illegal foreign employment," she said.

According to her, the continued employment of unauthorized workers deprives the Israeli state of approximately NIS 1 billion annually in potential revenues from income tax, National Insurance contributions, foreign-worker levies and health-related payments.

Again, the NIS 1 billion figure is an industry estimate, rather than a figure independently confirmed by the Finance Ministry or Israel Tax Authority.

A regulatory question reaches the Knesset

The issue is no longer confined to the construction industry.

The Knesset's Special Committee on Foreign Workers has specifically discussed the financial conduct of foreign workers staying in Israel without legal authorization.

In recent discussions, committee chair Hava Etty Atia called on banking and financial regulators to examine the possibility of creating a mechanism through which the validity of a foreign worker's visa could be verified when money is transferred abroad.

She also called for consideration of legislative changes and stronger enforcement against cash payments to unauthorized workers.

The committee's activity demonstrates that the question of financial transfers has become part of the broader policy debate surrounding illegal employment and the enforcement of immigration regulations.

Industry's demand: connect banking data with visa status

The foreign manpower corporations are calling on the Bank of Israel's Banking Supervision Department to instruct commercial banks to incorporate verification of foreign workers' visa status into their financial systems.

Under the proposal, a foreign worker seeking to transfer money abroad would be subject to an automated check of whether his or her Israeli work or residency authorization remains valid.

If the authorization had expired, the financial institution could potentially flag the transaction and notify the relevant authorities, subject to applicable banking, privacy and anti-money-laundering laws.

The industry argues that such a system could provide authorities with an additional enforcement tool without requiring inspectors to locate unauthorized workers at construction sites or other workplaces.

Banks face a different set of obligations

The accusations raise a complicated regulatory question.

Banks and licensed money-transfer companies are already subject to extensive requirements concerning customer identification, anti-money-laundering controls and suspicious transactions.

However, the mere fact that a customer lacks a valid work permit does not automatically mean that every financial transaction is illegal.

Any new mechanism linking immigration status to banking activity would therefore have to balance immigration enforcement with existing financial regulation, privacy protections and customers' legal rights.

This is one of the central issues that regulators would have to address before adopting the industry's proposal.

Why construction is particularly sensitive

The construction industry has become heavily dependent on foreign labor following severe shortages of workers in the wake of the October 7, 2023 attacks and subsequent restrictions on Palestinian workers.

The Knesset has consequently devoted considerable attention to bringing additional foreign workers into Israel while simultaneously addressing unauthorized employment.

In one recent discussion, the foreign-workers committee examined the allocation of foreign workers to major infrastructure projects, including the planned metro system.

For legitimate staffing corporations, unauthorized workers represent not only a regulatory problem but also a competitive threat.

Companies operating under permits and paying taxes and social contributions argue that employers using unauthorized labor can reduce their costs and gain an unfair advantage.

The bigger battle: enforcement versus financial freedom

The dispute therefore extends beyond the question of money transfers.

At its core is a broader policy question: Should Israel's financial system become another enforcement arm of its immigration authorities?

Supporters of the proposal argue that financial institutions are uniquely positioned to identify unauthorized workers and prevent the flow of wages generated through illegal employment.

Critics could counter that banks should not become immigration-enforcement agencies and that any restriction on financial transfers must be based on clear legislation and due process.

The debate is likely to intensify as the government seeks both to increase the legal supply of foreign workers and to crack down on unauthorized employment.

A new front in Israel's foreign-worker debate

The controversy marks a new front in Israel's struggle to regulate its foreign-worker population.

The staffing industry is demanding that the government use every available tool — including the banking system — to make unauthorized employment economically more difficult.

The banks and money-transfer companies, meanwhile, face the challenge of demonstrating that their existing compliance systems are being properly implemented while determining whether additional requirements can legally and practically be imposed.

For the Knesset committee, the issue represents a potentially significant enforcement opportunity.

For the banking industry, it raises a fundamental question about the boundaries between financial regulation, immigration enforcement and individual financial rights.

And for the tens of thousands of foreign workers living and working in Israel, the outcome could directly affect one of the most basic aspects of their lives: their ability to send money home.