Israel on Monday became a full member of the global financial watchdog on money laundering and terror financing, officials said, after having previously been blacklisted by the organisation.

Justice Minister Ayelet Shaked said that membership of the Paris-based Financial Action Task Force (FATF) would make Israel part of the group of countries "leading the global battle against money laundering and terror financing."

Membership of the FATF would also present Israel "as a safe and attractive place for investments" from around the world, Shaked said.

FATF president Marshall Billingslea welcomed Israel on becoming the group's 38th member, noting its "rigorous assessment of its measures to combat money laundering and terrorist financing," which enabled its membership.

Israel's "experience and perspective will make a valuable contribution to our work to prevent the misuse of the financial system," Billingslea, who is also the US assistant treasury secretary for terrorist financing, said in a statement.

The organisation had blacklisted Israel in 2000 due to what it described at the time as non-cooperation in the fight against money laundering

Israel was removed from the list in 2002 and has since taken steps to address the issue.

In a report evaluating the efficacy of Israel's anti-money laundering and counter-terrorist financing system released Monday, the FATF noted the ability to "identify, investigate and disrupt terrorist financing activity at an early stage" and prosecute those involved.

"However, it must improve its coordination on preventing the misuse of non-profit organisations for terrorist financing, in particular by increasing its resources to register and supervise these organisations," the FATF said.

Shlomit Wagman-Ratner, head of Israel's money laundering and terror financing prohibition authority, said "the report reflects the significant advances Israel made over the past two decades".

The FATF has recently warned Iran it would face further isolation from international finance if it did not clamp down on terrorism financing.