Israel, Trying to Improve its Image, Targets Money Laundering

Published July 5th, 2000 - 02:00 GMT

Israel, under fire from international bodies as a promised land for black money, has stepped up efforts to target money laundering. 

"The process will take a few weeks," assured Zippi Livni, a parliamentary deputy from the right-wing opposition Likud Party who has authored a bill against money laundering. 

The bill has already been approved in a preliminary reading but needs to be passed in second and third readings. 

The pressure comes after Israel found itself blacklisted by the Financial Action Task Force on Money Laundering (FATF), a group of 26 rich nations representing the world's major financial centers. 

Last month's report put Israel in the company of the Bahamas, the Cayman Islands, the Cook Islands, Lebanon and Russia among countries that are "not cooperative in the fight against money laundering". 

Livni said her bill would include "a requirement to declare funds upon entry to Israel, the creation of a police database on organized crime and a specification of various financial crimes and their penalties." 

The measure -- drafted with help from the justice ministry, central bank, police and customs services -- should meet the FATF's criticisms, she said. 

But awareness of Israel's problems with money laundering did not start with the FATF report. Last September, national police chief Yossi Setbon warned that Israel had become "a promised land for black money." 

Money laundering is increasing as Israel's financial sector is attracting an increasing number of private fortunes. The country's high-tech industry is booming, along with Israel's major diamond industry. 

On top of that, the Israeli shekel is strong and inflation last year was only 1.3 percent, the lowest in 32 years. 

"The fiscal regime works wonderfully" for the wealthy, said one high-ranking central bank official. "Right now there are no taxes on wealth, nor on stock-exchange profits, nor on inheritance, nor even on rental revenues." 

The official estimated that about 20 billion dollars has been brought into Israel from dubious sources. 

He pinned the growth of money laundering partially on the influx of immigrants from the former Soviet Union, nearly a million of whom have arrived in the past 10 years. 

"How does one differentiate between those who deposit legitimate savings in their accounts and those who are bringing funds from criminal activities?" he asked. 

The Israeli media have estimated that several billion dollars of suspect cash has gone out again into European banks thanks to the liberalization of Israel's exchange controls and the convertibility of the shekel. 

The FATF report found that Israel banks have not been very observant, keeping poor records and not insisting on verifying customers' identities. 

Under fictitious or foggy company names, launderers can take money from property bought in Israel or abroad and easily inject the black money into financial circuits, the bank official said. 

With such loose and opaque controls, Israel holds an irresistible attraction for those who have something to hide -- such as the Russian mafia.  

Some 15 organized crime outlets are believed to share the local market, as Israeli police have warned not to let the mafia enter the country's political life -- OCCUPIED JERUSALEM (AFP) 

© 2000 Al Bawaba (www.albawaba.com)

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