"Economic enforcement is having an impact"

Dr. Shlomit Wagman-Ratner Photo: Jonathan Bloom

Israel Money Laundering head Adv. Shlomit Wagman-Ratner tells "Globes" that money is becoming more and more difficult to hide.

Entering the offices of the Israel Money Laundering and Terror Financing Prohibition Authority in the government campus in Tel Aviv requires a comprehensive security check worthy of the most secret security institutions in the country. Even after we passed the check (following a half-hour delay at the entrance), we were not allowed to circulate in the Authority's corridors by ourselves. A security guard is assigned to each guest and accompanies them to their destination. Only after I shook the hand of Money Laundering and Terror Financing Prohibition Authority head Adv. Shlomit Wagman-Ratner did the security guard leave us. "There's a lot of secret intelligence information here. It mustn't leak," she tells me in a semi-apologetic tone, while making clear the importance of the heavy security.

The Money Laundering and Terror Financing Prohibition Authority that she heads could be called the economic Mossad. It is an intelligence agency that conducts the most difficult international economic investigations, tracks economic criminals, and follows the money trail of the world's largest terrorist organizations. It does all of this quietly behind the scenes, and is not usually around when the results of its activity becomes a weighty indictment against leading figures in the country or a noisy conviction on grave economic offenses, or when a terrorist operation is halted following the information it supplied.

"The Money Laundering and Terror Financing Prohibition Authority was formerly regarded as a database: you press a button and get output. The work done here, however, is complicated financial analysis, and as we invest more in this stage of mapping and detection of the financial networks, we enrich and create a quantum leap in the economic investigations," Wagman-Ratner says.

This was both a challenge and an agenda for Wagman-Ratner when she took up her position 30 months ago - to make everyone realize the Money Laundering and Terror Financing Prohibition Authority's importance. "In every case we're involved in, there is a concept of money and the results are much better. If the Authority is not involved in a case, the state will handle the entire process, the investigation, invest the State Attorney's Office's time and the judges' time. But it won't be able to get the money from the criminal at the end. In recent years, we have succeeded in showing that when we're involved in cases, when we pass along the financial intelligence, the contribution to the state is enormous, and it eventually hits the criminal in his most sensitive place - his wallet."

An active partner in every affair

According to this agenda, under Wagman-Ratner's management, the Money Laundering and Terror Financing Prohibition Authority has made major strides forward. Its personnel has expanded by 50% and it has dramatically increased the volume of intelligence cases that it refers to the enforcement agencies and its ties with its counterparts around the world. Today, in almost every affair involving illegal money, including global criminal organizations, fraud, sophisticated international economic crime, fictitious invoices, financing of terrorism, bribery, tax offenses, drugs, extortion, etc., the Authority is an active partner, helping the police and the Israel Tax Authority, and was also sometimes the one to expose it.

These cases include an indictment recently filed against an Israeli criminal organization managed from Spain, which distributed NIS 850 million in fictitious invoices while committing an assortment of economic crimes, including tax offenses , money laundering amounting to NIS 250,000; investigation of a corruption affair in Rishon Lezion popularly called the David Bitan affair (Bitan is a Likud Knesset member who chaired the coalition until recently - a number of suspects were investigated on suspicion of bribery, money laundering, and violations of the VAT Law and the Income Tax Ordinance); and the Israel Beitenu affair, in which former Deputy Minister of the Interior, former Israel Beitenu director general, and former MK Faina Kirschenbaum is accused of taking a bribe, soliciting a bribe, fraud and breach of trust, money laundering, and tax offenses.

The Money Laundering and Terror Financing Prohibition Authority nevertheless usually remains behind the scenes. A partner in the "pregnancy" (investigation), it is not a partner in the "birth" (the indictment and the convictions).

"We create the infrastructure and the intelligence mapping, but the materials coming from the Authority have to be 'laundered' in order to become evidence. We're an intelligence organization that collects material from sources we'll never reveal. The Prohibition on Money Laundering Law dictates absolute secrecy. We sometimes come in at the last minute before the 'birth' in order to map additional assets for confiscation or to search for additional criminal groups, but our mandate is to help in the stages that require financial intelligence," she explains. "The Authority's methods are confidential, and I can't discuss the matter, but I can say that with the help of very advanced technology, we can map distant connections between partners in crime who would never imagine could be traced. Criminals should know that not only crime is becoming smarter; the enforcement authorities are not being left behind."

Despite the heavy secrecy, Wagman-Ratner, the head of the (economic) Mossad agreed to be interviewed. In an exclusive pre-Yom Kippur "Globes" interview, she tells about modern economic crime and the integrated struggle against crime ("Criminals are becoming sophisticated, but so are we. They can't imagine what tools we have"); the work of the intelligence agency she heads ("We specialize in tracking and following the money trail all over the world, monitor the maps connecting distant parties, and map the money laundering and terror financing routes").

Wagman-Ratner also reveals the challenges of coping with the digital era ("The cryptocurrency sector involves an increased risk of money laundering and financing of terrorism") and a little about herself - how she came from Arad, far from central Israel, excelled at Yale University, and came to head one of Israel's most important agencies ("I was a grocer, and I worked very, very hard").

"Criminals should be attacked in their purse"

"But before we begin," Wagman-Ratner says, "I have to make it clear that there's no 'I' here. Everything is 'we.' I'm not alone. There are enforcement agencies and regulators that have joined hands. An intelligence agency among enforcement agencies and financial regulators has to cooperate. Our philosophy is joint operation of enforcement agencies in the struggle against crime."

This struggle in which she is now a partner is an international  one. The struggle is one against economic and conventional crime and criminal organizations using economic means. Throughout the world, efforts are being made to block the criminals' economic pipeline and strangle them economically, thereby halting their criminal activity. The way to do this passes through the Money Laundering and Terror Financing Prohibition Authority, which is responsible for the financial intelligence and follows the money trail.

"Global crime is becoming increasingly complicated. Criminals are becoming more sophisticated. The criminal organizations are utilizing experts such as lawyers, accountants, and tax advisors, which is making the enforcement agencies' job more difficult," says Wagman-Ratner, but she adds that the enforcement agencies are also becoming more sophisticated, and criminals do not have many places to hide.

"In recent years, the concept has changed; money does smell. We're dealing with not only the main criminal, but also the money launderer and the others helping him. We consult with the law enforcement agencies, security agencies, and the State Attorney's Office, and propose creative solutions. When everyone is concentrating on the same threats and events, it's a force multiplier. The international community long ago realized that the traditional tools - a prison term - weren't enough. In order to combat serious crime, criminals have to be attacked through their purse.

"The insight is that only when you take the money does crime become not worthwhile - what is called the Al Capone model. This global regime included several elements, including defining money laundering crimes; confiscation mechanisms; imposing obligations on the private sector, lawyers, and accountants (identification, customer recognition, and reporting); and establishing money laundering prohibition authorities in every country in order to follow the money trail. Today, the concept of 'banking secrecy' has almost disappeared. A large proportion of the world's tax shelters has been reduced, and everyone is making an effort to conform to the international standard and cooperate with the enforcement authorities in the other countries."

"When criminals are not making a profit, they are more afraid"

A week ago, at a party attended by Wagman-Ratner during the holiday, several of those present, who found out that she headed the Money Laundering and Terror Financing Prohibition Authority, asked her what they are getting out of the money laundering prohibition regime beyond the onerous questions being asked by the banks and not being allowed to deposit and transfer money easily in their accounts.

Wagman-Ratner: "I was glad that they asked the question, and I answered that economic enforcement made a substantial contribution to changing the map of crime in Israel. The leaders of the main criminal organizations are behind bars. Economic enforcement has proved to be a bigger deterrent than conventional punishment by itself. Sometimes it creates an incentive for state's witnesses. In the past, criminals believed that they would serve their sentence while their families enjoyed the fruits of their crimes, and they would benefit when they got out. The balance of their calculations has now changed. They are also calculating that it isn't worthwhile for them to sacrifice themselves for a head of a criminal organization if they don't get any economic profit from it.

"In Israel in 2018, a large proportion of organized crime, the heads of the crime families, and the criminal organizations are behind bars. Israel Police, is making great use of financial information, which is contributing and being reflected in the volume of confiscations."

"Globes": One of the criminal organization heads that you are talking about is Rico Shirazi, who was sentenced to eight years in prison for economic crimes. Only last week, the Supreme Court rejected his appeal of his conviction and sentence. He has become the face of integrated economic enforcement, the face of the struggle against the "Al Capone" model you mentioned.

"I'm not commenting on specific cases, but all of the results are visible. Economic enforcement has an effect. First of all, you can catch more people through economic mapping. Secondly, you see that all sorts of people in criminal organizations used to take a chance, thinking that they would serve in prison for a while and have money and economic comfort when they got out, financial pressure is now getting to everyone in the organization and making them think many times, and is also helping with state's witness agreements, which frequently help crack the case.

"When they have no economic gain from criminal activity, criminals are more fearful. There's a significant change in the situation. Among other things, we also see it in the volume of assets that Israel is reaching in its confiscations."

"The confiscation tool is not being abused"

You are being heavily criticized for the confiscations. Even the Supreme Court criticized the way the police are seizing property without warrants or restrictions, for example, in the case of Shaul and Iris Elovitz, in which jewelry was taken off their bodies and art works were taken off the walls without a warrant. Shouldn't the authorities reconsider what they did in this matter?

" I don't want to comment about any particular case, but in the Elovitz case, we saw headlines last week that the Court released NIS 6 million to the couple. What didn't make the headlines was that the Court did not reverse the seizure of NIS 80 million in assets.

"I'm not handling the case. I don’t want to talk at all about a concrete case," and I'm not the agency responsible for policy in seizing property and confiscations. At the same time, I don't think that confiscation tool is being abused. The enforcement agencies believe that this money is the result of crime, and the court oversees the process."

In most investigations, the police are given an order to seize whatever property they asked for almost automatically.

"In the end, the court authorizes the final confiscation of 70-75% of the assets following thorough consideration. This shows that the initial requests were not exaggerated. Were they exaggerated, we would see more significant differences. There is a balance. This doesn't mean that there aren't any mistakes in one case or another, but all in all, as a system and a policy, money is seized that has a connection to the relevant extent of the crime, and this tool is effective in combating crime."

Throughout the interview, it was clear that Wagman-Ratner (42) was uncomfortable being interviewed. Since her appointment and taking up her job 30 months ago, she has absolutely refused interviews. "I haven't been interviewed in recent years, because I thought that I had to first accumulate a record, and then I'd speak. That's where I am now, and it's still not natural for me to be interviewed."

Wagman-Ratner's neat and delicate features and her behavior as a woman who speaks quietly, weighs every word, and speaks responsibly are misleading. Her sensitivity disguises dogged determination, a diligent and dominant manager involved in every aspect, a strong woman standing (together with others) at the head of a struggle against economic and organized crime. She is the terror of criminals without their knowing who she is.

"Look at this," she tells me in the middle of the interview, turning her computer screen towards me. I expect to see state financial secrets, but what appears on the screen is hundreds, maybe thousands, of bubbles of various sizes and colors connected by lines in complicated patters that appear infinite. There are no words, names, or details there. "What do you see here?," Wagman-Ratner asks me, and answers without waiting for my response, "To a person who doesn't know what this is, it could look like a Rorschach diagram, but I see here a terrorist organization, and I see its financial channels and the financing.

"Each one of the bubbles we see here, all of these groups are connected to each other, and each one of the bubbles, according to its strength and size, reflect how important that group is to the criminal activity, terrorist activity, and channels the activity to it. Without this ability to map the financial connections, I'm liable to make a mistake of focusing on a marginal bubble at the ends, a small bubble, but my aim is to be capable of reaching the large junctions, the big financers, the heart of the problem."

In another picture on her computer screen - again, with all the names and details erased - Wagman-Ratner shows me how a professional money launderer looks through the eyes of the Money Laundering and Terror Financing Prohibition Authority. One point is in the middle, connected to hundreds and thousands of other points, some of which are marked in red. "A professional money launderer is a party that really interest me, because in the financial world today, it is the focus of money laundering. In the past, criminals could transfer their money from place to place without any problem. Today, is has become difficult, because the countries are cooperating and have closed the borders.

"But while we have become more sophisticated, the criminals have become far more sophisticated, and they need facilities, people to help them manage the money, get it in, and launder it, and so forth. We're photographing x-rays of the professional money launderer, and we see immediately that he is the main party in the middle, and has hundreds and thousands of his actions with financial concerns."

Wagman-Ratner regards as one of the Money Laundering and Terror Financing Prohibition Authority's principal tasks focusing on detecting the professional money launderers. "They are professionals who are preparing for the criminals the channels for laundering the money transferred, and acting for them and in their name. They sometimes serve as a front (holding shares, accounts, trusteeships, etc.). They are often lawyers or accountants.

"In the case of lawyers, the situation is relatively difficult for the enforcement authorities, because it is difficult to investigate them on account of lawyer-client privilege, restrictions on wiretapping, and so forth. We definitely regard this phenomenon as important in this field. It could be that the steep increase in the number of dealers is leading to the development of creativity niches.

"In this case," she says and points to the screen with no names or identifying details on it, "the money launderer is a lawyer who is giving the platform to criminals. All of those marked in red around him are people in whom Israel Police is interested. The police asked me for information about them, and I managed to find a key junction connecting all of those people; that's where their capital is laundered.

"This is how we get to the big money. We map the financial networks, cross-reference the information we see with the other information from the enforcement authorities, and find the criminal focus behind the front man, the straw man. We're able to connect them all together, help the investigation, and the mapping of assets for confiscation also comes from this. We have learned and invest a great deal of effort in this, which we see as a very important goal of ours as an Authority: to identity new targets for Israel Police and other investigative and enforcement agencies."

On the other hand, it could be said that you have become Big Brother. The quantity of information reaching you today from the financial institutions is enormous. In a series of red flag documents you published, you are demanding more and more information from the financial sector. You have turned the private sector into an informer.

"The private sector is regarded as the closest party to the criminal. In the past, parties in the financial sector, the banker, as a code name were like three monkeys: no see, no hear, no smell. They said, 'Money is money, and money has no smell,' and all the other slogans. Today, they have been assigned an important role at a global level in the struggle against unreported capital, and they are required to verify that the money they manage for their customers is legitimate. They have to ask questions, know what the source is, and not ignore the source. That's how it is everywhere in the world. They are required to report to the authorities in cases in which it appears that there is concern about money laundering. It applies equally to a bank in Honduras and to a bank in India."

Published by Globes [online], Israel business news - www.globes-online.com - on September 17, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Dr. Shlomit Wagman-Ratner Photo: Jonathan Bloom
Dr. Shlomit Wagman-Ratner Photo: Jonathan Bloom
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