Fraud was Israel's leading money laundering offense in 2016

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Bribery and financing of terrorism were in second and third places, the Israel Money Laundering Authority reports.

The Israel Money Laundering and Terror Financing Prohibition Authority in the Ministry of Justice has published its annual report for 2016. The report reviews the Authority's activity and provides a glance at the intelligence figures behind the headlines. These include money laundering accompanying huge deals originating in criminal activity, such as the alleged bribes paid by billionaire Beny Steinmetz, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), and Shapir Engineering and Industry Ltd. (TASE:SPEN); tax evasion allegedly encouraged by suspects, such as Bank Leumi (TASE: LUMI) executives now being investigated; and taxi drivers, garage owners, and people renting out vacation homes in unreported deals, without issuing tax invoices or paying VAT.

The Money Laundering Prohibition Authority tracks and processes information from the financial sector - banks and currency converters - and passes it on to the relevant law enforcement authorities (Israel Police, Israel Tax Authority, Israel Securities Authority). These authorities decide whether to open an investigation. Information is passed on to the Money Laundering Prohibition Authority only if there is a real suspicion that money laundering or terror financing has taken place.

The professional anti-money laundering task forces include the Lahav 433 national police fraud squad, the Tax Authority Yahalom (Diamond) unit, the Ministry of Finance unit for currency service providers, and the Tel Aviv District State Attorney's Office (taxation and economics).

Money Laundering Prohibition Authority head Dr. Shlomit Wagman-Ratner wrote in the introduction to the report, "Over the past year, the Authority made significant progress in cooperation with law enforcement agencies in Israel and overseas, and initiated and accompanied an unprecedented number of investigations involving organized crime, sophisticated and trans-border economic crime, financing of terrorism, governmental corruption, etc. The Authority is currently leading complex projects and promoting legislative initiatives needed in order to improve the governmental system in Israel and adjust it to international standards. The aim is to conduct an all-out and combined struggle against money laundering and financing of terrorism in Israel and worldwide." She thanked the minister of justice and the Ministry of Justice director general for their support in developing the Money Laundering Prohibition Authority.

The report states that 29% of the detected money laundering activity in 2016 consisted of embezzlement, forgery, and fraud, 21% of bribery, and 11% of financing of terrorism. The report found a drop in crimes committed by criminal organizations. The Money Laundering Prohibition Authority stepped up its intelligence activity, with a 23% rise in requests from law enforcement authorities (Israel Police, Tax Authority, Securities Authority) for financial intelligence from the Authority, together with hundreds of requests for information from 55 equivalent authorities around the world.

The number of non-routine reports by concerns obligated to provide information about abnormal activity by their customers in 2016 was notable. These concerns included banks, which supplied 70% of such reports, and currency service providers (converters of currency). There were over 78,000 such reports in 2016, 6% more than in 2015 and 75% more than in 2012, an average annual increase of 15%.

A routine report is one in which the bank or currency converter is required to report any cash deposit of over NIS 50,000, the deposit of a check in foreign currency equivalent to NIS 1 million, and other cases. Most of these reports are issued automatically by the computer system.

A non-routine report requires the exercising of judgment by the financial concern - whether, in view of the customer's pattern of action, an activity arouses concern about money laundering, such as a transaction involving an amount close to the amount requiring a report (in order to evade the reporting requirement), activity that creates concern that an account may be managed for straw man without this being declared, etc.

The banks and currency converters are the watchdogs for preventing the entry of unreported capital into the financial system. The Money Laundering Prevention Authority turns these reports into essential information likely to be of assistance when a suspicion arises of money laundering or terror financing offenses.

The report also describes a significant upward trend in non-routine reports by the currency services providing sector, together with further emphasis on them in the report, following activity over the past year. According to the report, the number of these reports soared by 150%, and they accounted for 16% of all the non-routine reports in 2016.

As in the preceding year, the rest of the non-routine reports were obtained mainly from insurance companies and agents (5%), credit card companies (5%), and the postal bank (2%).

Unexpectedly, there were 10,500 reports concerning the entry and exit of money at border crossings in 2016, compared with over 12,000 in 2015, a 15% decrease, reversing the rising trend in 2013-2015. According to the Money Laundering Prevention Authority, the increase was a result of closer inspection, enforcement, and lowering the threshold requiring a report at the Erez border crossing between Israel and the northern Gaza Strip, which is the only crossing for pedestrians. The threshold is currently NIS 12,000.

Published by Globes [online], Israel Business News - www.globes-online.com - on August 29, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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