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Nearly every day, it seems, we read about money laundering scandals, some even involving high-ranking officials. What is Israel doing to combat this crime?
Last December, the Tax Authority published a detailed overview of Israel's efforts to combat money laundering (http://ozar.mof.gov.il/taxes/).
According to the Tax Authority, the international campaign against serious crime and terror over the last decade has sought to sap the financial means of crime and terror organizations, on the premise that they cannot survive without money. Removing the profit element from criminal and terror activities serves a dual purpose. First, criminal funds taken out of circulation won't be re-used in the future. Second, preventing criminal gain removes the incentive to commit crime.
One of the key means of enforcement is the Prohibition of Money Laundering Act, 2000 and related regulations. (They can be viewed in English at http://www.justice.gov.il/MOJEng/Halbanat+Hon/.) The law is administered by the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) at the Justice Ministry.
But first, the basics: What is money laundering? Money laundering is defined in the law as performing a property transaction, on property originating directly or indirectly in an offense, used to commit an offense, or enabling the commission of an offense, with the object of concealing or disguising its source, the identity of the owners of the rights therein, its location, its movements or the performance of a transaction with respect to such property Such activity is often carried out using the legitimate financial system or by mixing property derived from crime with other property.
Recognizing the need to combat money laundering as part of the strategy against serious crimes, terror and narcotic dealings, international cooperation is a key objective for many countries now. The present international strategy is based on uniform standards of legislation and enforcement. Anti-money laundering legislation is based on standards developed by a body known as the Financial Action Task Force (FATF). The law was passed in the light of international efforts, to protect Israel's reputation and uphold public confidence in its anti-money-laundering system.
The cross-border transfer of money is a typical money laundering technique. Therefore, the Knesset, like other countries, has adopted Recommendation 9 of the FATF by prescribing the need and the means to report money transferred to or from Israel. According to the law, as amended, a report is required from any person entering or leaving Israel with money on him (Israeli or foreign currency, cash, bankers' drafts or travelers' checks) exceeding NIS 90,000, or importing or exporting money exceeding NIS 90,000 by mail or any other method.
The Prohibition of Money Laundering Act prescribes a range of enforcement measures regarding the conduct and non-reporting of money laundering offenses depending on the circumstances and severity of each case, distinguishing between civil and criminal enforcement.
In serious cases, involving a prohibited property transaction aimed at concealing its source or carrying out a property transaction intended to obstruct its disclosure, the law prescribes a 10-year jail sentence or a substantial fine. In many cases the fundamental element of "intent" may not exist, in which case the Law prescribes a six-month jail sentence or a lesser fine.
In cases where the facts indicate that an infringement has occurred, a Financial Sanction Committee is authorized to impose a financial sanction on reporting infringers. This civil process is intended impose rapid administrative sanctions without a criminal indictment in cases where an infringement has occurred but it is decided to make do with a civil process and satisfy the public interest with a financial sanction that reflects the circumstances of the case.
According to the Tax Authority, 28 decisions taken in the first half of 2008 imposed a total of NIS 744,000 in fines, with the largest sanction imposed totaling NIS 200,000.
As always, consult experienced legal and tax advisers in each country at an early stage in specific cases.