Special report: A lack of cooperation by law enforcement has helped organize crime thrive

Tax Authority, Israel Police, State Prosecutor’s office, and other bodies lack level of cooperation needed to target illegal banking and money laundering,

May 24, 2016 13:58
2 minute read.
Israeli police drug bust

Cocaine, heroine and cash seized by police from drug dealers during an early morning Wednesday raid in southern Israel.. (photo credit: ISRAEL POLICE)


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Organized crime in Israel benefits from insufficient cooperation among police, prosecutors and regulatory bodies, according to the State Comptroller’s Report.

In a section titled “The Financial Battle against Serious and Organized Crime,” the report states that the Tax Authority, the Israel Police, the State Prosecutor’s Office and other bodies lack the level of cooperation needed to target illegal banking and money laundering, in particular the thousands of private currency exchange businesses across Israel.

On Tuesday, the Israel Police issued a response.

“The economic harm caused to criminals and the deterrence created by the combined financial efforts against organized crime (as can be seen with criminals who have moved their operations abroad) speak for themselves. The dozens of special police cases, joint task forces and integrated investigations are evidence of this, as is the large amount of seizures,” it said.

“At the same time, we will study in depth the findings of the report, and in the few cases where it says we have room for improvement, we will take actions in accordance with these findings,” it continued.

According to a 2015 Justice Ministry report, there were only six inspectors in the Finance Ministry responsible for regulating more than 2,000 currency exchange stores across the country. The same report estimated that the unofficial, unregulated economy known as the “gray market” is worth as much as NIS 130 billion or more annually.

The gray market includes the underground banking system, which many say could rival the size of the regulated banking system in Israel. These include “loan sharks” dealing with small, high-interest loans to everyday Israelis who often can’t get loans from banks or don’t have the luxury of waiting, and bigger “gray market” players who secure massive, unregulated loans to businesses that need short-term cash flow.

The billions reaped in this unofficial economy are laundered in a multitude of ways, but most prominently through the currency exchange stores, the control of which has often sparked turf wars in the underworld.

The comptroller’s report charges that police do not take steps to reign in currency exchanges that operate without licenses, and that this neglect, in addition to the scant licensing requirements and regulatory requirements, “ease the path for crime organizations to move into this field. The size and severity of the operations of the currency exchanges among criminals, and their use as a central means of laundering money for crime organizations is well known. Nonetheless, by the time the report was done, no systematic method had been shown for dealing with this.”

The comptroller found that while property seizures had increased in recent years, they were not nearly as high as they could be because police, prosecutors and the Tax Authority often work independently from one another on the subject of seizures, and that greater coordination could increase the amount of assets seized.

“The comptroller’s office believes that the effective way to fight the war on organized crime and to reduce the phenomenon of crime is through greater cooperation and by causing damage to the revenue base of criminal organizations,” the report stated.

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