Organized crime hurts economy, inflates housing prices – Justice minister

One of the main ways organized crime affects housing and construction prices is through the use of “security companies” that extort exorbitant fees from contractors.

December 3, 2015 00:26
1 minute read.
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Police cyber crime unit. (photo credit: POLICE SPOKESPERSON'S UNIT)


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Israel’s organized crime networks are hurting the economy in far-reaching ways, including by inflating the prices of real estate, Justice Minister Ayelet Shaked said on Wednesday.

“Criminal organizations in Israel have succeeded in penetrating many aspects of our lives, and they have an effect on the economy, fair competition and real estate prices,” she said at the annual tax conference of the Goldfarb Seligman law firm.

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Shaked said that crime was integrated with legitimate activity, making it difficult to confront.

One of the best strategies for doing so, she added, was increasing the use of electronic transactions and closer monitoring of nonbank loans and currency transactions.

Earlier this week, the Bank of Israel published an interim report recommending ways to spread the use of electronic payments.

One of the main ways organized crime affects housing and construction prices is through the use of “security companies” that extort exorbitant fees from contractors. The security companies demand fees that can easily run into the tens of thousands of shekels per month, and when contractors don’t pay, the companies typically retaliate either by damaging property or through the use of violence.

The exact extent of such scams is unknown, but it is estimated that the overall protection industry in Israel makes billions of shekels a year.

A report issued by the Justice Ministry earlier this year said the unofficial, unregulated economy of Israel, known as the “gray market”, is worth as much as NIS 130 billion or more annually.

The gray market includes an unknown number of the thousands of currency exchanges done in Israel, loan sharks charging exorbitant interest fees, both of whom act as unofficial and unregulated banks and serve as a main avenue for laundering money.

Though it’s difficult to quantify the negative impact of organized crime, the FBI estimates that global organized crime takes in $1 trillion a year in illegal profits. That figure would not account for lost productivity, innovation and growth.

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