A Lack of Cooperation By Israeli Law Enforcement Has Helped Organize Crime

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

In a section entitled “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 currency exchange businesses across Israel.

According to a 2015 Justice Ministry report, there were only 6 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 estimate may rival the size of the legal, regulated banking system in Israel.

These include “loan sharks” dealing with small, high interest loans to every day 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 who need the 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 that dot the country, the control of which has often sparked turf wars in the underworld.

The Comptroller’s report states that police do not take steps to reign in currency exchanges which operate without licenses, and that this neglect, in addition to the scant licensing requirements and regulatory requirements on the industry “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 was shown for dealing with this.”

The Comptroller’s exam found that while property seizures have increased in recent years, they are not nearly as high as they could be, because police, prosecutors, and the Tax Authority, often work independent 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 states.

On Tuesday, Israel Police said in response to the report that “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.”

“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 to improvement we will take actions in accordance with these findings.”

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