Explosion in Israel of financial crimes linked to terrorism and organized crime

A government agency report, released Wednesday, revealed a sharp increase in illegal financial activities related to organized crime and terrorist financing in 2021 compared to the previous year’s figures.

According to the Israeli Authority for the Prohibition of Money Laundering and the Financing of Terrorism, which is part of the Ministry of Justice, the share of organized crime in all financial crimes has dropped from 6.8% in 2020 to 19% in 2021 .

Organized crime in the Arab sector has become a serious problem in recent years. Due to the scarcity of financial services available to large numbers of Israeli Arabs, criminal organizations have filled the void and now offer loans and other services to Arab citizens on the black market, thereby generating funds for these groups and contributing to their growing power and increased violence.

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The report also reveals that terrorist financing has also increased as a percentage of financial crimes in Israel, from 9% in 2020 to 14.6% in 2021.

Fraud, scam and counterfeiting accounted for the largest share of financial crime in 2021 with 23%, while tax crimes (11.2%), extortion and corruption (8.7%) and drug trafficking (4%) ) were the other main areas of this crime.

These crimes were perpetrated through various means, including international financial transactions (18.7%), cash payments (12.8%) and the provision of criminal financial services (12.3%).

The report highlights several investigations carried out by the authority in different areas of financial crime during the year 2021, including a large-scale investigation conducted in Israel and internationally against an organized criminal organization.

The Israeli Authority for the Prohibition of Money Laundering and Terrorist Financing has uncovered complex schemes to launder acquired money by defrauding investors through fraudulent financial investments. Illustration: (Credit: Non-stick / iStock)

The scam involved defrauding online investors by offering them various financial assets including binary options, forex and cryptocurrencies with the promise of high returns.

In practice, the investors were duped and the money they invested in these assets went directly to the criminals.

The Anti-Money Laundering Authority has provided information on this large-scale scam to the Israeli police, the tax authority and the State Attorney’s Office, helping to identify the individuals involved, the origin of the scam and the ways of money laundering.

These methods included setting up a complex network of companies and branches in offshore financial centers and opening bank accounts to receive the money there, mainly in the countries of the scam victims.

Information received by the authority from parallel bodies abroad highlighted the links between the criminals and the shell companies they created, with transfers made in various forms such as dividend payments and loan repayments.

The authority said it was able to identify international transfers of funds from bank accounts associated with the suspects to Israeli bank accounts shortly after receiving the victims’ funds.

Trust funds had been set up in Israel to deposit the money, fake dividend payments were made to bank accounts held by fictitious people to launder money in Israel.

The funds were then used to purchase luxury properties, cars and other assets in the name of criminal family members and fictitious people to further conceal the source of the money.

Minister of Justice Gideon Saar at the Knesset on June 22, 2022. (Olivier Fitoussi / Flash90)

The head of this authority, prosecutor Ilit Ostrovitz-Levi, insisted that he had significantly improved his intelligence-gathering and evaluation efforts over the past year in order to continue the fight against financial crime, “which damages the security of the citizens of the State of Israel. “

Justice Minister Gideon Saar said criminal activity is becoming increasingly sophisticated and authority is “an important part of our efforts to expose criminals and identify assets and money routes.” “

He added the importance of this element “in the national fight against crime in Arab society” carried out as part of the government’s five-year plan to combat this phenomenon.

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