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One morning in 1991, two nice young men skipped into the office of Israel Discount Bank manager Gideon Lahav bearing a small suitcase. We came to make a deposit, they trilled, $85 million. Lahav started, but the young men sought to assuage his fears by presenting a document from the Polish central bank attesting that the money was kosher.

But at the bank they wondered, and asked the Bank of Israel's Supervisor of Banks what he thought they should do with the money. Regardless of what he said, what's certain is that Discount took the money, deposited it, and within a few months, Andrei Gushiurovsky and Bogoslav Bagshik, who later became known as the "Polacks", bought half of Paz.

Later it transpired that the "Polacks" had not inherited the money from a rich uncle, or earned it selling bibles door-to-door or from a lemonade stand. They had embezzled it from a Polish bank.

If you were shocked and aghast to learn yesterday that Israel's banks have stooped to laundering money for dubious people, relax. In fact, the story is exactly the opposite. For decades, Israel's banks specialized in laundering ill-gotten gains, and during the last three years, they started weaning themselves off the insidious habit, which enormously contributed to their financial stature and stability.

What happened is that the rules changed: In 2002, the Knesset enacted a law prohibiting money-laundering. What had been permitted became prohibited.

The suspects in the massive Bank Hapoalim laundering scandal unveiled this week can't claim not to have realized the rules had changed. The entire banking establishment has spent the last three years studying and digesting the new, stringent rules, which had been enacted to crush the economic mechanisms of terrorist organizations, but in practice, also makes life complicated for white-collar criminals.

Why are we so popular?

The Israeli bank books reveal that they have no less than $25 billion in foreign deposits. Why do foreigners like Israeli banks so much?

Some because they are Jewish, but in most cases, it's because the lion's share of the money comes from tax dodges at best, and crime at worst.

Over the years, Israel's banks set up massive branches and operations in South America, Europe and the U.S., which amassed money from exactly such dubious sources. A lot arrived in unmarked suitcases, and usually the banks made little effort to elucidate its provenance.

As the 1990s began, Israel's big banks discovered a new geographical entity growing far faster than South America, Europe or the U.S. - Russia.

Every few months, some new Russian celebrity, all Jewish of course, would visit Israel, bringing tens or hundreds of millions of dollars. The banks didn't pester the dignitaries with questions, they just opened special divisions for eastern Europe.

Picking on Russians

Yesterday, Knesset member Yuri Stern attacked the police, claiming the only reason it was picking on the customers of Hapoalim's Hayarkon branch was that they are Russian.

The truth is, he has a point. The police and the bankers are highly suspicious of "Russian" money.

Yet one can understand their itchiness. Forbes counted no less than 10 Russians in its latest list of the world's richest people, from Mikhail Khodorovsky of Yukos fame with $15 billion, to Roman Abramovich with $10.6 billion, to Mikhail Fridman, Vladimir Potanin, Mikhail Orokhorov, Vladimir Lisin, Alexei Mordashov, Oleg Deripaska, Viktor Vekselberg, and Vagit Alekperov, the poor man on the list with a mere $2.7 billion.

Where were these people 10 years ago? Some were in their 20s, some were penniless entrepreneurs, and most were small businessmen. How did they become enormously wealthy, in global terms, in a vast country whose GDP is 5 percent of America's? Good question. The truth is that most of their assets derived from corrupt politicians.

Legitimate millionaires

Israel's parallel to Forbes, TheMarker list of the 500 richest people in Israel, has been published for three years now. It also sports some surprising names, such as Arkady Gaidamak, whose wealth is estimated at $800 million; or the trio of Vladimir Dubov, Mikhail Brudno and Leonid Nevzlin, each of whom is worth billions.

The Russians on the list don't actually like the publicity. The editor of the Russian version of Forbes was murdered a few months after running the list of Russia's wealthy.

Attorney Zvi Hefetz is Israel's ambassador to London. Until recently, he was the representative in Israel of Vladimir Gusinsky, another Russian multi-millionaire who made most of his money in the 1990s. Four years ago, we met with Hefetz after the Wall Street Journal published unflattering assessments of his Russian patron.

Hefetz was boiling mad. He claimed Gusinsky had made his fortune legitimately, through banking and media businesses in Russia. During the conversation, he shot out, "You think that all the rich families in Israel, the ones starring on the business pages, made their money legitimately? Did you check how they made their money in the `50s, `60s, `70s and `80s?"

Like Stern, Hefetz has a point. The difference between most of the Russians who deposited money at Bank Hapoalim's branch on Hayarkon Street and our "legitimate" millionaires is mainly one of the times.

The best way to launder money is to let it age. Wait a few decades. Time is the best bleacher of all. The robber barons of the 20th century are America's most distinguished families today. Israelis who smuggled, stole and bribed politicians for franchises and the like have become the respectable monied classes of this millennium.

Until the enactment of the money-laundering law, all a crook had to do was wait enough time for his coal-black filthy lucre to turn white as snow. Now, with the law in place, that's become harder to do.

There is no telling how this Bank Hapoalim scandal will end. Will it branch out? Will it reach the highest echelons at the bank, reach out and touch some of the highest-ranking nouveau riche in Israel? Will it end with a whimper? Who knows, but what's sure is that Israel's banks will have to go cold turkey on their old habit.