Israeli Money Changers Linked to Organized Crime, Government Official Says

Tax authority urges lawmakers to increase regulation of the sector.

Many, if not most, of Israel's 1,500 licensed storefront money changers have ties to organized crime, a government official alleged on Monday, urging lawmakers to approve legislation that would step up supervision of the sector.

"Most of the money changers are feeding criminal organizations," Avi Arditi, deputy director general of the Tax Authority, told the Knesset Finance Committee, explaining why the authority wants to set up the database of large transactions. "Every crime organization has its own backyard money changer," he charged.

The legislation - one of the provisions contained in the Economic Arrangements Bill - would require money changers to report on all transactions over NIS 50,000.

"Every year, some NIS 100 billion falls 'under the radar' of the Tax Authority. If we want to fight 'black' capital, we need the tools," Arditi said.

In spite of the urgency expressed by Arditi, the bill is much narrower in scope than the one originally proposed by the Justice Ministry, which called for a database on all foreign currency transactions over NIS 50,000, including those performed by credit card companies.

Under the original legislation, the Tax Authority could demand raw information on anyone changing money, even when there was no suspicion of a crime having being committed. However, due to the bill's problematic legalities, David Rotem (Yisrael Beiteinu ), chairman of the Constitution, Law and Justice Committee, called for softer wording.

Still, the plan met with widespread criticism on Monday in the finance committee.

According to Deputy State Prosecutor Yehuda Shaffer, the information can already be obtained by the Tax Authority through on-the-spot audits, but the authority doesn't have sufficient manpower. "With 1,000 additional inspectors they could do it," he said.

Attorney Ron Dror, of the Association Of Currency Service Providers, acknowledged that the government has the right to improve the way its collects data from currency service providers, including banks and credit companies.

"But what happened here is that when they didn't succeed with everyone, they went for the 'easy prey' and left just the money changers. Former judge Dan Cohen didn't evade taxes through the money changers but through the banking system," he said, referring to a judge who last week agreed to prison time and millions of shekels of penalties in a plea bargain over bribery, fraud, breach of trust and obstruction of justice charges.

Bloomberg