Illicit Money From Jews Abroad Threatens Israel, Government Warns

Money-laundering expert: Illicit money from foreign Jews has spiked Israeli housing prices in recent years.

Reuters

The Israeli government has concluded that allowing money to come into the country from Jews who are residents of foreign countries but didn’t pay taxes there is detrimental to Israel's reputation and economy, said Paul Landes, head of the Israel Money Laundering and Terror Financing Prohibition Authority.

“There are still some in Israel who see in a positive light money-laundering and illicit fund transfers by foreign residents,” said Landes, speaking at Tuesday's Sderot Conference for Society at Sapir College.

The fact that Israel has become a tax shelter for Jews from around the world has become a source of irritation to Western nations, he added.

Landes presented figures showing a significant uptick in the amount of illicit money entering Israel’s real estate market over the past several years. This has played a significant role in the country’s skyrocketing housing prices, according to the data. TheMarker reported on these figures in depth in Friday’s Hebrew edition.

Alongside the increased presence of illicit money in the real estate industry, Israel’s shadow economy has grown to equal 26% of GDP, according to Dr. Avichai Snir of the Netanya Academic College and the Infinity Fund. As of 2013, some 355 billion shekels (about $91.8 million) in transactions were not reported to the authorities. The real estate market is one of the sectors with the largest sums of unreported transactions, according to Snir, who also addressed the Sderot gathering.

Money laundering in the real estate sector involves Israelis and foreign residents alike, who purchase homes with funds whose source is unreported, pay for renovations performed off the books and do not report rental income.

The major presence of laundered money in the real estate sector has helped push housing prices upward, Snir added.

For their part, Landes stressed, Western nations are no longer willing to put up with Israel serving as a shelter for money being brought over illicitly by Jews who are foreign citizens.

“When we’re considered a tax shelter, they start making accusations. The United States, France, Germany and Austria aren’t willing to put up with Israeli-enabled tax evasion any more. Israel has changed its approach when it comes to tax collection and has concluded that taking in money from foreign Jews who didn’t pay taxes in their home countries is causing major damage to Israel’s image and economy,” Landes said at the conference.

“In the face of the tough stance taken by American banks and the U.S. Internal Revenue Service, Israeli banks are making sure their customers paid their [foreign] taxes so that they [the banks] won’t be charged major fines by the U.S. authorities, as recently happened with Bank Leumi, which was charged a 1-billion-shekel fine,” he added.