Russian crime fuelling Israeli money laundering

JERUSALEM - Money laundering in Israel has reached colossal proportions in the last few years, fuelled by the rise of Russian organised crime in the aftermath of the Soviet Union's collapse, liberal banking laws and bank secrecy policies.

Billions of illicit dollars from Russia and former Soviet republics, South America, Africa and Europe have been flowing through Israel in the past few years, , securing its status as one of the world's leading money laundries.

Israeli police believe Russian gangsters take advantage of Israel's money-transfer laws - which are aimed at attracting Jewish immigrants to the country - to deposit profits and launder funds from their operations.

These include narcotics and prostitution rackets, bribes and cream-offs from Government funds and loans.

But they also involve the winnings from a huge asset-stripping exercise that began under Mikhail Gorbachev and has continued since, turning Russia into a kleptocracy in which corruption runs from top to bottom of society.

In this, the launderers are helped by the presence in Israel of about a million former Soviet citizens who have arrived since 1991.

A Chechen was arrested this year for reportedly trying to open an Israeli account with $US50 million ($106 million) in Venezuelan cheques.

Last summer, an Israeli mobster was convicted in Florida of running a money laundering business for a Colombian cartel, prompting worries in Israel about recycled cocaine cash.

Perhaps the most notorious case was that of businessman Gregory Lerner, who admitted defrauding Russian banks of $48 million, which he used to try to open a bank in Israel.

In an example of Israel's liberal fiscal laws, he was fined $5 million, not for bringing in stolen money but for bribery and fraud in his local dealings.

Banking or spending the profits of illicit offshore enterprises has not been illegal in Israel, although moves are afoot to change this.

Meanwhile, the country is considered a launderer's paradise. Reporting requirements for new accounts are minimal, and so are the penalties for breaking the rules.

Israel, established as a haven for Jews, has made a point of not asking too many questions about where new arrivals acquired their riches, especially families who fled nations that prohibited them from expatriating their money.

According to the New York Times, immigrants from the former Soviet Union brought an estimated $2.5 billion to Israel during the 1990s, almost no questions asked.

Israel is, however, not alone, as Arnaud De Borchgrave, head of the Institute of Strategic Studies' global organised crime project, told a US congressional committee last year.

"From Buenos Aires to Berlin, from London to Lugano, from Bogota to Beirut, the pattern was identical - countless billions of dollars siphoned out of Russia to be laundered before buying commercial properties or being used to pay cash for lavish private residences in Europe's capitals and in the Mediterranean's luxury resorts, as well as to purchase yachts and private planes," he said.

"I discovered scores of examples of properties ranging in price from $5 million to $75 million paid for by Russians in cash."

- INDEPENDENT