MK Rabbi Moshe Gafni is certainly public about his priorities
Money laundering and white collar crimes in the Haredi community
Both in Israel and in the USA, money laundering is a common phenomenon in the ultra-Orthodox community. Just as MK Rabbi Gafni fought tooth and nail to protect ultra-Orthodox free loan societies from oversight, so too did the American ultra-Orthodox community lobby for the 2018 prison reform law passed by the US Congress and signed by President Trump.
02/01/2019 22:50
Tags: white collar crime · money laundering · gemachim · gemach
Money Laundering
The last act of the Knesset before shutting down in anticipation of the early 2019 elections was the “Gemach Law.” This law was mostly the result of MK Rabbi Gafni’s (United Torah Judaism) strong-arming and holding hostage the OECD Common Reporting Standard (CRS) regulations, which are required of Israel along with all other OECD member countries.
For those who may not be familiar with it, a gemach is a free-loan society run by volunteers that allows members of the community to deposit money and others to receive loans interest-free. There are thousands of such free-loan societies in Israel’s one-million strong ultra-Orthodox community, with total deposits estimated by one economist to be between NIS 5 billion ($1.4 billion) and tens of billions of shekels.
Gafni refused to pass the OECD’s CRS regulations without a promise that the activity of these ultra-Orthodox free loan societies (gemachim) would be largely exempt from oversight. Under United States law, Israeli banks have been demanding information about American depositors into gemachim that the gemachim cannot or will not provide, and many Israeli gemachim have had their bank accounts closed.
In June, Israel received a grave warning. It would be sanctioned by the OECD and could even lose its status as a member of the OECD, should it fail to uphold a financial information-sharing treaty it has signed with governments around the world.
However, Gafni wouldn’t pass the regulations unless his demands regarding the gemachim were met, and, indeed, whereas the American authorities were willing to compromise and make these gemachim exempt from close regulation (up to $50,000), the threshold that the new Israeli law set was one million NIS ($270,000).
It should be stressed that nobody doubts the social and economic value of these charitable institutions. However, they clearly present an opportunity for black market operations and money laundering, as was explicitly stated by Israel’s Deputy Attorney General, Meir Levin: "[This law] treats the Gemachim as if they were banks. It's not only that are they not supervised bodies. They are entities that pose a significant risk in terms of money laundering." Dr. Shlomit Wagman-Ratner, Head of the Prohibition of Money Laundering and Terrorism Financing Authority, objected as well, saying: "There is a fear of significant exploitation of the gemachim for money laundering and terrorism. We already see indications of money laundering through the gemachim." Another measure that was recently passed by the Knesset severely restricts the use of cash in business transactions, but there too special exemptions were made for the gemachim.
An article in the Israeli ultra-Orthodox media alluded to the fact that the passage of the law brought about a collective sigh of relief in New York’s ultra-Orthodox communities due to the relatively widespread phenomenon of money laundering and other white collar crimes in that sector of society.
These political behind-the-scenes maneuvers also raise an interesting point regarding yet another behind-the-scenes maneuver in the USA, which our readers may not be aware of. We could not find it in the English language media, but only in the Israeli ultra-Orthodox news, and it involves the December 20, 2018 passage of the United States 2018 FIRST STEP Act, which reformed the federal prison system of the United States of America. Among its provisions, it includes special pardons for white collar offenses.
What the Israeli ultra-Orthodox media offered by way of additional background to this legislation is that there was a concerted effort among ultra-Orthodox circles to lobby for the law. An article in the Israeli ultra-Orthodox media alluded to the fact that the passage of the law brought about a collective sigh of relief in New York’s ultra-Orthodox communities due to the relatively widespread phenomenon of money laundering and other white collar crimes in that sector of society. The article indicated that many, many ultra-Orthodox prisoners are sitting in jail in the USA for committing white collar crimes. In fact, the ultra-Orthodox community invested two million dollars in a professional lobbying campaign initiated by the Skver Hasidic community to advance this bill through Congress.
While we may not be familiar with all the details of who is sitting in prison, a number of high visibility scandals have made a splash in recent years, such as:
Hiddush focuses exclusively on matters of religion and state, and we do not hold any position on the merits of the 2018 FIRST STEP Act, which enjoyed overwhelming bipartisan support in Congress and the White House. Still, it is always interesting to note the motivations of those who lobby for and against particular pieces of legislation; and a well-organized, professional lobbying campaign funded to the tune of two million dollars by the American ultra-Orthodox community is a phenomenon that Israel’s ultra-Orthodox media itself could not ignore.