Israel-style bluff

Op-ed: Current US pressure brings to mind Israel’s solution for money laundering case

Gideon Eshet|Published: 11.19.10 , 00:00

Some people in the know claim that it’s a bribe. Some of them argue that it’s a case of extortion. One way or another, the American proposal – fighter jets in exchange for a temporary freeze – is perceived as a mafia-style offer that cannot be refused.

Should we get excited? Anxious? Well, here is a story about the last time the US exerted pressure on Israel.

Shortly after the attack on the Twin Towers and the Pentagon, the US embarked on a global campaign to curb the funds received or transferred by terror groups. The Americans pressed all states to adopt two laws: One against terror sponsoring and another against money laundering. Israel was also asked to do it.

There was no problem with the law against terror sponsoring. Yet the anti-money laundering legislation was much more complex. For dozens of years, Israel has made a living through illegal Jewish capital smuggled from Central and South America, South Africa, and other locations. Most of the State’s currency reserves were illegal funds under a patriotic veneer.

So what will happen now to the proverbial Mr. Cohen from Uruguay, who smuggled money and deposited it in the New York branch of an Israeli bank?

Israel attempted to buy time. The Americans did not buy into the Zionist explanation for laundered illegal funds and threatened that a state which fails to pass the required legislation would be ostracized and won’t be able to operate financially in the US. This was a grave blow for the three largest Israeli banks. Israel showed flexibility and passed the law.

Yet the story isn’t over here. Two of the largest banks, Discount and Hapoalim, were the only ones since the Oslo Accords to allow Arab banks to operate in Palestine (including east Jerusalem) and worked with those banks. And what would an Israeli bank do when a Palestinian bank deposits or withdraws money? How would the Israelis know the money is not coming from a terror group or is being funneled to terrorists?

Fear of lawsuits

Well, as a condition to keep working with Palestinian banks, the Israeli banks asked the government for a guarantee against lawsuits over the matter.

Indeed, such lawsuit arrived quickly, when several families of terror victims filed one in New Jersey against Arab Bank, charging that it handed over money on behalf of terror groups to the families of martyrs in Gaza and the West Bank. The bank responded, among other things, that the funds – in Israeli currency – were transferred via Israeli banks.

In order to avoid an entanglement, Discount and Hapoalim decided to end their business relationship with the Palestinian banks – yet our government was livid. After all, Israel was the one to force Palestine to use the shekel as its currency. What will the Palestinians do with their piles of shekels now?

To address the crisis, the government approached its own bank, the Postal Bank, and instructed it to do the work vis-à-vis Palestinian banks. The bank announced happily that it agrees to do it, as long as the government provides a guarantee against lawsuits. The government hesitated. Should it provide compensation in case some Postal Bank clerk approves a transfer to some anonymous terrorist? We don’t think so.

The Palestinian Authority pressed for a solution, the Americans intervened, and what did Israel do? Every time a large amount of shekels accumulates at Palestinian banks, they bring this money to our government, that is, to the Bank of Israel. Our central bank registers the amounts and proceeds to deposit the money in Israeli banks, as a legitimate Israeli deposit.

In short, the Israeli government is engaging in money laundering every month.

The Americans live with it Israel lives with it, Palestine pays a small commission, and the bluff continues unabated. So does this twisted arrangement prevent money from terrorists? Apparently it does, courtesy of the strictness of the Palestinian banks. Hence, all that is left with the current case of bribe/extortion is to find the latest bluff. It shouldn’t be too difficult.