Last Sunday, Justice Ministry director-general Shlomo Gur urgently summoned a bevy of colleagues to Jerusalem.
Gur brought together people from his ministry, the Internal Security ministry, the Finance Ministry, the Communications Ministry, the Securities Authority, and Customs, all of whom share responsibility for implementing the law against money-laundering enacted in August 2000.
The occasion was that on November 11, the Justice Ministry received a letter from FATF, the inter-governmental Financial Action Task Force on Money Laundering.
In the letter, FATF announced a meeting in Rome on December 5 and 6 to review events in countries under its eagle eye, ahead of a general assembly scheduled for January 2002 in Paris. That is where the FATF will rule who stays on the black-list of countries that permit money to be laundered in their territories.
Israel needs to present its progress against the malady. But, as several sources sourly said, the delegation might as well stay at home. Israel is sure to stay on the black-list this time around.
Putting on a good show
Israel made the black-list in June 2000. It has strived to get removed, but can't yet hack the basic requirements cited by the FATF. Its presentation in Rome will just be a show for the record, say some of the people involved.
Technically, Israel could argue that it has complied: Its law calls for the establishment of a database, not infrastructure. It doesn't even specify that the database has to be computerized. Theoretically, Israel's financial institutions could pack up their relevant reports in cardboard boxes and wing them over to the authority by camel caravan. Not that the FATF would be impressed, which could be a problem.
Scrabbling to make the grade
The Justice Ministry feels that even if Israel doesn't make the grade, it should make the trip to Rome to show goodwill. Failure to attend could be interpreted as retreat from intention to enforce the law, which could lead to sanctions against Israel's banks, they say.
That, by the way, explains why Israel's banks are bending over backwards to start routine reporting to the AML authority by January 25, 2002, as required. Bank representatives don't even want to speculate about the kind of sanctions Israel could expect if it finds itself still on the black-list in 2002. "Let's not give anybody ideas," they say.
Fine, but Israel still won't have much to say for itself in Rome in two weeks. Its hasty efforts look like patchwork. The government just published its big tender to establish a computer system for the AML authority this week. It will take a long, long time for a company to be chosen and actually finish the job.
Meanwhile, Tel Aviv-listed Amanet has been compiling a specification for the computer system, and will handle the information about to stream in from the banks.
The Justice Ministry will today, or soon, be publishing another four tenders to man top positions at the AML authority. Three executives have already been chosen, subject to background security checks. But a tender for 11 underlings will only be published in late January.
Nor are directives in place to oblige other financial bodies, including for instance insurers and mutual funds, to report suspicious activity. That too is a matter being rushed through parliament at the last second by a hard-pressed Justice Ministry.
The FATF is unlikely to view these delays kindly.
Another snag revolves around advocate Yehuda Shefer, a lieutenant colonel in reserves, a former employee of the attorney general and appointee to the top job at the AML authority. He was at the Justice Ministry meeting on Sunday even though his appointment has been suspended until the outcome of a court case regarding alleged sexual harassment of a (female) army officer.
At the attorney-general's request the court brought its hearing forward to next Tuesday, but meanwhile for Shefer it's business as usual. At the Sunday meeting he reviewed FATF's demands of Israel and what the Israeli delegation should say in Rome.
For whatever reason, sources at the meeting were unimpressed by Shefer's coverage, saying Gur had been wrong not to leave advocate Lior Horev ¿ head of the team founding the AML authority - on the job, at least until after the Rome meeting.
The problem is that Horev had fatally annoyed Gur, mainly by attacking the Justice Ministry for showing inadequate keenness to build an AML authority. There was basically no chance that he'd get the top job at the authority after that. When discovering he'd been replaced, he resigned in a huff, leaving a vacuum at this very sensitive time.
Hence Shefer's appointment as chief of the AML authority, which is supposed to commence operations on February 18, 2002. Yet it transpires that Shefer was actually the second choice, after an advocate from the offices of Caspi & Co. turned down the job.
Gur defends Shefer's appointment, saying he has experience in managing and driving systems, and sports a Masters' degree in public administration from Harvard. Nice, sniffed one of the persons at the Sunday meeting, but irrelevant to the future authority and to its mandate. Some suspect his appointment was more a matter of convenience to the Justice Ministry, in that he wouldn't become embroiled in unnecessary warfare.
If the court finds for Shefer, he could wind up in Rome as head of the Israeli delegation. If not, Gur will probably lead it himself. It's just one of many hurdles to be cleared entrepreneur route to a money-laundering free nation.