Sources inform ''Globes'' that the Bank of Israel intends to fine Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) several million shekels in the online pornography and gambling clearing scandal. The decision to fine the company is not final, and ICC will likely appeal against the size of the fine to the Bank of Israel's Sanctions Committee.
The case involves ICC's clearing of online pornography and gambling transactions, uncovered by "Globes" in 2009. In 2011, the Bank of Israel ordered the company to make several changes in its conduct, including a thorough mapping of high-risk transactions. The Bank of Israel decided to fine ICC after it failed to implement the changes demanded of it.
The "Globes" investigation found that ICC subsidiary ICC Assets, cleared transactions on problematic websites, especially soft pornography, gambling, and nutritional supplements sites, and that the company had agreements with sites for which US law banned the clearing of transactions. "Globes" also found that some of the foreign companies which ICC contracted with had an unusual percentage of cancelled transactions, indicating problematic activity. It also found that ICC's money laundering controls were poor.
In response to the scandal, Visa Europe, the the licensee of Visa Inc. (NYSE: V) in Europe, Turkey, and Israel, fined ICC €9 million, and MasterCard Inc. (NYSE: MA) fined it $8 million. ICC subsequently slashed its international activity, even though it was an important source of profits. ICC CEO Boaz Chechik resigned and was succeeded by Israel David, but this was not enough for the Bank of Israel.
ICC, owned by Israel Discount Bank (TASE: DSCT) and First International Bank of Israel (TASE: FTIN) with 71.8% and 28.2% stakes, respectively, is trying to placate the Bank of Israel, and promise that the new CEO, Doron Sapir, who is replacing the retiring David, will properly deal with the flaws. It is not clear whether the Bank of Israel will agree.
ICC said in response, "At issue are flaws discovered in 2008, and many resources have since been invested to correct them. We appreciate the professionalism of the supervisor of banks and the chairman of the Money Laundering Prohibition Authority, and we hope that no fine will be levied, since the flaws have unquestionably been corrected."
The Bank of Israel declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on January 15, 2013
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