The Israel police today removed a gag order on an international investigation it has been conducting for the past year, in cooperation with the Bank of Israel banking supervision department. The investigation, which concerns suspected violations of the Prohibition on Money Laundering Law (5760-2000), focuses on branch 535 of Bank Hapoalim (LSE: BKHD; TASE: POLI), and on Poalim Trust Services.
The police suspect that hundreds of millions of dollars from overseas were deposited at branch 535, Bank Hapoalim’s center for private and international banking, located on Hayarkon St. in Tel Aviv, and were immediately transferred out. The police suspect that the bank branch was used as part of a long trail for crime-derived money. The police have arrested 22 employees of the branch, including the branch manager. The employees are now being questioned at the Petah Tikva branch of the Israel Police National Serious and International Crimes Unit.
Unit commander Brigadier General Amihai Shai said that the investigation involved 80 separate incidents involving 200 customers, all of whom would be summoned for questioning by the police. The police have convincing evidence against 45 of the 200 customers.
Senior police officials attended a special press conference today. When asked whether they had evidence against more senior Bank Hapoalim executives, and whether more senior executives would be investigated, Shai, Investigation and Intelligence Department commander Major General David Cohen, and Supervisor of Banks Yoav Lehman declined to answer. They also declined to comment on today’s capital market rumors that the owners of accounts and the money launderers were immigrants from Russia known to have extensive business interests in Israel.
It was also reported that the police had issued eighteen orders freezing various accounts at the branch. Hundreds of millions of dollars have been accumulated in these accounts.
Both senior police officials and Lehman stressed that the investigation was confined to branch 535, Poalim Trust Services, and Bank Hapoalim’s French branch, which has been suspected of involvement in money laundering in the past.
Bank Hapoalim said in response that when it had been notified of the investigation at its Hayarkon branch, it had ordered its employees to cooperate fully with the investigators. Bank Hapoalim added that it had acted according to the law in order to prevent money laundering, and that its management was keeping a close watch on the investigation. Ban Hapoalim also said it would act in cooperate closely with the Supervisor of Banks and the police.
When the investigation was reported, the Bank Hapoalim share dropped sharply on a heavy volume.
Following the disclosure of the investigation, Israel Money Laundering Prohibition Authority director Adv. Yehuda Shefer said, “This proves that Israel is serious about changing its culture with respect to money laundering crimes. It was once said that Israel was becoming a refuge for organized crime funds that Israel was becoming a refuge for organized crime.
”This investigation makes a definite statement that Israel will not become a refuge for crime money, or for criminals. That is its true significance. If anyone thought that money laundering could be carried out in Israel, this investigation constitutes proof that they were wrong.”
Bank Hapoalim this morning appointed Adv. Avigdor (Dori) Klagsblad to represent it in the affair. Poalim Trust Services chairman Shlomo Recht and CEO Haim Shamir have hired Adv. Pinhas Rubin to represent them.
Sources inform "Globes" that the bank accounts of Vladimir Gusinsky, one of the controlling shareholders in Ma'ariv Holdings (TASE: MARV), were being examined as part of the investigation.
Sources close to the investigation said that it would not be confined to the Hayarkon branch. The investigators suspect that higher-ranking Hapoalim group executives were aware of what was going on at the branch.
Published by Globes [online] - www.globes.co.il - on March 6, 2005