District Court of Tel Aviv – Jaffa Convicts Money Services Business of an Offense under Section 3 (b) of the Prohibition on Money Laundering Law
On 1 September 2013, the District Court of Tel Aviv – Jaffa (presided over by Honorable Justice Dr. E. Mudrick) convicted Jacob Gerbi (hereinafter "the Defendant") and Y.M. Better Service Ltd. (hereinafter "the Business") of the crime of transmitting false information in order to not be reported under section 7 or to produce a false report under section 3 (b) of the Prohibition of Money Laundering Law, 2000 (hereinafter "the Law"), together with the Prohibition of Money Laundering Order (The Money Services Businesses' Requirement regarding Identification, Reporting, and Record Keeping), 2002 (hereinafter "the Order").
The Defendant, the owner and manager of the Business, in the years 2002-2006, provided check discounting services. In 2003, the Business was registered as a Money Services Business in accordance with the Prohibition on Money Laundering Law and the Defendant accepted the responsibility of complying with the Business obligations in accordance with the Law. In the period of the indictment, the Defendant and his Business were accused of conducting more than one thousand discount transactions in return for cash, each in the amount of at least 50,000 NIS without reporting them to the Israel Money Laundering and Terror Financing Prohibition Authority (hereinafter "IMPA"), amounting to a total of 156 million NIS where in each one of the transactions the Business issued a check in return, which was not handed over to the customer and instead was cashed by an employee of the Business. Twenty five discount transactions, each in the amount of at least 500,000 NIS (amounting to a total of 17 million NIS) were also not reported to IMPA. In addition, during the relevant period, the Defendant and his Business avoided requesting statements from their customers specifying whether they were acting for themselves or on behalf of another party. The Defendant and his Business took several measures to conceal the identity of the recipient of service, including artificially splitting the transactions in the amount of at least 500,000 NIS in order to create the appearance of a transaction that is below the reporting threshold.
On a factual level, the Court held that the Defendant and his Business did not comply with the reporting obligations imposed on them under sections 6 and 7 of the Order. The Court also addressed the issue of the mental element required in order to be convicted of an offence under section 3(b) of the Law. In this matter, the court referred to the ruling in the Criminal Case (Tel Aviv) 40083/07 State of Israel v. Hajami et al (4.9.2012), according to which the probable consequences rule as established in section 3 of the Law should be applied, in light of the purpose of the Law. The Court emphasized the importance of thorough and meticulous compliance with the reporting requirements in order to achieve the purpose of the law and combat money laundering. The Court also noted that one of the purposes of article 3 (b) is to prevent the exploitation of Money Services Businesses by criminals, and in this context does not mean that the Money Services Business was not aware of the nature of the criminal activity conducted by its customers.
In the circumstances of this case, the Court held that there is no need to use the probable consequences rule because there is sufficient evidence to prove "intention", as required under section 3(b) in the Law. The Court ruled that the Defendant was aware that for many years that reports were not sent to IMPA and that his actions were intended to prevent reports from being sent to IMPA. The court based its conclusion on, inter alia, the fact that it rejected the Defendant's version regarding his innocence and stated that it was convinced that the Defendant clearly understood the meaning of the reporting obligation. Finally, the Court rejected the defendant's arguments regarding abuse of process which was based on the unjust conduct of law enforcement agencies and selective enforcement.