The New Jersey Scandal, Pt. 2: The Israel Fallout

Even before the dust settles in the States, Israel and her charities will already start to feel the effects from last week’s scandal.

First, we can expect that donors’ skepticism of Israeli charities will increase, which is understandable. The current proliferation of nonprofits already casts doubt on their authenticity: Israeli charity-representatives hound communities weekly; American Friend organizations exist in abundance; internet and email advertisements appear on every Jewish website broadcasting Israel’s fight for its physical and spiritual survival. In short, this scandal has cast a shadow on a situation already wrought with suspicion, doubt, and misconception.

Second, we can expect the relationship that exists between Israeli amutot [nonprofits] and money changers to come under fire. Charities need their donation-checks to clear as soon as possible. As opposed to banks, “cash houses,” or money changers, can exchange cash for checks (for a one to two percent fee) with a wait time of zero to two days. Thus, Israeli charities regularly deposit large sums of cash received from money changers into their bank accounts.

Depositing cash in a bank account (or not even reporting it) is not a good idea. It has never been a good idea. Recently, with the changes in American and Israeli oversight, it is an even worse idea yet, plenty of organizations still do it. Due to recent events, those charities that continue to do this are essentially taping a “kick me” sign to their backs. Don’t be surprised when the Rasham Ha’amutot [Israeli Registrar of Charities] comes a knocking to inquire about the large deposits of cash. Also, banks are required to report out-of-the-ordinary transactions to the Bank of Israel. An organization can bet that some or all of those below-the-radar cash deposits have been reported.

Third, we can expect that the Israeli police will become involved. Maybe not this week. Maybe not next month. But it is only a matter of time. For those who are not aware of it yet, the world is a small place and the United States has a very big reach. Just ask the banks in Switzerland, which until recently were known for their very discreet and private banking. That is until the US government came along and asked them nicely to give over the names of those American citizens who are hiding their assets from the IRS. Either due to U.S. initiative or common sense, it is only a matter of time before the Israeli authorities pick up where their American counterparts have left off.

Fourth, as mentioned above, we can expect that the Israeli Registrar of Charities will take a microscope to charities that receive money from abroad, specifically, in cash. In my experience I have seen nonprofit banking procedures boil down to one thing: convenience (not compliance). In addition to cash deposits, many nonprofit directors and employees use their own private bank accounts instead of opening/using an account under the organization’s name. In Israel, nonprofits are checked about once in every five years. The chance for an Israeli nonprofit to pull one over the governmental oversight committee is slim and only getting slimmer.

Fifth, we can expect that Israeli banks will introduce internal regulations to alert themselves of charity wrongdoing in accounts they manage. Israel was relatively late in getting approved as a country free of money laundering. Like any latecomer, the banks make up for lost time in their zealousness in adhering to the law.

Tizku LeMitzvot [May you continue to merit doing good deeds],



Related Posts:

The New Jersey Scandal, Pt. 1: The Facts

The New Jersey Scandal, Pt. 3: The IRS Expected Response

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