Police recommend indicting Israeli credit card co ICC-Cal

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ICC-Cal and its former CEO, Boaz Chechik, are suspected of fraud and money laundering.

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/ By Irit Avissar and Chen Ma’anit/

Israeli credit card company ICC-Cal and Boaz Chechik, its former CEO, suffered a serious blow yesterday, when the Israel Police announced that they were recommending an indictment for them and additional former company employees. Israel Police Investigations and Intelligence Unit head Meni Yitzhaki accepted the opinion of the head of Lahav and the investigative unit, and ordered that the case be forwarded to the Economic Department in the Office of the State Prosecutor, which accompanied the investigation. The recommendation to indict followed suspected cases of aggravated fraud, false entries in corporate documents, bribery, and violations of the Prohibition of Money Laundering Law.

The affair occurred in 2007-2010, when ICC-Cal conducted clearance for illegal pornography and gambling websites. Indicting a financial entity is considered a rather unusual and grave step. Actually, as far as is known, if the company is in fact indicted, this will represent the first indictment of an important financial entity in Israel.

The consequences of the police recommendation are still unclear, mainly for the various licenses ICC-Cal has to clear funds and issue credit cards. An additional sanction that could be employed against ICC-Cal involves confiscation of funds, which is liable to reach serious proportions, since in the past a considerable proportion of the company’s profits came from those dubious sources.

Heavy fines in the banking system

It is believed that the police recommendation to indict ICC-Cal for criminal offenses is also liable to complicate the company’s relations with the international credit card organizations with which it is linked: Visa and MasterCard. Membership in those organizations is what gives ICC-Cal the right to issue their credit cards. In order to be a member of those organizations, companies must fulfil a series of conditions, in which reputation is an important criterion, and a decision to indict ICC-Cal will definitely affect its reputation. Following the affair for which ICC-Cal is being investigated, global companies Visa and MasterCard have already probed ICC-Cal’s risk management setup, and have fined the company: Visa imposed a €9 million find, and MasterCard a $3.6 million fine. The Bank of Israel has also imposed a NIS 6 million find in these areas. Credit card industry sources said that as far as Visa and MasterCard were concerned, the affair was concluded to their satisfaction by payment of the fine and changes instituted at ICC-Cal since the affair was exposed. At the same time, the question arises of whether the indictment of ICC-Cal for criminal offenses, regardless of the substance of the affair, would constitute a problem for those organizations, and whether they will be able to accept a member whose indictment for criminal offenses has been recommended.

According to the police, the investigation findings show that, in 2007-2010, the suspects at ICC-Cal defrauded the international credit organizations on a large scale. “The suspects cleared transactions of online gambling websites with false coding designed to give the impression that the business was providing a service other than gambling. They closed and reopened the pornography and pharma websites in order to conceal the extent of transactions cancelled at these businesses, while committing fraud and money laundering, ” the police say. It is suspected that the allegedly improper transactions increased ICC-Cal’s business activity by billions of shekels. In addition, the suspects allegedly made large individual profits on the money gained from crime. The investigations of Chechik, who was ICC-Cal CEO in 2003-2010, began following a complaint filed by ICC-Cal controlling shareholder Israel Discount Bank (TASE: DSCT) with the police.

The complaint followed a series of investigative reports published by Moshe Lichtman in “Globes” five years ago concerning irregularities in risk management at the company, primarily in online clearance of gambling, pornography, and food additive (over-the-counter medications) websites. The investigative reports showed grounds for suspecting money laundering, since the source of the money being cleared by ICC-Cal was illegal gambling. The credit card companies are forbidden to do business with businesses in Israel or overseas whose activity violates the law applicable to them. The investigative report took place at the same time as a probe of the matter by the Bank of Israel. Chechik eventually left his position, together with a number of managers in the company, and the questionable activity was discontinued.

ICC-Cal was also fined, but this did not end the saga. Three years ago, the police decided to conduct a criminal investigation of the affair. Adv. Negev Navit of the Sheinman-Negev-Niv law firm, representing Chechik, said yesterday in response to the indictment decision, “All of Boaz Chechik’s actions were legal, in good faith, and for the good of the company. I believe that it will later be shown that Chechik committed no crime.”

ICC-Cal: We took effective measures to correct the faults

ICC-Cal said in response, “The events in question occurred in 2007-2008, and involved e-trading by foreign businesses, a field in which the company discontinued its activity long ago. In recent years, ICC-Cal has invested large resources in augmenting its control processes and its infrastructure for meeting regulatory requirements in general, and the provision of the Anti-Money Laundering Ordinance in particular. The audits conducted by the Bank of Israel also found that ICC-Cal had taken effective action to correct deficiencies and prevent their recurrence, and Banking Supervision Department welcomed the substantial change led by the board of directors and the CEO.”

Published by Globes [online], Israel business news – www.globes-online.com