Want to avoid financial scams? Submit indictments and lots

One of the troubling issues arising from the treatment (or lack of treatment) of law enforcement agencies in cases of "multi-casualty" financial fraud is the unbearable ease with which companies that violate the law and embezzlement of investors' money evade the radar of the authorities; At the same time, the controlling shareholders "hand over" the companies to liquidators appointed by the courts - usually after the company's coffers are emptied of its investors' money - and "leaving" intact.

In too many cases in recent years, tens of millions of investors' money has been stolen, stolen or simply stolen from investors in financial companies, merchant and forex markets, without those responsible for the disappearance of the money being prosecuted for their actions. At the same time, here and there, there are cases in which the embezzlement attributed to it was particularly large (for example, the Kela Foundation), and / or the embezzlement received a large media response (eg Yotrade and Aviv Talmor); Then the matter was dealt with at the criminal level with the intention of filing indictments.

Experience has shown that in every single case that amounts to an indictment, there are quite a number of cases in which similar or even identical acts were committed, without receiving the required criminal treatment.

Thus, for example, the Yotrade affair, in which tens of millions of shekels were stolen, is now before a serious indictment is filed (as published). At the same time, other companies, such as the Jerusalem Stock Exchange, were not "treated" or similarly treated by the enforcement agencies, the Securities Authority and the Economic Prosecutor's Office, despite the fact that these exact and even more serious acts were allegedly committed On securities laws).

The recent "collapse" of Forex AG Investec Global, in which a temporary liquidator has been appointed - without properly being investigated by the Securities Authority but "left" for police treatment - is a clear example of the fact that economic enforcement activity is partial and insufficient "Leaving" the handling of this and other cases to the police is not a solution at all, but more a form of disavowal, since the police do not have the tools and expertise to handle and enforce offenses relating to securities laws.

A review of Investec Global's agreements and examination of its manner of operation leads to the conclusion that the Company and its managers managed the customers' money without a license, similar to the manner in which it operated. In both cases, tens of millions of public funds were "liquidated", many families lost their savings, and a whole life was destroyed. In both cases, the law appears to have been violated; And in both cases it appears that the controlling shareholders have gone unscathed - apart from forfeiting assets to a negligible extent to the volume of debts.

What is troubling is that on the face of it, it is impossible to identify "legality" or systematicity regarding the fate of companies and controlling shareholders acting in similar or even identical ways. Why do most of the companies and controlling shareholders, who ran illegal investments and stole public funds, not be prosecuted while a limited number will face the risk of being behind bars?

This seems to have no logical explanation; The result is completely random; And apparently depends on the good fortune of those companies and controlling shareholders and other random circumstances such as the handling body (police or securities authority), and in which district the complaints were filed.

This state of affairs, in fact, involves a kind of selective enforcement, which is an undesirable situation that not only does not achieve the desired result and is deterrence against fraud, but it accomplishes the opposite in the form of an incentive for fraudsters to carry out their scheme.

If the fraudster knows that the chance of paying a real price for his actions is not statistically high, it is reasonable to assume that nothing will deter him from cheating because the temptation and the amazing ease with which to perform a seemingly sophisticated financial fraud is great.

If the deceiver knows that by fraudulently smuggling assets into unknown places, he will still have a large sum of money, even after transferring his "open" assets to the company's liquidator, the cheater has a great incentive to carry out the fraud, knowing that the risk of having to pay a significant price for his actions High.

The conclusion is that without uncompromising enforcement and an attitude of "zero tolerance" to fraudsters, it will not be possible to realize one of the main goals of criminal enforcement that is to deter the public from similar acts; And the incentive to carry out acts of economic fraud will increase.

In my opinion, there is no benefit in "selective" enforcement, and it is best that the authorities internalize this and change the existing approach while strengthening the enforcement mechanisms, while establishing a separate body whose role will be to prevent and enforce illegal financial institutions.