The writer of this article came across an occurrence of laundering monetary winnings from the National Lottery while conducting an investigation. The article describes how money laundering has been done in the past. Since the time that this article was wr
How to “Launder” Winnings from the National Lottery
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How to “Launder” Winnings from the National Lottery


By Uri Shitrit (written a few years ago)

Private investigator, this has been my occupation over the past few years.  After years of serving the state in investigative and informational service roles, I made a decision to join a private investigation agency with the goal of putting the experience I accumulated in service of the country into use. Ten years ago, on one of the stations along my career path, I joined the “Haaretz” newspaper as an investigative journalist. One of the journalistic investigations that I conducted dealt with laundering monetary winnings from the National Lottery.

“The National Lottery is aware of the existence of this phenomenon, but does not track it.  As far as it is concerned, whoever holds the winning lottery ticket and approaches the National Lottery is the winner,” Moshe Gal (then the spokesman of the National Lottery) told me in response to an investigation I published under the title, “Who Hides in the Bag”.

This week, when information regarding the exploitation of National Lottery winnings for the purpose of money laundering by criminals in the north was published, I got a sense of déjà vu. It was clear to me back then, while I was investigating the phenomenon, that the IRS was aware of the existence of the occurrence as well.

Abraham Tsarfati, who was then serving as the associate representative for investigation and informational services commented to me, “The IRS has no precise estimation of the amount of money laundered through this method. The buyer and the seller are not interested in disclosing that kind of information to the IRS.”

The IRS spokesperson back then, Sarit Giladi-Dor, completed Tsarfati’s response, “Laundering monetary winnings from the National Lottery is a complex and complicated action that requires sophistication and special circumstantial correspondence. The combination of these conditions is unique and rare,” the spokesperson said and added, “In our estimation, the amount of incidents is minimal.

The winning tickets do not list names, and so they do not allow us to track the winners.  We can, however, track large monetary movement amongst assesses through the information available in our database and other information methods.”

What has been done since then, and whether the IRS has taken upon itself to strategically and frontally attack this issue, is hard to tell. I do not recall any publications that mentioned investigations or initiatives on behalf of the IRS against criminals who “launder winnings” from the National Lottery.

What actually happens and how the system works, I already revealed back then. I assume that there are additional methods that have been developed with time and which had to be customized, following the legislation of a law forbidding the laundering of money and taxing the winners of lotteries such as the National Lottery.

Who doesn’t remember images of the happy winner descending the stairs of the National Lottery with his head covered by a paper bag with two holes cut out for the eyes? The cameramen who were hired by the publicists of the National Lottery film unrecognizable characters, which are hiding from an expected attack of requests for support and charity.

As it turns out, the character with the paper bag over his or her head is not always the actual filler out of the form that won the big prize. The winning lottery tickets are merchandise that change hands. Various business owners are willing to purchase the tickets for the price of the winnings, plus an additional 25%.

Until recently, before it was determined that a tax would be placed upon winnings, business owners who would hide revenues from the IRS purchased a winning lottery ticket and registered it in their account books as tax-exempt winnings from the National Lottery.

One of those involved explained the simple math behind this stunt to me back then, “Tomorrow an IRS inspector could come to me, ask for explanations regarding the funding sources of the cars, the two-story house and the yacht. So you can always wave the considerable check issued by the National Lottery in their face and remove their suspicion for a while”.

The winner who sold his ticket, on the other hand, is left with money from an unexplainable source.  IRS inspectors check samples of the population in order to locate suspicious tax-payers, and they almost never check salaried employees.

The chances are that no one will ever find the original winner who sold his ticket and ask him to explain the sources of his income. In return for the risk he is taking, though, the original winner selling his ticket receives a 25% bonus. The sum must be worth the risk of exposure.

The connection between the prize winner and the ticket buyer is usually made through a mediator. The mediator receives a work order from an interested business owner, locates winners, and offers them an exchange in which they receive the cash value of the winnings in addition to a fat commission. If the ticket holder agrees in principle to the exchange, he or she meets with the purchaser in order to finalize and execute the exchange.

The winning ticket is handed over to the potential buyer. If the ticket is found valid after an additional test, there are a few ways to close the deal - the winner receives the commission in cash on the spot, and the purchaser hurries to the National Lottery and presents the winning ticket.

The National Lottery has no way of knowing who the real winner is. Ticket purchasers are not required to identify themselves at sales points, and the winnings are made out in the name of the person holding the ticket, meaning, the ticket purchaser. His bank account is credited with the sum of the winnings, and then the purchaser of the ticket has enough bank coverage to pay the real winner in cash.

There are certain cases in which, depending on the occupations of the winner and the purchaser, payment for the winnings and the commission is made in foreign currency. The currency used is determined according to the nature of the original winner’s business. If the real winner has a bank account abroad, the money he receives can be deposited into that account through a bank transferal.

Back then, I was informed of a businessman from Tel Aviv who purchased a winning lottery ticket. A dealer active in the black market told him that someone who had won the prize for eight million shekels was interested in selling his ticket for a 25% commission. After a meeting between the winner and a mediator followed by negotiations, the deal was closed.

The winner received ten checks totaling ten million shekels. The purchaser received the ticket and collected the big prize from the National Lottery. The deal paid off for the businessman. It was then his intention to continue to launder money in this method.

This week we learned through the exposure of the episode in the north, that the world behaves in a certain way.  Will the new limitation laws that recently came into effect destroy the phenomenon, or significantly reduce it?  Who knows, time will tell. 

Are you interested? Links to additional articles written by private investigators or the Investigation Room.

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