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On March 23, 2020 taxnotes.com reported that Israel’s largest financial institution, Bank Hapoalim, expects to pay $870-million to end investigations by US authorities into allegations that the bank helped clients evade their US tax obligations.
Hapoalim stated in their March 18th filing with the Tel Aviv Stock Exchange “Recently, the bank group and … the [Justice Department] and bank regulatory teams handling the investigations have extensively negotiated the terms of resolutions which, once approved by the US authorities and the bank group and (are) finalized, would resolve the investigations.”
This proposed settlement, part of a deferred prosecution agreement, includes the signing of a consent order with the New York Department of Financial Securities and an enforcement action with the Federal Reserve System. Hapoalim has been steadily increasing its provisions for a settlement with US authorities in recent years. In March 2019 the bank booked an additional charge of $246 million, bringing the total to date to $611 million, to cover possible resolution of the dispute.
Dave Wolf of the Dave Wolf & Co Law Firm stated that while it is unclear whether Hapoalim’s settlement offer will be accepted, fiscal exigencies related to the coronavirus pandemic may influence the decision. “This case is dragging out so long and the IRS is understaffed and needs funds” Wolf said. “It may have been in [Hapoalim’s] thoughts to try to settle now, as the IRS needs money more than ever with the current crisis.”
Israeli banks have made significant changes to their practice to limit future exposure to tax investigations by the US and other countries. Banks are now extremely careful about accepting money from abroad, closing or consolidating foreign branches or operations abroad in countries such as Mexico, the US and Switzerland.
Hapoalim is the last major Israeli bank to settle its dispute with US authorities. In March 2019, Mizrahi-Tefahot Bank LTS. Agreed to pay $195 million as part of a deferred prosecution agreement with the Justice Department. Prior to that, Bank Leumi paid a file of $270 million and entered into a deferred prosecution program in 2014.
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William Hoke,” Israeli’s Bank Hapoalim Offers $870 million to Settle with U.S.”, March 23, 2020, accessed April 7, 2020, https://www.taxnotes.com/tax-notes-federal/financial-institutions/israels-bank-hapoalim-offers-870-million-settle-us/2020/03/23/2c9kb
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