It’s possible that Bank Leumi (TASE: LUMI), Bank Hapoalim (TASE: POLI), and Mizrahi Tefahot Bank (TASE:MZTF) are not the only Israeli financial institutions being targeted by US authorities. Already in the coming months, US authorities may open investigations into the activities of Israeli financial institutions that are not conventional banks, such as private investment houses and private or family mutual funds (including money managers for high-net-worth families), on suspicions that they helped a number of their clients – US citizens or Green Card holders – to avoid reporting financial assets and avoid making payments to the US tax authorities.
Washington D.C. based Dearson, Levi & Pantz attorney Zion Levi, who specializes in US and Israeli tax law and in representing clients in cases against US tax authorities, told “Globes” that such steps are being taken against financial institutions that are not traditional banks in other countries around the world as well.
Levi did not name the financial institutions that may be targeted in the investigation, but other industry sources said that some are names that are very familiar to the Israeli public. The institutions being targeted are those that advised customers to open accounts in tax havens that, until recently, did not report customers with US citizenship to the authorities.
Israeli-Americans (and Israelis holding Green Cards) received advice from these institutions to invest in Hong Kong, Mauritius, Singapore, and Brazil. However, the number of tax havens that challenge the US is dwindling, and these four countries recently signed cooperation treaties with US tax authorities.
“The Israeli financial institution that advised its clients to invest in these countries could find itself ensnared in a serious situation,” said one source.
Levi explained that the decision whether to open investigations into the activities of Israeli institutions, in addition to the three banks, will be made based on the findings of investigations are currently underway into the activities of US citizens who apparently made investments through these institutions in order to evade taxes in the US. If the name of a particular financial institution rises repeatedly in the investigations of the suspected tax evaders, it is highly likely that an investigation into its activities will be opened.
It is quite possible that some of those under investigation will prefer to provide incriminating evidence against the banks or financial institutions with which they worked, and to detail how they helped them hide financial assets from the US authorities. Such collaboration may give the suspects a way to avoid criminal charges and to receive less severe fines from the tax authorities.
In a relatively new development, which is intended to increase enforcement of US tax laws, the authorities also decided to invest resources in physically tracking down officials at financial institutions about which suspicion of helping clients evade taxes were raised. “This is a personal focus on specific people,” said Levi.
Levy says, “It’s not unreasonable to assume that investment mangers themselves will be stopped at airports in the US upon arrival, and questioned, and if there is grounds to do so, charges will be brought against them.”