Hot Off the Press: Israel’s Three Largest Banks Pay Hundreds Of Millions In Fines For Helping US Citizens Evade Taxes
By Eve Mykytyn
Following a few mild words of dissent by Congresswoman Ilhan Omar, the US House of Representatives was almost united in affirming the special relationship between Israel and the US. See, for ex. So how is “our most reliable and most important ally” treating us? If ‘our' includes the US treasury, the answer is that Israel’s banks have been accused of and have admitted to actively colluding with wealthy US taxpayers to avoid US taxes.
On March 12, Israel’s third largest bank, Mizrahi Tefahot, agreed to pay $195 million to the United States to settle charges that the bank knowingly aided tax evasion by US citizens from 2002 until 2012.
Israel’s largest bank, Leumi paid a $400 million dollar fine for similar “criminal activity” that spanned the period from at least 2000 to 2011. Hapoalim, Israel’s second largest bank is presently negotiating a settlement with the US Justice Department. The total settlement from all three banks will amount to over $1 billion.
As conceded by the banks, these tax avoidance schemes have been going on for decades. Israel’s Supervisor of Banks, Hedva Ber, noted the longevity of this practice: “Twenty years ago, Israeli banks did not ask customers about the source of their money and did not ask if they had paid taxes or not.” But the issue is not limited to banks failing to inquire about the source of funds, these admissions of actively aiding tax evasion show that “Israeli banks…..for decades helped Diaspora Jews evade taxes and launder money on a major scale.”
According to Hevda Ber, for many years Israeli banks provided essentially the same services to foreigners that Swiss banks gave, minus Switzerland’s banking secrecy laws. Actually, according to the settlements and to criminal cases against US taxpayers, Israel’s banks not only did indeed offer American customers secrecy for bank accounts, (Leumi admitted to failing to send statements to the US addresses of over 2400 customers) but also provided ways for US citizens to bring untaxed income back to the US without paying US taxes.
For instance, for over twelve years in the 1970s and 1980s, the Antar family, owners of the discount electronics chain Crazy Eddie, laundered money through Bank Leumi. Sam Antar described to The Times of Israel how he and his family transferred a total of about $10 million in unreported cash by handing a briefcase full of cash to a Bank Leumi employee in New York and then receiving an equivalent suitcase the next day on an El Al flight to Israel.
Here was the challenge of withdrawing that money as described by Anton. “Say I had $10 million in Israel, and I needed to use that money over here in New York. They couldn’t wire me the funds because the account is secret. This money is hidden from the US government to evade income taxes.” So, according to Antar, Bank Leumi in New York would give him a low interest rate loan secured by Antar’s assets in Israel. The paperwork for the loan concealed the fact that Antar had money deposited in Israel.
Similarly, and according to court documents, Elie Waknine, of Huntington Beach, California, held millions of dollars in an account at Bank Leumi. Waknine’s tax returns falsely claimed he did not have any foreign accounts. Bank Leumi did not send bank mail to Waknine’s home in the United States. Leumi allowed Waknine to access his accounts through certain ‘loans’ issued by Leumi’s U.S. branch that were secretly secured by funds in his undeclared accounts in Israel.
The Times of Israel notes that the fact that three of Israel’s major banks have been under criminal investigation by the US Justice Department for allegedly helping thousands of US citizens launder money and evade taxes has garnered remarkably little public attention. The Jewish press covered the Mizrahi Tefahot settlement, but the New York Times gave only a short summary and I could find no mention in the Wall Street Journal.
According to David Shuster, a lawyer who represents a number of American citizens who had undisclosed bank accounts in Israel, the lack of publicity is understandable because none of the actors involved are interested in the limelight.The Department of Justice’s goal is tax enforcement and the banks are “going to say as little as possible. The more they say, the more evidence can be brought against them.”
Mr. Shuster may be right, but he fails to account for the dearth of reporting about Israel’s banks as compared to the Panama Papers or even the recently uncovered money laundering activities of certain European banks. I suspect in the present atmosphere of heightened paranoia over anti Semitism, the press may be reluctant to touch a financial scandal in which most of the participants are Jewish. Maybe they have taken into consideration that much of the outrage over Omar’s observations about Israel was over her accusation that “it’s all about the Benjamins.”
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