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  1. NameUBS Affair Repeats itself, this time with an Israeli Bank
    Date2015-01-02 00:00:00 +0000

    Last week a historic settlement was signed, between the American Authorities and Bank Leumi Le-Israel, the second largest bank in Israel. The settlement (a deferred prosecution agreement) relates to events that took place in 2000-2010, in which Bank Leumi and its subsidiaries (particularly in Switzerland) assisted their American customers to evade payment of taxes.

    Under the settlement, the bank will pay a fine of $400,000, an enormous sum when compared to fines that have been imposed on Israeli banks by the Israeli Regulator. In addition, the bank disclosed the names of 1500 customers, as well as information regarding their accounts; names of involved employees; and a huge amount of internal e-mails and documents.

    Very soon after the bank was informed about the launch of the investigation against it, the bank decided to adopt a strategy of cooperation with the American authorities. In fact, the decision to cooperate was a precursory condition for the willingness of the American authorities to negotiate the issue vis-à-vis the bank.

    According to the Israeli media, before the bank decided on cooperation, its higher echelon checked previous similar affairs and met with senior managers of UBS, who very strongly recommended cooperation, including the disclosure of names of customers. They also advised Bank Leumi to reach an agreement as soon as possible, because as time would pass, the possibility existed that the authorities might increase the sum of the settlement.

    Another occurrence that was checked was that of the Swiss Wegelin Bank, which decided not to cooperate. After it was convicted, other banks refrained from working with it, and it actually went out of existence

    Another body that recommended cooperation was the Israeli Supervisor of Banks.

    The strategy of cooperation resulted in a significant reduction in the amount of the fine. In addition, the bank received additional latitudes: The original demand of the authorities was that the bank would admit to committing fraud and conspiracy against the IRS; but under the settlement it only admitted to assisting customers to evade tax.

    In conclusion, the Swiss affair caused Bank Leumi serious damage. However, had the bank not cooperated, its financial damage would possibly have been far larger. The parties, who may pay the price for this cooperation, are customers and employees, who are now exposed to criminal proceedings based on the information given by the bank. 

    Prof. Ruth Plato-Shinar, Founder and Director, the Center for Banking Law, Israel

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