Israeli bank hit with $195 million fine for US tax avoidance scheme

Israeli bank hit with $195 million fine for US tax avoidance scheme
Mizrahi-Tefahot Bank, the third-largest bank in Israel, has agreed to pay $195 million to the US government for aiding US citizens in tax evasion.
2 min read
13 March, 2019
Third-largest Israeli bank has to pay $195m to the US over tax evasion [Getty Images]
One of Israel's largest banks has agreed to pay $195 million after admitting to helping US citizens avoid paying taxes by stashing their assets in offshore accounts.

The US attorney's office says Mizrahi-Tefahot Bank Ltd and two subsidiaries acknowledged guilt on Tuesday in a deferred prosecution agreement with the Department of Justice filed in a California court.

This culminates a five-year long investigation into Israel's third-largest bank.

From 2002 to 2012, Mizrahi-Tefahot conspired with US clients to avoid taxes on assets and securities by opening and maintaining offshore accounts under false or code names or through foreign entities.

The bank agreed to pay the government $53 million in restitution, plus the $24 million in fees it earned from the transactions and a $118 million fine.

The bank had set aside $117 million this quarter to cover a likely fine by US authorities. It previously set aside $44 million and plans to cover the rest of the fine in its fourth-quarter results, Reuters reported.

Mizrahi Tefahot rejected an earlier Justice Department deal in August with a fine of $342 million, saying any "reasonable calculation" would result in a significantly smaller fine.

Bank Leumi, a larger rival bank, paid $400 million in fines to the US in late 2014 after a similar investigation.

Hapoalim, one of Israel's two largest banks alongside Leumi, said last week it would set aside an additional $246 million to cover a potential US investigation into possible tax evasion.

The US investigations has led to a sharp decrease in the number of deposits held by foreigners in Israeli banks, according to the Bank of Israel. 

In the past 10 years, almost $19 billion has been withdrawn by foreign residents from Israeli banks, said The Times of Israel

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