Bank Leumi (TASE: LUMI) has concluded most of its business with the US tax authorities (although the US Securities and Exchange Commission (SEC) investigation against the bank is still pending), but now faces a probe of the affair by the Bank of Israel. The central bank is expected to begin its inquiry into the events in which Bank Leumi and some of its officials actively assisted its US customers in evading taxes. Up until now, Supervisor of Banks David Zaken's involvement in the affair consisted mostly of briefings from Bank Leumi officials about the progress of the investigation in the US. He also welcomed their cooperation with the US authorities, even at the cost of disclosing information about their customers.
As far as is known, the Bank of Israel Banking Supervision Department has conducted no investigation of its own to date, because it always waits for other authorities to finish their investigation before beginning its own. Concerning the question of the fine and its own expected investigation, the Bank of Israel said, "This is a heavy fine levied on Bank Leumi as part of the US tax authorities' efforts to enforce payment on US taxpayers, and against financial institutions that allowed the depositing of checks on which tax was not paid. The Banking Supervision Department is evaluating risk management at the bank, given its activity and the results. If the probe shows a need for measures by the Banking Supervision Department, these measures will be taken.
At the beginning of the month, Zaken was interviewed on this subject at the "Globes" Israel Business Conference. He said, "We will check the matter out, since this is a significant event. We will also make sure that lessons are drawn from the event by both Bank Leumi and the entire banking system. One of the questions being examined is how to make sure that such events do not recur, not necessarily just in business involving US citizens, but in general."
"Globes" recently reported that the Bank of Israel was considering the possibility of requiring senior bank officials, headed by former Bank Leumi CEO Galia Maor and former chairman Eitan Raff, to return the bonuses they received during those years. It is believed that this is the main sanction available to the Bank of Israel, because it cannot demand that the bank should dismiss officers that it no longer employs. At the same time, the Bank of Israel emphasizes that this conclusion is premature. Owing to the grave findings published by the US authorities, however, it is hard to imagine a situation in which the Bank of Israel does not adopt any sanctions in the affair.
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2014
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