Mizrahi Tefahot nears settlement over US tax evasion

Mizrahi Tefahot Photo: Eli Yizhar

The bank has already made a NIS 162 million provision, and more is expected.

Progress has been made in the US authorities' investigation against Mizrahi Tefahot Bank (TASE:MZTF) on suspicion of abetting tax evasion by its US customers. The bank's reports published today show that the US authorities last month sent the bank a letter stating that they would soon give the bank a draft proposal for a settlement. At the same time, when this proposal will be sent is unclear.

"The bank is in advanced negotiations with the US Department of Justice concerning a possible outline for concluding the investigation involving the type of agreement and its principles," Mizrahi Tefahot Bank wrote in its financial statements.

"This is the first sign of progress in the investigation in the US. At this stage, it appears that the bank is headed for a deferred prosecution agreement (DPA) settlement, similar to the settlement with Bank Leumi, and we therefore expect additional provisions for the investigation during the coming year," writes IBI Investment House head of research Dorin Zelnir-Palas.

Mizrahi Tefahot Bank has made a NIS 162 million provision for the investigation so far, and the most recent financial statements contained no new provisions. "It is possible that the amount of the loss emerging later will be substantially greater than the provision reported to date," the bank wrote in its financial statements.

Although the US Department of Justice wrote that it would send a draft settlement soon, the process of transferring the figures to the authorities is not yet completely finished. "The US Justice Department has sent other requests for examinations to the bank, including concerning additional accounts likely to be relevant to the investigation. The bank is taking action to comply with and complete these requests," Mizrahi Tefahot Bank wrote in its reports.

A similar investigation is being conducted against Bank Hapoalim (TASE: POLI), but Bank Hapoalim's situation appears to be worse; it has already made provisions of over NIS 1 billion, and stated in its reports that the final fine will probably be substantially higher. In addition, Bank Hapoalim is in a less advanced position than Mizrahi Tefahot Bank, because it has yet to receive a letter stating that a draft settlement would be sent to it.

Published by Globes [online], Israel business news - www.globes-online.com - on May 8, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Mizrahi Tefahot Photo: Eli Yizhar
Mizrahi Tefahot Photo: Eli Yizhar
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