"CNBC" reports this morning that, "as far as the Department of Justice’s investigation into offshore tax avoidance is concerned. It looks like Israel is going to be the next Switzerland."
"CNBC" recounted that last week the US Department of Justice issued an indictment against three American tax preparers for helping clients avoid taxes by moving money to Israel. According to the indictment David Kalai and his son Nadav and David Almog, all from a company called United Revenue Service, helped clients avoid taxes by transferring money to two Israeli banks, simply referred to as banks "A" and "B."
The alleged violations related to relatively small amounts of tens or hundreds of thousands of dollars. "CNBC" could not reach the men for comment.
However, the "CNBC" report added that, "The indictment revealed the existence of a grand jury that is almost surely going after much bigger fish. And the details provided in it appear to suggest that “Bank A” is Bank Leumi, whose private banking operation is headquartered in Tel Aviv, and “Bank B” is Bank Hapoalim, which also maintains its global private banking center in Israel’s second-biggest city."
Bank Hapoalim (TASE: POLI) spokesperson Ofra Preuss told CNBC, “We read the press reports and are checking into them.” Bank Leumi (TASE: LUMI) was unavailable for comment.
Referring to tax avoidance in Switzerland, "CNBC" said, "The US government has successfully cracked the code of Swiss bank secrecy, forcing UBS, Switzerland’s largest bank, to turn over thousands of names of American account holders to investigators, and taking similar actions against other Swiss institutions."
The report continued, "Sources tell CNBC the new case is just the beginning of a potential series of indictments, which may snare some of the wealthy American clients who have hidden money in Israel, many for generations. That’s likely to be politically controversial, especially at a time when the US and Israel are working closely together to contain a geopolitical threat from Iran."
The report also cited the political sensitivity of an Obama administration Department of Justice in an election year targeting a group of clients of whom many are likely to be Jewish or have historical family ties to Israel.
Scott Michel, a partner at the law firm Caplin & Drysdale which specializes in criminal tax fraud investigations told CNBC, "There are a substantial number of Americans with unreported assets in Israel. I wouldn’t be surprised if it is on a par with Switzerland.”
Bryan Skarlatos, a partner and lawyer at Kostelanetz & Fink LLP, told "CNBC" that he has clients who are being questioned in the wide-ranging investigation into Israel bankers. He said, “I have special agents asking questions about specific banks. They need evidence that somebody spoke to a banker and the banker had a sense that they were dealing with a US person - they’re asking ‘did you give them your U.S. passport?’”
Both Michel and Skarlatos spoke of allegations of cash-transfer banking, in which overseas bankers match up American clients who want to withdraw and deposit the same amount of cash with the foreign bank.
They said that the bankers appear in the US, typically at a hotel, and arrange for couriers to bring the cash to the hotel from the depositing customer, and later turn it over to the withdrawing customer, only later crediting each account for the transaction back in the foreign bank offices.
Skarlatos said, "It can be a dangerous way to avoid taxes. Some people don’t want to pay taxes, but they’ll risk their lives having someone show up on their doorstep with $3 million in cash."
"CNBC" concluded its report by observing, "In a highly technical and global economy, it’s getting more and more difficult for Americans to hide their assets overseas - and keep it hidden from the IRS. And that means the days of $3 million cash transfers may be coming to an end."
Published by Globes [online], Israel business news - www.globes-online.com - on June 20, 2012
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