* Bank Leumi sends letter to U.S. customers about IRS
* Seen as sign that U.S. tax crackdown wider than
* At least three Israeli banks seen under U.S. investigation
By Lynnley Browning
Jan 10 Bank Leumi, the largest commercial bank
in Israel, has urged U.S. clients to disclose information about
their accounts to U.S. authorities, who are investigating Leumi
and many other foreign banks over possible tax avoidance by
In a Dec. 16 letter obtained by Reuters, Bank Leumi
le-Israel BM urged U.S. clients to enter
the Internal Revenue Service's voluntary disclosure program,
part of a wide-ranging U.S. crackdown on offshore tax dodging.
"As published in the media, U.S. authorities are conducting
investigations of foreign banks in connection with compliance
with U.S. tax laws," the bank said in the letter.
The U.S. effort has been focused largely on banks in
Switzerland, but it has been known that banks in other
countries, including Israel, are under scrutiny.
Under the voluntary disclosure program, Americans can tell
the IRS about undisclosed income from offshore accounts, and in
return possibly get reduced fines and penalties. About 38,000
Americans have taken part in the program since 2009, bringing in
$5.5 billion in back taxes. The IRS has grown less lenient over
The Leumi letter to clients said: "The bank supports you in
this step and will assist you in this process by gathering the
information and documents in the bank's possession that are
required by the OVDP," in reference to the offshore voluntary
disclosure program. The bank also gave a hot line for clients.
Asked about the letter, Lee Neumann, a Leumi spokesman in
Tel Aviv, said, "Like other banks in the world, we decided to
address our clients and advise them of the existence of the
IRS's voluntary disclosure program. We also informed them that
in the event they choose to apply for this program, the bank
will provide them with any technical assistance that may be
required from the bank." He declined to comment further.
An IRS spokesman declined to comment.
ISRAELI BANKS UNDER SCRUTINY
As previously reported by Reuters, Leumi and two other
Israeli banks, Bank Hapoalim and Mizrahi-Tefahot
, are under investigation by the U.S. Justice
Department in connection with offshore private banking services
that may have enabled wealthy Americans to evade taxes.
The broad probe comes as the United States moves closer to
fully implementing in 2014 the Foreign Account Tax Compliance
Act (FATCA), which requires foreign financial institutions to
help ensure that U.S. clients comply with U.S. tax laws.
Bryan Skarlatos, a New York tax lawyer with Leumi clients
who got the letter, said it "is the result of ratcheted up
pressure on Bank Leumi." He said U.S. officials "are asking
clients questions about Leumi accounts: who the bankers were,
what they said, did they come to the U.S., whose idea was it."
Faced with a federal deficit of roughly $1 trillion, the
U.S. government is searching for new revenues and coming down
hard on tax dodgers. Last July, the crackdown on offshore
account holders saw Credit Suisse AG get a target
letter saying it was a formal target of the U.S. probe.
Earlier this month, Switzerland's oldest private bank,
Wegelin & Co., announced it would shut its doors after it
pleaded guilty to helping Americans evade taxes. In 2009, UBS AG
, Switzerland's largest bank, agreed to pay $780
million to the U.S. government after admitting to similar
wrongdoing with its private bank. The bank provided more than
4,400 names of U.S. account holders to U.S. authorities.
Jeffrey Neiman, a criminal defense lawyer and former federal
prosecutor who was involved in the UBS case, said U.S. officials
are eager to expand their push beyond Switzerland, "and the
Israeli banks have whetted their appetite."
'CAUGHT IN CROSSFIRE'
Leumi told Reuters in September 2011 that its Swiss branch,
Bank Leumi Switzerland, was cooperating with the Justice
Department investigation "in accordance with Swiss law and under
Despite the scrutiny of Swiss banks, Leumi bought Banque
Safdie, a small Swiss private bank, in 2011.
Datan Dorot, a tax lawyer in Boca Raton, Florida, with
clients who are customers of Israeli banks, said Leumi had
frozen the accounts of some U.S. clients last year after they
did not provide the bank with documentation regarding their
compliance with U.S. tax laws, such as federal income tax
"These people aren't tax-evading millionaires - they're mom
and pops caught in the crossfire," Dorot said.
Asher Rubenstein, a tax lawyer in New York with similar
clients, said that with FATCA looming, his clients "are getting
a lot of pressure from the banks to provide W-9s." The IRS
forms, filled out by clients and given to banks, require banks
to withhold any tax the clients may owe the IRS.
FATCA requires foreign financial institutions to collect and
turn over data on U.S. clients with accounts of at least
$50,000, or to withhold portions of interest, dividend and
investment payments due clients and send the money to the IRS.
Last March, Leumi wrote to U.S. clients, citing FATCA and
requesting that they submit W-9 forms and sign declarations that
their accounts complied with U.S. tax laws, according to a copy
of the letter from the bank's Haifa branch that was obtained by
Reuters. In signing the forms, the letter said, clients
"explicitly waive banking secrecy/consent to such disclosure."