October 3, 2017 / 8:19 AM / 2 years ago

UPDATE 1-Israel's Bank Hapoalim sells Swiss unit, warns of higher U.S. fines

(Adds details)

JERUSALEM, Oct 3 (Reuters) - Bank Hapoalim, Israel’s largest lender, has sold its Swiss private banking unit and warned that a settlement it may have to pay in a U.S. tax evasion case could be “significantly higher” than previously thought.

The bank said on Tuesday that it decided last month to end its activities in Switzerland, which have been the focus of the U.S. investigation, and sold its private banking businesses in Luxembourg and Switzerland to private bank J. Safra Sarasin Group.

The deal is worth 27-33 million Swiss francs ($28-34 million) and is expected to close in the first half of 2018, pending regulatory approval.

The bank said it expected to take a charge of 110 million shekels ($31 million) in the third quarter for ending its Swiss activities.

U.S. authorities are investigating whether Hapoalim helped American clients evade U.S. taxes at its Swiss unit. The bank has already set aside a provision of close to $200 million.

It said its representatives have recently been discussing the case “intensively” with the U.S. Department of Justice and the New York Department of Financial Services about reaching a settlement in the coming months.

“It is possible that the amount the bank will pay in the settlement with the U.S. authorities - if reached - will be significantly higher than the provision amount,” Hapoalim said in a statement to the Tel Aviv Stock Exchange.

“The bank may update the amount of the provision in accordance with information it has at that time,” it said.

Israel’s banking regulator last week ordered the country’s lenders to reduce their overseas operations and keep a closer eye on subsidiaries to help them better comply with risk and compliance rules.

The clamp-down came in response to the Hapoalim investigation and similar cases with two other top lenders - Leumi, and Mizrahi Tefahot.

Leumi paid $400 million in fines to U.S. authorities in late 2014.

($1 = 0.9764 Swiss francs)

$1 = 3.5374 shekels Reporting by Ari Rabinovitch, Maayan Lubell and Michael Shields; editing by Jason Neely

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