US sends ultimatum to Swiss branches of Hapoalim and Leumi

The US government has set an ultimatum for ten Swiss banks operating in Israel – among them Bank Hapoalim Switzerland Ltd., Bank Leumi (Switzerland) Ltd. and Swiss UMB (Mizrahi-Tefahot Bank subsidiary UMB (Switzerland)) Ltd. – to provide information about their activities in the US, and about the activities of their clients who are American citizens. A number of the banks have already transferred the information. The US is demanding this information by September 23.

For now, only a statistical breakdown of clients is being requested, without their names, and their activities in the US. It is believed that the US will request names of specific clients in the next stage. This request is part of an investigation of tax evasion by US citizens, and in preparation for the Fair and Accurate Credit Transactions Act (FACTA) that will soon take effect.

It is believed that the US government will take legal action in an effort to uncover the identity of American clients who are using foreign bank accounts to avoid paying taxes. Credit Suisse Group AG, Julius Baer AG, HSBC Holding Plc., and Basler Kantonalbank AG are among the banks on the list.

Pressure from the US government on this issue is extremely heavy, and it seems that the Swiss government, in an effort to avoid conflict with the US, will allow the transfer of information about activities that occurred after September 30, 2009, if these activities are a direct breach of US law, or are plain fraud.

The Basel-based newspaper The Basler Zeitung first reported the matter.

Bank Leumi said in response, “The Swiss authorities did indeed make a request to ten Swiss banks, including Bank Leumi Switzerland, in an effort to receive general statistical information. Apparently, this statistical information is to form a basis for a comprehensive arrangement with the entire Swiss banking sector between the Swiss and American authorities. Bank Leumi Switzerland is of course cooperating fully with authorities, in accordance with Swiss law, and following legal advice.”

It added, “Bank Leumi Israel and its branches abroad are taking active steps to be fully updated from legislative changes resulting from the implementation of the FACTA.”

Bank Hapoalim said, “The bank cannot comment on Bank Hapoalim Switzerland activity since, as is known, it is a Swiss bank and operates according to Swiss law.”

Mizrahi-Tefahot has not yet responded.

FACTA, a US law that will take effect in January 2013, will require banks worldwide to report on accounts and assets they manage for US citizens, in an effort to collect taxes from them. Any bank that fails to transfer the requested information to the IRS will be subject to sanctions in the US.