Bank Hapoalim (TASE: POLI) announced this morning that it will set aside an additional NIS 992 million in its 2018 financial report to published later this month cover the US investigation on alleged assistance to customers evading tax. The amount of money written off by the Israeli bank for the probe so far will be NIS 2.29 billion ($611 million).
This means that the fine to be paid Bank Hapoalim will be considerably higher than the $400 million paid by Bank Leumi (TASE: LUMI) to the US authorities four years ago to settle similar allegations.
In addition, Bank Hapoalim, led by CEO Arik Pinto, has had to pay hundreds of millions of shekels in legal consultancy fees to US layers and in Israel to Adv. Pini Rubin. The bottom line is that the entire affair could cost Hapoalim close to NIS 3 billion.
The settlement is being reached as talks between the Israeli bank and the US Justice Department move forward. The money written off also includes a future expected fine from the New York financial regulator as well as the Federal authorities.
In addition to Bank Hapoalim and Bank Leumi, Mizrahi Tefahot Bank (TASE:MZTF) is also undergoing a similar investigation by the US authorities for allegedly helping customers evade tax. The Mizrahi Tefahot US probe is in a very advanced stage and the bank already received a demand for a $340 million fine six months ago even though it has relatively small operations in the US. Mizrahi Tefahot refused to pay the fine and is in advanced talks with the US authorities in attempts to reduce the fine. To date, Mizrahi Tefahot has set aside $170 million.
As a result of the Us investigations, both Bank Hapoalim and Mizrahi Tefahot have stopped paying dividends.
Published by Globes, Israel business news - en.globes.co.il - on March 7, 2019
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