Human Rights Alert (NGO)

Joseph Zernik, PhD PO Box 31440, Jerusalem 91313, Israel; josephzernik@humanrightsalertngo.org ;

" 91313 " 4413

12-11-04 Zernik v Fischer (7650-12) Request to Add a Record - Haaretz 2010 report on Bank of Israel position re - future enactment of FATCA
In Zernik v Fischer (7650-12), petition to compel Stanley Fischer, Governor of the Bank of Israel to perform his duties, Petitioner Zernik alleges that through unconditional submission to FATCA, Stanley Fischer replaced his loyalty to the State of Israel and its laws with loyalty to another nation and its laws, or loyalty to financial institutions and their interests. New evidence, filed today, suggests that Fischer has made this change of loyalty as early as 2010. Permitting lawlessness in banking in the State of Israel, through unconditional submission to FATCA, should raise concern regarding integrity and stability of the Israeli financial system. Conduct of Stanley Fischer and Bank Israel stand in contrast to conduct of Canada, UK, and Australia in this matter. # 1 2 Record
12-11-04 Zernik v Fischer (7650-12) Request to Add a Record - Haaretz 2010 report on Bank of Israel position re - future enactment of FATCA [English translation - jz] 12-11-04 Zernik v Fischer (7650-12) Request to Add a Record - Haaretz 2010 report on Bank of Israel position re - future enactment of FATCA [Hebrew original]

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LINKS:

[1] 12-11-04 FATCA, Stanley Fischer in the High Court of Justice of the State of Israel
http://www.scribd.com/doc/112124727/

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English translation of excerpts from the filing:

The Petitioner alleges that significance of the report lies in describing the preparation in Israeli banks and Bank of Israel-Banking Regulation already in 2010 in view of future legislation in the United States. 4. The report documents steps taken already then by Bank HaMizrahi-Tefahot against customers, who were "US Persons". Such steps were only against securities investment accounts, but not against cash deposits in local and foreign currencies. 5. The report also documents the position of Bank Leumi in this matter at that time: 'its business decisions are "based on legal standards." ' 6. Upon the Petitioner's information and belief, position of Bank Leumi today the Bank sent notices to his customers, who are "US Persons", threatening to liquidate their securities accounts, unless they sign US Income Tax forms W-9. 7. The Petitioner alleges that conduct of Bank Leumi today is not "based on legal standards" of any validity. 8. Conduct of Bank HaPoalim, BM, today in this matter including demands and threats pertaining to cash deposit accounts in local and foreign currencies, which are not in securities was documented in the August 25, 2012 Complaint, filed by the Petitioner with Bank of Israel. 9. Therefore, the Petitioner alleges that the Haaretz report describes the initiation of a process, which led to the establishment of the current situation where each bank acts as it wishes, where different banks fabricate different regulations in this matter, and where different banks enforce such simulated regulations on their customers, who are "US Persons", with no foundation at all in the laws of the State of Israel. 10. Moreover, the Haaretz report describes what appears as the position of Bank of Israel-Banking Regulation in this matter, already in 2010, "The Bank of Israel hasn't handed down instructions to the banks on the matter, which doesn't fall under its purview." This statement, which the Petitioner alleges is baseless, appears with no attribution, in contrast with other statements detailing the positions of institutions in this matter. The Petitioner alleges that it is unreasonable that Haaretz published such statement, unless it originated in senior officers in Bank of Israel, or was cleared with them. The Petitioner has forwarded a request to the reporter, Raphael Ahren and to Haaretz Editor-in-Chief, to disclose the source of this statement. No response has been received to this date. 11. The Petitioner alleges that further investigation is likely to reveal that Governor of the Bank of Israel Stanley Fischer was directly involved in setting policies in this matter as early as 2010, and not only as early as 2012, as originally alleged. 12. The 2010 Haaretz report supports the Petitioner's allegations: "Bank of Israel-Banking Regulation was fully aware of the unlawful nature of the conduct of the management of Bank HaPoalim, BM, in this matter, even before the Petitioner filed his August 25, 2012 Complaint Through his continuing refusal to register and review the Petitioner's Complaint, Respondent Stanley Fischer and Bank of Israel-Banking Regulation continue to patronize simulated lawfulness, to aid and abet the conduct... Conduct of the Respondent should be deemed Fraud, Deceit, or large-scale public deceptionUndermines the sovereignty of the State of Israel. replacement of his loyalty to the State of Israel and its laws to the laws of another nation and/or the interests of financial institutions Undermines the rule of law in the State of Israel. misprision of felonies, and abuse of his office." 3.

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Haaretz.Com

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Israeli banks urge America clients to close Israeli accounts

Israel banks aiming to avoid conflict with Washington in wake of new U.S. banking regulations.
By Raphael Ahren | Mar.09, 2010 | 2:29 AM
Tw eet

Obedient to intensifying U.S. government pressure to crack down on offshore tax evaders, in January Israeli banks began ordering clients they identify as "Americans" or "U.S. tax residents" to close investment accounts they hold in Israel. It is apparently an anticipatory measure, ahead of changes in U.S. law. Local banks are apparently responding to changes in American regulations as their legal counsels interpret them. The Bank of Israel hasn't handed down instructions to the banks on the matter, which doesn't fall under its purview. In February, for instance, Bank Mizrahi-Tefahot informed clients that as a "result of current U.S. regulations" it can no longer provide "securities services to U.S. persons," and explained the termination procedure. "You are receiving this letter because you are identified in our records as a customer who may be a U.S. person, within the meaning of the applicable regulations," Mizrahi wrote. The letter said that clients who fall into this category have until April 7 to tell the bank how to dispose of their holdings, adding that the bank will continue to provide "banking and non-securities services, including deposit accounts and CDs as well as foreign currency, checking and credit card services". "If we do not receive your instructions by March 16, 2010, we may liquidate the securities in your account," Mizrahi warned. Local finance professionals agree that the situation is likely will evolve as the Americans develop and implement new banking guidelines, but differ in their assessment of the possible consequences for U.S. citizens living in Israel. "Theoretically, any American who has an account here could be affected by the changes," Aaron Katsman, a Jerusalem-based financial consultant who specializes in English-speaking clients, said. "They won't be able to hold stocks. They could have deposits here, but that's about it." Americans in Israel are left with "with very few options," added Philip Braude, CEO of Beit Shemesh-based financial planning company Anglo Capital Limited. His suggestion: "Take the money back to America. If you're an American you should be investing in America." He agrees that the current situation is murky, with Israeli banks aiming to avoid conflict with U.S. authorities. "The bank aims to comply with legal and regulatory requirements and constantly reviews the services offered to its clients to adapt them to the changing regulatory environment," Bank Hapoalim spokeswoman Ofra Preuss told TheMarker. She declined to elaborate. Bank Leumi spokesman Aviram Cohen said that while he could not discuss the bank's customer relations policies, its business decisions are "based on legal standards." What is not under contention is that American citizens must file annual tax returns with the Internal Revenue Service even if they live abroad, hold dual or multiple citizenships and pay taxes to another country. While the U.S. has not instructed Israeli banks to close accounts held by American nationals, the IRS is widely expected to ask foreign banks to disclose information about U.S. account holders at some point. The IRS "does not comment on pending legislation," agency spokesman Bruce Friedland told TheMarker. He said that U.S. citizens may bank in Israel "so long as they appropriately report the existence of accounts, report the income from the accounts and pay the tax on the income generated from the accounts." Braude, of Anglo Capital Limited, points out that even if the bank is not specifically aware that a particular customer hold U.S. citizenship, that fact would not help them in a court of law. The bank could not argue that it did not know the client was American, he said: Israeli identity cards indicate place of birth, and banks obtain a copy of the document when opening an account. The problems Americans face in Israel are part of the fallout from a tax evasion scandal involving Switzerland's biggest bank, UBS. In 2008 the U.S. accused the Zurich-based bank of helping wealthy Americans to evade taxes. In response, UBS announced it would stop providing crossborder private banking services to American clients. Last month the Swiss bank UBS agreed to pay $780 million to avoid being prosecuted by the American authorities. It also disclosed the names of some account holders. It's perfectly legal for U.S. citizens to own stocks outside the U.S., Jerusalem wealth manager Katsman explained. However, he added, many people open accounts abroad for the express purpose of dodging tax payments. "Since the U.S. is desperate to get any kind of revenue possible, because things are tough there and they're running huge deficits, this is one of their ways: to make American citizens either pay huge fines or repatriate the money back to America." America has a weapon: It could withdraw the licenses of U.S. branches of foreign banks if it suspects collusion in tax evasion. "Israeli banks have branches in the U.S. and they know [the U.S.] would make it very hard for them to operate if they don't give them the same information that UBS gave them," Nir Amikam, head of research at Wareham Investment Bank, told TheMarker. "I don't know if it makes economic sense, I guess it depends on how much money [Americans have in Israeli banks]," he added. "The banks are probably thinking that it's not as much as they themselves are making by having branches in the U.S." Finance professionals estimate that U.S. residents hold several billion dollars in Israeli investment accounts. "The banks here in Israel, and all around the world, just took a business decision: They're not going to deal with Americans having stocks and bonds portfolios here because they don't want to take any risks," an investment advisor in one Israel's leading banks told TheMarker. However, she added, she believes that at present only U.S. residents are directly affected by the banks' decision. Americans living in Israel would not be asked to liquidate their stocks and bonds portfolios, in her opinion. "We definitely think that in the next two or three years, there's going to come a point when America will stop and declare: OK, we're happy now," said Dylan Shub, principal of Tel-Aviv-based Fortress Capital Management. At that point we'll be able to understand exactly what has to happen and what we need to do." Since the American authorities have not yet clarified what guidelines they might implement in the future, it is likely that Israeli banks will take further preemptive measures to avoid any conflicts with the U.S. authorities, several finance professionals agreed.

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__________________ " " 04413, 31319 josephzernik@humanrightsalertngo.org _____________

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