IRS Makes Israeli Banks Bar US Customers From Holding Securities


israelIsraeli banks will no longer allow US residents to hold securities accounts. Sources inform Globes that the banks recently notified US residents with accounts in Israel that they will no longer be allowed to hold securities in these accounts. The banks instructed the US residents to immediately sell the securities in their possession, or, alternatively, to close the account.

The sources added that Bank Hapoalim (TASE: POLI), Bank Leumi (TASE: LUMI), and Israel Discount Bank (TASE: DSCT) were among the banks that sent out such notices. US residents are believed to hold several billion dollars worth of securities in investment accounts in Israel.

The sources said that several customers had considered hiring an investment house to manage their accounts, but that they were informed that there was no choice: sell all the securities.

The origin of the new policy is the UBS AG (NYSE; SWX: UBS) scandal in Switzerland. UBS held billions of dollars in accounts owned by US residents, who held the money there, among other reasons, to evade US taxes. The Internal Revenue Service (IRS) applied uncompromising pressure on UBS to disclose the names of the account holders so that the IRS could find tax evaders.

In an unprecedented move, UBS agreed, and signed an agreement with the IRS, in which the bank disclosed the names of 300,000 US customers who held money in confidential accounts, and whom the IRS suspected were tax evaders. UBS also agreed to pay the US government $780 million compensation to avoid lawsuits being filed against the bank.

In the aftermath of the agreement, the IRS began applying similar pressure on banks in other countries, Israel included, where US residents held bank accounts. So far as is known, the IRS sent a message that it would make it more difficult for the foreign banks to operate in the US unless the demands were met.

The US demands are based on existing regulations, which have gained prominence as the US toughens its enforcement of them.

Sources close to the affair said that no explicit demand had been received, but that the Israeli banks decided to act on their own.

Bank Hapoalim said in response, “The bank’s decision was taken on the basis of a legal opinion recently given by US lawyers.”

Discount Bank said in response, “The matter is under review. We’ll act as required.”

{Globes/Yair Israel}


  1. Seems like US is putting pressure on Israel for not going along with peace plans. A democracy gives a person the choice where he can put his money. The fact the IRS wants to know how much and where is one thing. The fact that one is not allowed to put his money where he wants to is not; sounds like socialism not a democracy to me.

  2. If the government is deciding where we can put our money, that’s not a democracy, that’s socialism. If the IRS wants to know how much and where that’s their job. But to tell an American where he can or cannot put his money that’s not legal. Unless it’s to pressure Israel to “make peace.”