Sources tell CNBC the new case is just the beginning of a potential series of indictments, which may snare some of the wealthy American clients who have hidden money in Israel, many for generations. That’s likely to be politically controversial, especially at a time when the U.S. and Israel are working closely together to contain a geopolitical threat from Iran.
Add to that the political sensitivity of an Obama administration Department of Justice in an election year targeting a group of clients of whom many are likely to be Jewish or have historical family ties to Israel.
“There are a substantial number of Americans with unreported assets in Israel,” said Scott Michel, a partner at the law firm Caplin & Drysdale who specializes in criminal tax fraud investigations. “I wouldn’t be surprised if it is on a par with Switzerland.”
Attorney Bryan Skarlatos, a partner at the firm Kostelanetz & Fink LLP, said that he has clients who are being questioned in the wide-ranging investigation into Israeli bankers.
“I have special agents asking questions about specific banks,” Skarlatos said. “They need evidence that somebody spoke to a banker and the banker had a sense that they were dealing with a U.S. person — they’re asking ‘did you give them your U.S. passport?’”
Both Michel and Skarlatos spoke of allegations of cash-transfer banking, in which overseas bankers match up American clients who want to withdraw and deposit the same amount of cash with the foreign bank.
The bankers appear in the U.S., typically at a hotel, and arrange for couriers to bring the cash to the hotel from the depositing customer, and later turn it over to the withdrawing customer, only later crediting each account for the transaction back in the foreign bank offices.
See also Bonnie, Kavoussi, Tax Evasion Through Israel: IRS And Justice Department Indict Three Israeli-American Tax Preparers (Huffington Post 6/19/12), here.