Capital controls coming to Israel? If your broker banks with an Israeli bank, now is the time to move it abroad – Op Ed

Israeli banks are asking entities owned by dual-nationals and also dual-nationals themselves to hand over all of their details from overseas or face having their accounts blocked. We investigated this in full and what to do if you are an FX firm or technology provider with operations in Israel.

During the past fifteen years, imagery of a ‘Startup Nation’, a phrase coined by Dan Senor and Saul Singer’s famous book which likens Israel’s perceived innovative character to some of the young geniuses that learned their improvised skills in programming, system development and finding solutions to the future’s commercial obstacles in some of the analytical units in the Israeli army (IDF)’s elite R&D units.

Several years have now passed since the high technology label was metaphorically applied to what had previously been a very undeveloped safe haven which had in its pioneering years turned accountants, scientists, doctors and musicians from prewar Europe into postwar farmers and tree-planters who lived in the post-war hope that they would build their own prosperous land.

Seventy years have now passed and the land is developed, but the notion that it is a hive of industry is quite simply the result of blanket propaganda.

To insinuate that Israel has a thriving technology industry that serves the world and invents modern devices and software that has contributed to every aspect of life worldwide is a statement that is often used, however this resembles the waste product that emanates from the rear end of the male of the bovine species.

It is quite simply not true, and herein lies the problem for any business that operates ancillary services and provides them to the FX industry from within Israel, or to any innovator of technology who wishes to provide a global service.

One of the key factors to consider when looking at Israel as a developer of new technology – and in this case financial technology – is that the vast majority of companies and their founders have dual nationality, usually American or British as well as their Israeli nationality, hence the majority of the brains and the financial resources are coming from London, New York or San Francisco.

Israel, a nation of over eight million people, does not have a diversified domestic economy, with cartels running the supermarkets, the import and export business, the entire stock and diamond exchanges, the mafia choosing who opens a restaurant and where they do it, and senior government officials like David Bitan making deals with binary options fraudsters to help them safeguard their illicit schemes.

Indeed, any genuine firm that has been founded by Israelis from within Israel usually uproots and moves to a major center in the first world very soon after achieving any degree of success. FinanceFeeds demonstrated this last summer when looking at how many esteemed FX pioneers have now left the country. That’s right. All of them.

There are very few international retail shops, no international foodstuffs in mainstream supermarkets, and worst of all, no international banks, instead four mainstream Israeli banks which are, unbelievably, owned and run by families. Families which are untouchable and are completely unaccountable.

FinanceFeeds has conducted some research into the matter of how this increasing closing down of the free market is likely to affect global firms whose origins are in Israel, who wish to provide services to an international audience, with some quite horrifying discoveries having come to light.

Bank HaPoalim, Israel’s largest bank, owned privately by the Arison family, not publicly listed or held by shareholders and accountable to their customers in public reports as with banks in first world countries such as the United States or Britain, but instead completely non-transparent, with no reporting responsibility and whose policy is down to the whims of the Arison family and their lobbying power with the very weak Bank of Israel which is the central bank operated by the even weaker and extremely corrupt government.

When was the last time a former British or American premier was jailed, or inspected for bribery, battery, rape or money laundering? Israel’s list of former premiers is riddled with a litany of such prosecutions, and the incumbent prime minister is under investigation for an alleged fraudulent deal.

With banks having no reporting responsibility, the market controlled by four families whose reputation is less than crystal clear, a government structure that does not belong in the OECD world and controls on allowing foreign banks to enter the market, it does not paint a clear picture for free market genuine business activity.

FinanceFeeds discovered this week, and has confirmed this with a senior Bank HaPoalim employee, that individuals or entities with dual citizenship and who conduct business activities abroad with limited companies or partnerships established outside Israel under their other nationality are being contacted and invited to branches to declare all of their assets and provide their Social Security Number (US) and National Insurance Number (UK) or face having their account blocked.

The threats of having the accounts blocked apply regardless of how much money is held within those accounts and bears no relation whatsoever to the account holder’s conduct with the bank.

An account holder could have had the account for several years and always kept a large sum in it, never defaulted or ever caused the bank any reason to treat them with less than the respect they deserve as a good quality customer, but instead they are demanding that all information about overseas activity is handed over including SS and NI numbers and all account and business information, or face having their money locked into their accounts until they do so.

Whichever way this can be dressed up, it represents a form of capital control, in which banks in Israel are harvesting information in order to make the life of the account holder intolerable with no recourse until they hand everything over. Usually this type of activity signals the beginning of a national attempt to bring all the overseas money of citizens into the country or face sanctions.

If this is the case, my advice is to close your Israeli bank account and move every cent abroad, for those who have not already seen sense and done so.

FinanceFeeds investigated the reasons for this policy having been invoked, and no bank employee was allowed to give an answer. When asked if they require it by law from the US tax authorities, or the British government, they admitted that they do not, hence it is an internal bank policy which aims to prevent YOU, the customer, from accessing your own assets – be they stock, shares, capital, or cash in a current account, until you hand over all details about your activities abroad.

This is absolutely not an attempt at tackling fraud, either. Quite the opposite. Israel allows all sorts of fraudulent activity to take place from within the country, and those with no dual citizenship can do so with no questions asked. Indeed, it is fair to say that when considering that Israel has absolutely no bona fide industry at all – where are the home-grown blue chip companies? Where are the home-grown multinational enterprises with well known publicly listed branches all over the world? Where are the household names that can genuinely be recognized globally that originated from Israel? …. They do not exist.

They do not exist because of the pump-and-dump mentality that prevails across the country. They do not exist because of the lack of work ethic and concentration on aggressively extorting unsuspecting people via internet ruses all over the world. They do not exist because the government, the banks and the entire business market is run by disreputable gangs.

Indeed, Bank HaPoalim,, the very same bank that is now attempting to impound the hard-earned capital of its own customers if they do not hand everything over that they have achieved abroad, which, quite frankly is none of Bank HaPoalim’s business, is actually allowing anyone to view anyone else’s personal or business bank account.

If you know someone wealthy who has a ‘special relationship’ with Bank HaPoalim management because of the clannish nature of the entire economy in Israel, that person will be able to go to his friend at the bank and ask him to see YOUR bank account statement.

Don’t want some swarthy man with a cash-rich but primitive business ethic to constantly monitor where you last bought a can of Coca-Cola? Then do not bank with Israeli banks. Don’t want the banks to block access to your own hard-earned funds until you bring what you earned abroad? Then do not bank with Israeli banks.

During this investigation, FinanceFeeds was met with an extremely frosty and defensive stance by the bank staff. There was no polite explanation, no offer to show a written policy from the bank as to why these ‘capital controls’ are being implemented, instead brusque rudeness and curt attitude was universal across all departments interviewed.

A way to describe this could be that what was not said actually speaks volumes.

A few extreme cases that have been brought to light by our research that highlight the risks that face brokerages that are forced to use 3rd tier banks have recently emerged because of the reluctance by mainstream firms to maintain their business, some of which involve the theft of capital from accounts held by brokerages, due to lack of security of accounts, as many lower-level banks in overseas regions do not have the same level of security as those in regions in which FX firms (and companies in every industry sector) are used to.

This is because often, if holding only an Israeli passport, banks in first world countries are reluctant to open business accounts due to the deplorable history of poor ethics that have come from the country’s emigrants.

this puts those Israeli owners of genuine business in extreme danger by being forced to use third tier banks. In some cases, the level of theft of capital has been into the hundreds of thousands of dollars, which is alarming and most certainly a point worthy of consideration for brokers considering placing their business with banks that are not structured according to Basel III liquidity ratio levels or under strict regulations in terms of data security and identity verification compliance procedures.

We know of one brokerage, owned by an Israeli citizen who had nowhere else to turn for a bank account apart from a third tier bank. This particular brokerage had its accounts closed for absolutely no reason whatsoever in Cyprus, which was then forced to use a third tier bank, and has had approximately $350,000 stolen from its operating capital account by fraudsters because third tier banks have weak security and their systems are easily hacked.

Another example, which is equally toxic, manifested itself in a brokerage in Cyprus having had its commercial bank account frozen by a Cypriot bank, with no explanation, resulting in the inability to deposit or withdraw funds, almost causing the downfall of his business.

For those with European or American citizenship, matters are somewhat easier.

Trying to get an account with either HSBC or Barclays would be nigh on impossible for a newly established broker whose directors are not British citizens and quite difficult for a well established brokerage with a large capital base, due to the blanket disdain for FX – the very business that represents the core activity of these very same banks!

Whilst customer service at these British leviathans is variable according to which bank, it is a genuine free market and everything is transparent hence this is the only way to go.

FinanceFeeds recommendation to all FX industry participants is to avoid the Bank of Cyprus at all costs, and not to be tempted to go down the route of third tier banks in less than salubrious regions with lax security.

Lloyds Bank actually came up trumps with our research. The company’s business and commercial banking unit is centralized with operations in Scotland, and is largely a call center-based experience, however the branches are staffed with knowledgeable employees who welcome business, and are able to understand the needs of a complex firm such as an FX company or service provider which conducts a lot of international transactions and needs to be able to have a multi-faceted service including the holding of client assets.

As long as the relevant documents from shareholders are provided, and the company’s past credit record is all ok, the account can be open and running with all facilities operational within a week. During our investigation, Lloyds Bank also showed no animosity toward FX industry participants.

Thus, it is odd that the firms whose largest business interest is interbank FX – Barclays and HSBC are averse to working with brokerages and FX service providers, yet Lloyds, which is not a major FX market participant, is actually very good when it comes to providing service to FX firms.

The way to get this done properly is to appoint British citizens as responsible officers, and allow them to open the bank account and register it to a British address.

This would ensure complete freedom of capital, instant transactions (Israeli banks take over a week to send money abroad and are not accountable in the SWIFT terms of service with regard to how long it takes to transfer money), and no chance of ever having your account peered at by an unsavory character with a beady eye and a less than desirable close relationship with an even less desirable bank manager who works for an even less desirable family-owned so-called bank which has as much social responsibility as a stray tomcat, or even worse, if you do not want your money seized by said undesirable until you hand over your entire list of assets abroad and all of your government ID numbers without any actual legal stipulation from the US or British tax authorities to do so.

Note: This is NOT a requirement by the British or American tax authorities – it is an internal ruse from inside Israel. What you keep outside Israel is your concern, not the Israeli government or the bank. It is therefore strongly recommended that nobody kowtows to any request of this nature by the bank.

The FX and electronic trading industry is the genuine pioneer of the modern financial system, and it is therefore our responsibility to create our own, proper, bona fide and respectable full service solution for our own valued industry participants and distance ourselves from this villainry.

Last year, at the offices of Saxo Capital Markets in Canary Wharf, London, Lucian Lauerman, Head of API Business discussed a solution to this very important issue with FinanceFeeds.

Mr. Lauerman stated “I took note of your recent research with regard to the difficulties experienced by brokerages in opening bank accounts for operating capital and holding client funds.”

FinanceFeeds then suggested that there could be a method by which specialist firms could provide these services, thus avoiding the pitfalls that many brokers are now exposed to by being pushed toward third tier banks.

“Sometimes we meet clients that have well run businesses and are doing good job for their clients, but they are having difficulties getting bank accounts” explained Mr. Lauerman.

“Recognising this issue, several years ago we invested in Saxo Payments, a business that provides a real alternative. FX payments businesses need a bank account in order to send and receive payments and they need a service that is fast and low cost. The Saxo Payments Banking Circle provides exactly that solution. It allows companies who are serving merchants in the digital space to open physical and/or virtual IBAN accounts in 25 currencies, in their name and/or their client’s name” he continued.

The accounts can be domiciled in the UK, EU and Denmark, with Asia and the US becoming available in 2017. Companies can send and receive cross border and local payments at a low cost and within seconds rather than days, if the other company involved in the transaction is also a Banking Circle member, and payments are sent in the underlying client’s name, in order to increase transparency and reduce rejections.

“Saxo Payments was established to provide a simpler, faster and more cost effective way for businesses to make and receive payments. The Banking Circle cuts out the middle man – and the fees charged” said Mr. Lauerman.

This represents excellent progress and in an age in which self-determination is essential but a luxury that is only afforded to those who happen to live and operate in first world countries, is welcome as a very good solution globally.

The old jape “How do you become a millionaire in Israel? Come with five million” is no longer amusing. Take your money out now, whilst you can.


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