Offshore
Bank Leumi Reaches US Settlement

This publication brings latest news around regulatory and law enforcement actions affecting wealth managers in, or dealing with, the US.
Israeli-based Bank
Leumi has agreed to pay $1.6 million and admit wrongdoing to
settle charges in the US that it provided investment advice and
induced securities transactions for US customers for more than a
decade without registering as an investment advisor or
broker-dealer.
The action, announced by the Securities and Exchange Commission
earlier this week, stem from how the bank had continued to manage
money for US clients three years after it had moved to exit from
the business amid a crackdown by the US on foreign accounts.
The statement said it found Bank Leumi maintained several hundred
securities accounts that were beneficially owned by US customers
and managed more than $500 million in securities assets for US
customers. To manage and mitigate the risk of breaching US
laws, Bank Leumi began exiting the US cross-border business in
2008.
“But despite these efforts, approximately 100 US customer
securities accounts remained open with the bank three years
later, and bank employees continued to have contact with US
customers,” the SEC said in a statement.
“The broker-dealer and investment adviser registration provisions
provide core protections to investors,” Scott Friestad, associate
director of the SEC’s Division of Enforcement, was quoted as
saying. “Bank Leumi’s efforts to come into compliance with these
laws took years, during which time the bank continued to profit
from its unlawful cross-border business,” he said.
The SEC’s order finds that Bank Leumi made $3.3727 million in
profits from its US cross-border business. The bank
disgorged $3.307 million of those profits in a deferred
prosecution agreement with the US Justice Department in December
2014. Bank Leumi must, the SEC said, disgorge the remaining
$65,700 in its settlement with the SEC plus $8.713
million in interest and a $1.517 million penalty.