Banks to Chessed Groups: Get Your Financial Houses in Order

Gemachs that have not done so need to legally secure their non-profit status, banks are telling chairpersons of chessed groups – or they will find themselves without bank accounts. The First International Bank is the latest to issue letters to the heads of the gemachim demanding that they produce paperwork that they are recognized as non-profits, a report in Calcalist said. Failing to do so will result in the closure of the gemachs’ bank accounts, the bank said.

Like banks around the world, Israeli financial institutions are lining up to comply with rules set by the IRS, the Justice Department and other U.S. agencies. American laws against money laundering are now the de facto standard worldwide, with the US demanding that all institutions that do business with American banks reveal full details about accounts held by American citizens, or accounts that receive money from the U.S.

Failure of an institution to furnish full information demanded, could result in a 35 percent penalty on all transactions with U.S. institutions, and continued refusal could get an institution blacklisted as supporting money laundering.

Gemachs and chessed groups accept donations from Americans, who take tax deductions for supporting charitable institutions for their donations, and the Israeli banks are demanding the paperwork to show compliance with Israeli and American tax rules.

Along with the First International Bank, letters were sent to organizations that bank with Bank Pagi (Poalei Agudath Yisrael), a very popular bank for chessed groups, and a subsidiary of First International, Calcalist said.

In response to queries by the newspaper, the banks said that they “act in accordance with regulations in Israel and internationally regarding all matters that affect our clients.”