Israel's Largest Bank Blocking Human Rights NGO From Receiving Foreign Donation

Bank Hapoalim is demanding Rabbis for Human Rights to present a form allowing donors to receive a tax refund, even though the donor is foreign

Or Kashti
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File photo: Bank Hapoalim Branch, Tel Aviv,  June 13, 2016.
File photo: Bank Hapoalim Branch, Tel Aviv, June 13, 2016.Credit: David Bachar
Or Kashti

Bank Hapoalim, Israel’s largest lender, is refusing to let a $100,000 donation enter the bank account of Rabbis for Human Rights, claiming that the state has not confirmed the group’s tax status via the form for deducting such donations from tax.

Still, the bank’s demand would appear to be irrelevant because the donor is foreign and the money is coming from abroad. Also, there is nothing in Bank of Israel procedures or Israeli tax law requiring nonprofit groups to provide such confirmation.

As far as is known, no similar demand has been made of other human rights groups. Rabbis for Human Rights, founded in 1988, includes rabbis from various streams of Judaism, and one of its departments deals with human rights in the West Bank.

In recent years, the state has repeatedly rejected the group’s efforts to improve its tax status as a nonprofit organization, including on the grounds that some of its activity is not “for the good of Israel’s residents.”

“We are having difficulty finding a logical explanation for why Bank Hapoalim is blocking a major, essential donation, transferred to us by a private, long-standing supporter,” the organization said, adding that previous donations from the same source had gone through without problems.

As the group put it, “A procedure that isn’t the norm in the philanthropic world has been invented against us.”

Earlier this month, Bank Hapoalim told the group that the $100,000 donation had arrived but had not been placed into its account. Later that day the group told the bank that the donation had been made by an individual, an American Jew living in Hong Kong.

When a few days later Rabbis for Human Rights inquired why the money still had not reached its account, the bank demanded documents, including “confirmation of proper governance” provided by the companies authority. The organization complied and delivered the documents.

At that point, the bank made a new demand, for the group to deliver a Form 46, a request that the Tax Authority recognize an organization as a public institution donations to which can be tax deductible.

A Hapoalim branch in Jerusalem repeatedly rejected Rabbis for Human Rights’ argument that the donor was a nonresident who has been donating to it for years. Form 46 would be completely irrelevant to him, the organization argued, and in any case, this had never been a condition for transferring a donation to a bank. The group generates most of its funds from donations.

The head of Rabbis for Human Rights, Ayala Levy, said she was told by the branch manager that “according to our procedure, every association needs to have this confirmation.” Levy said her group operated without that form, and the tax deduction would not be relevant to the donor in question.

She said the branch manager replied, “As far as I’m concerned, there’s something improper in the management of the account if that form isn’t there.”

Bank Hapoalim declined to provide details on the procedure in question. 

The accountant for Rabbis for Human Rights then wrote a letter to Bank Hapoalim, noting again that Form 46 lets Israeli donors to charities deduct donations from tax. He wrote that, like other organizations, the group operates without the form, and the form’s existence or absence has no bearing on the organization’s governance. The form is irrelevant to the transfer of the donation, which arrived from abroad, the accountant wrote.

Bank Hapoalim also did not respond to a letter sent by the rabbis’ legal counsel, Yair Nehorai.

It did tell Haaretz, however, that it was obligated to “ensure that all its customer accounts are handled properly, in compliance with the anti-money-laundering directives. These directives today include violations of tax law.”

It said it had to “inspect the legitimacy of money transfers into accounts, and when a transfer is not a commercial or family matter, monitoring by the tax authorities can provide some degree of security that the monitored entity is conducting itself properly.”

Rabbis for Human Rights has four departments, two for human rights and legal problems in the West Bank, and two operating in Israel proper, one for social justice and one for education. Two-thirds of the group’s resources go to these operations in Israel proper.

In 2014 the state rejected the organization’s request for tax breaks, arguing that part of its activity was not for Israelis’ greater good. Rabbis for Human Rights rebutted that the Tax Authority was not empowered to discuss its values and goals.

In 2015, the organization filed again and this time received no answer. A month ago it filed again — with updated documents and a “proper governance confirmation” for 2018.

In the past, the state suggested that the group split in two and stop fighting for Palestinian rights if it wanted to improve its tax status.

According to Rabbis for Human Rights, when the government depicts it as a hostile organization receiving “nonkosher funds,” as it put it, banks’ judgment may be affected, even unwittingly. The group called on Bank Hapoalim to stick to the law and allow the money through.

For its part, the Tax Authority said the procedures involved did not originate with it, while the Bank of Israel said Bank Hapoalim’s demand did not conform with Bank of Israel regulations.

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