Special Investigation: Mizrahi Tefahot Bank — Three Files, One Pattern

Where are the Holocaust victims' shares

In 2000 the Knesset established a parliamentary commission of inquiry into the location and restitution of assets of Holocaust victims. The commission selected five banks it defined as "relevant to the period" and sent outside examiners to each: Bank Leumi, Bank Hapoalim, Israel Discount Bank, Mercantile Discount Bank and United Mizrahi Bank. The examination of United Mizrahi Bank was carried out by the accountancy firm Kaspi & Kaspi, and it forms Appendix 3 to the final report.

The examiners found the bank's shareholder registers dating from its foundation. They record 8,082 shareholders, of whom 309 held addresses in Europe or no known address. In Bank HaPoel HaMizrahi, merged into it in 1969, a further 786. And in addition:

"We discovered 136 shareholders who had paid for rights to shares that had not yet been allotted to them."

These were people who paid the bank for a share and did not receive one. The document does not establish what became of them.

Those registers are, in the examiners' words, "the only source of information on the shareholders from the day the bank was founded", because the Registrar of Companies records held at the Ministry of Justice up to the 1980s were destroyed by fire and cannot be reconstructed. From this follows the conclusion: the distribution of dividends and bonus shares over the decades cannot be reconstructed, and therefore, the examiners write, "the question of indemnifying the shareholders must be considered by another route". As of the report's publication, nothing had been paid.

Source: Report of the Parliamentary Commission of Inquiry into the Location and Restitution of Assets of Holocaust Victims, and Appendix 3 thereto

Did the bank act to locate the owners

The obvious question follows: the bank knows who bought the shares, because the names are written in its own books. Did it look for them. The documents answer on three levels, and on all three the answer is no.

First, the registers survived by accident. The examiners record that the bank "greatly reduced its storage space in the branches", that "in many cases old documents were destroyed, apparently to free space in the storeroom for newer documents", and that there was no retention procedure. And then:

"Notwithstanding the above, one branch kept the shareholder registers; when the branch manager learned of the examination, he approached our office and transferred the registers into our hands."

The only surviving source in the world for the identity of these shareholders reached the examiners because one branch manager kept it against the prevailing practice and volunteered it.

Second, as to the dormant accounts, the only documented initiative ran in the opposite direction:

"The bank apparently paid no interest on accounts without movement, and on the contrary charged them fees... caused the erosion of many accounts whose balance had been in credit, and even turned them into debit accounts. Several years later these accounts were closed on the initiative of the branch management."

The final report adds that "no report by the bank on the closure of inactive accounts was found".

Third, the computerisation. In 1974 the bank moved its accounts onto computer, and in that process the true opening dates were lost:

"In the computerisation process the entire history of the account was lost, since on entry into the computer each account received the date of entry as its opening date... past transactions were not entered into the computer and the bank lost information of great importance to this inquiry."

The examiners note further that the bank "did not prepare a summary report at the end of the computerisation operation", and that the discrepancies found between manual and computerised clearing "were considered immaterial and were therefore recorded in the bank's profit and loss statement".

Finally, the gravest finding, concerning the war years themselves. In the minutes and correspondence of the bank's management with Anglo-Palestine Bank in 1939 and 1940, the management separately identifies account holders abroad as, in its own words, depositors who "cannot claim their deposits, being abroad, or who are unlikely to claim them for other reasons", and emphasises that their place of residence was "occupied countries such as Russia and Poland". A document from mid-1940 by Mr Pinkas of the bank's management describes the bank's true debt and notes "of which, to the Jews of Germany, Poland and Belgium". By that date the enemy property orders were already in force: Germany from September 1939, Poland from January 1940, Belgium from June 1940. The examiners' finding: "orders which the bank did not comply with".

The bank's liability not yet returned, revalued to 30 September 2004, stood at ILS 1,774,688. For comparison, Bank Hapoalim's liability in the same table stood at ILS 81,901, and of Mercantile Discount Bank the report states "no liability exists against the bank".

Source: Appendix 3 to the Commission of Inquiry report, "The examination at United Mizrahi Bank Ltd. — Kaspi & Kaspi, Certified Public Accountants"

$195 million: the U.S. tax settlement

On 12 March 2019 the United States Department of Justice announced that Mizrahi Tefahot Bank, together with two of its subsidiaries, United Mizrahi Bank (Switzerland) and Mizrahi Tefahot Trust Company, admitted that its employees had helped U.S. taxpayers conceal income and assets from the Internal Revenue Service. The bank entered into a deferred prosecution agreement for an initial period of two years and paid $195 million.

The breakdown, per the Department of Justice: $53 million in restitution for the approximate pecuniary loss to the United States, $24 million in disgorgement of the gross fees the bank earned from U.S. taxpayers holding undeclared accounts between 2002 and 2012, and a $118 million fine.

Among the conduct the bank admitted: opening accounts under pseudonyms and through nominee entities, opening accounts for customers known to be American using non-U.S. identification documents, holding customers' bank mail in Israel and Switzerland rather than sending it to them, and breaching the bank's Qualified Intermediary Agreement with the IRS.

It should be stated plainly what this agreement is not: it is not a conviction. A deferred prosecution agreement means the criminal proceeding is suspended and, if the conditions are met, closed at the end of the period. That said, the admission of facts is itself part of the agreement.

Source: U.S. Department of Justice, Press Release 19-215

ILS 6.8 million: the Bank of Israel sanction, March 2026

On 25 March 2026 the committee for the imposition of financial sanctions on banking corporations, acting under section 14 of the Prohibition on Money Laundering Law, imposed on Mizrahi Tefahot Bank a financial sanction totalling ILS 6,800,000. The violations were uncovered in a Banking Supervision Department audit on counter-terrorism financing conducted at the bank between January and June 2023.

The committee found the bank had breached four provisions: section 13a on the duty to check against the list, section 8 on reporting by transaction size, section 9 on reporting apparently unusual transactions, and section 2a on the know-your-customer process. In detail: 12 cases in which the bank failed to report unusual transactions "although they could be identified as such", and a further 35 cases in which accounts with business activity were classified in know-your-customer questionnaires as private accounts.

The bank made its arguments, and two hearings were held, on 24 July 2025 and 20 November 2025. On section 13a the bank argued that the breach originated in a reasonable legal interpretation; the committee held that the interpretation "is not reasonable in this context" and that this was "a serious failure in the classification of the transactions". On section 8 the bank argued a one-off system fault corrected immediately; the committee replied that effective controls would have detected it earlier. On section 9 the bank argued it had exercised reasonable discretion in real time; the committee held that the bank "was negligent in the exercise of its discretion", and that it "did not properly document, in real time, the discretion underlying the failure to report".

In the bank's favour, the committee took into account that three of the breaches arose from a single factual matrix, and that the bank retroactively transmitted all the relevant reports to the Money Laundering and Terror Financing Prohibition Authority.

Source: Bank of Israel, Banking Supervision Department, sanctions committee decision of 25 March 2026

What the annual report does not carry

What the three files share is not the amount. $195 million, ILS 6.8 million and ILS 1,774,688 are entirely different orders of magnitude, and two of them are negligible against the bank's balance sheet. What they share is what happened to the records.

In the Holocaust victims file, the account opening dates were erased in the 1974 computerisation and the Registrar's records burned, and the registers that survived reached the examiners through a single branch manager. In the American file, customers' bank mail was held in Israel and Switzerland instead of being sent to them. In the Bank of Israel file, the central finding is that the bank "did not properly document, in real time" the discretion behind its failure to report.

Three periods, three regulators, one pattern: in every instance where documentation was needed in order to examine the bank, the documentation was not there.

For an investor this is not a historical question but a question of operational and regulatory risk, and it is not measured in a profit and loss statement. A reader of Mizrahi Tefahot's financial statements will not find in them the 136 shareholders who paid and received nothing, nor that the question of their indemnification remains open.

Reading the documents themselves

Two separate investigation sites deal with Mizrahi Tefahot Bank and hold the documents themselves rather than a summary of them.

mizrahi-tefahot-v-yagudin.org — the historical and corporate archive. It carries the examination of company registration 520000522 from 1923 to the present, the chain of subsidiaries, and the commission of inquiry documents. The article on company 520000522.

mizrahi-tfahot-case.com — the enforcement file and the case law. It holds the database of legal proceedings against the bank and its subsidiaries, alongside the investigation into its conduct towards debtors.

The primary documents on which this article rests: the U.S. Department of Justice press release of 12 March 2019, the Bank of Israel sanctions committee decision of 25 March 2026, and the report of the Parliamentary Commission of Inquiry into the Location and Restitution of Assets of Holocaust Victims together with its Appendix 3. Company registration data was drawn from the open Registrar of Companies dataset at data.gov.il.