Israel arrests four diamond dealers in HSBC Swiss tax evasion case

JERUSALEM, Sept 22 (Reuters) - Israeli authorities made their first arrests in a tax evasion investigation focused on the Swiss arm of HSBC, taking into custody four diamond dealers who allegedly held undeclared accounts at the bank, the tax authority said on Thursday.

The four Israeli men are accused of holding close to 100 million shekels ($21 million) at the bank that was not reported to the Israel Tax Authority.

A Tel Aviv court later agreed to release them after posting bail. All four have denied the allegations.

Israel's tax authority had been working since February 2015 to obtain a list of Israelis with accounts at HSBC Switzerland. In August, it said that French authorities handed over a list of more than 8,000 Israeli customers.

HSBC early last year acknowledged "past compliance and control failures" that may have allowed some customers to evade taxes.

Having a Swiss bank account is not illegal in Israel as long as it is reported to authorities and taxes are paid.

($1 = 3.7609 shekels) (Reporting by Ari Rabinovitch; editing by Ralph Boulton)