LOS ANGELES – A major Israeli international bank admitted to helping U.S. taxpayers hide assets in offshore bank accounts to avoid paying taxes, officials said Monday.
Bank Leumi Group will pay the U.S. a total of $270 million after disclosing that more than 1,500 of these accounts were in Israel and elsewhere in the world, according to federal authorities.
Of this total payment, officials said $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland.
Bank Leumi officials agreed to stop providing banking and investment services to U.S. taxpayer-held accounts.
The U.S. Justice Department agreed to postpone the prosecution of Bank Leumi Group, charging the bank with conspiracy to aid and assist in the preparation and presentation of false tax returns and other documents to the Internal Revenue Service.
This unprecedented agreement marks the first time an Israeli bank has admitted to such criminal conduct which spanned over a 10-year period and included an array of services and products designed to keep U.S. taxpayer accounts concealed at Bank Leumi Group’s locations in Israel, Switzerland, Luxembourg and the United States, officials said.
“The Bank Leumi Group recognized that the writing is on the wall for offshore banking, and cooperating with the government’s investigation was the only way to proceed,” said Deputy Attorney General James M. Cole. “This deferred prosecution agreement demonstrates both that the Justice Department will hold financial institutions accountable for their crimes, and that we will be fair in recognizing extraordinary cooperation.”
The Bank Leumi Group’s parent company is Bank Leumi le-Israel, B.M. Bank Leumi le-Israel is one of Israel’s largest banks, with subsidiaries in seven countries and more than 13,000 employees.
Other subsidiary banks entering into this prosecution agreement include:
- The Bank Leumi le-Israel Trust Company Ltd., the oldest and largest of all bank trust companies in Israel
- Leumi Private Bank S.A., a Switzerland-based subsidiary
- Bank Leumi (Luxembourg) S.A., a Luxembourg-based subsidiary
- Bank Leumi USA, a FDIC-insured, full-service commercial bank with offices in California, Florida, Illinois and New York.
“There are many provisions of federal law that can benefit taxpayers, but maintaining secret offshore accounts to conceal assets is not a legal method of lowering one’s tax liability,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California.
Adding, “Any financial institution – no matter where it operates – will be held accountable if it helps U.S. residents dodge their tax responsibilities. This agreement with Leumi Bank is the latest notice to American taxpayers who might flout the law that we can and will uncover your hidden assets.”
According to the filed statement of facts, from at least 2000 until early 2011, the Bank Leumi Group did the following:
· ● Secretly sending private bankers from Israel and elsewhere around the world to the United States to meet secretly with U.S. clients at hotels, parks and coffee shops to discuss their offshore account activity;
· ● Assisting U.S. clients in using nominee corporate entities created in Belize and other foreign jurisdictions to hide their undeclared accounts by concealing the U.S. client as the true beneficial owner of the account
· ● Using the Bank Leumi le-Israel Trust Company as the account holder for U.S. clients with accounts in Israel to conceal the U.S. client as the true beneficial owner of the account
· ● Maintaining U.S. clients’ undeclared offshore accounts under assumed names or numbered accounts to conceal the U.S. client as the true beneficial owner of the account;
· ● Providing hold mail services so that correspondence and other account information would not go directly to the U.S. client to make it more difficult to connect the client to the secret offshore account
· ● Extending loans to U.S. clients from Bank Leumi USA that were collateralized by the assets in those clients’ offshore accounts, so that the clients could leverage their offshore assets to obtain and use capital in the United States while keeping their foreign accounts secret and undetected from the U.S. government
· ● After the department’s investigation, the Bank Leumi Group opened accounts for U.S. taxpayers who left UBS and other Swiss banks due to the investigation in an effort to continue to avoid detection by the U.S. government.