Israel’s Bank Leumi Group has agreed to pay a total of some $400 million to US and New York authorities to settle a criminal probe, after admitting to helping US taxpayers hide assets, the Department of Justice announced Monday.
The bank will also terminate the employment of senior staff as part of the settlement.
Leumi agreed to pay $270 million to the US Department of Justice, $156 million of which is a fine for US taxpayer accounts held at the bank’s Swiss subsidiary, and $130 million to New York’s Department of Financial Services.
From at least 2000 until early 2011, Leumi sent private bankers from Israel and elsewhere to meet with US taxpayers and help them conceal assets at Leumi locations in Israel, Switzerland and Luxembourg, documents revealed.
Leumi, a unit of Bank Leumi le-Israel, also helped US taxpayers prepare and present false tax returns, prosecutors said.
As part of a deferred prosecution agreement, Leumi agreed to supply information on more than 1,500 US account holders.
“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 Cole.
The bank agreed to a deferred prosecution deal in which it admitted to wrongdoing without pleading guilty and avoiding prosecution.
“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,” said Cole
The Justice Department said the case marks the first time an Israeli bank has admitted to such criminal conduct.
According to a report in Forbes magazine, the statement of facts in the case included the following main accusations: “surreptitiously sending private bankers from Israel and elsewhere around the world to the United States to meet secretly with US clients at hotels, parks and coffee shops to discuss their offshore account activity; assisting US clients in using nominee corporate entities created in Belize and other foreign jurisdictions to hide their undeclared accounts by concealing the US client as the true beneficial owner of the account; using the Bank Leumi le-Israel Trust Company as a nominee account holder for US clients with accounts in Israel to conceal the US client as the true beneficial owner of the account;maintaining US clients’ undeclared offshore accounts under assumed names or numbered accounts to conceal the US client as the true beneficial owner of the account.”
The report also said the bank was guilty of “providing hold mail services so that correspondence and other account information would not go directly to the US client to make it more difficult to connect the client to the secret offshore account; extending loans to US 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 US government; and after the department’s investigation into UBS and other Swiss banks’ criminal conduct in aiding US taxpayers to evade their taxes became public, the Bank Leumi Group opened and maintained accounts for US taxpayers who left UBS and other Swiss banks due to the investigation in an effort to continue to avoid detection by the US government.”