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News & Events

Israel Bank Facing Millions in Fines for Tax Evasion Schemes

Offshore Account Update

Posted in on December 12, 2014

Bank Leumi is the second largest bank in Israel. The bank allegedly helped American investors avoid their income tax obligations by structuring sham loan arrangements with investors. The “loan” arrangements would allow investors to avoid paying the amount of taxes that they owe to the U.S. government, but they would still have access to their funds.

The bank is one of several large financial institutions that has gotten itself into trouble and become the target of an Internal Revenue Service probe. Many of the banks under investigation or facing criminal prosecution are making deals and turning over client names, which is making investors very nervous. If you are an investor with offshore accounts you have not yet declared to the U.S. government, it may be time to talk to a New Jersey international tax attorney about your options for coming forward.

Banks Face Tax Evasion Probe and Large Penalties

Bank Leumi is under investigation for its tax evasion assistance both by the federal government, as well as by the New York Department of Financial Services. The Department of Financial Services is in charge of regulating banks within the state of New York where many large financial institutions operate.

According to Reuters, Bank Leumi may be close to making a deal in which the financial institution pays around $300 million to the New York authorities for its part in tax evasion schemes.  The financial institution was also close to a deal this past June to pay around $238 million to the U.S. Justice Department because a Swiss branch of its bank also allegedly helped clients evade their tax obligations.

The penalties may seem steep, but the fines are nowhere near the highest amounts of penalties that have been imposed on banks as part of an effort by U.S. authorities to stop investors from putting money offshore to evade their taxes.

In fact, Credit Suisse, the second largest bank in Switzerland, also faced huge penalties and a rare criminal indictment for a large financial institution.  Credit Suisse paid around $2.5 billion in total penalties to the United States government for its part in tax evasion schemes. The bank also paid $715 million specifically to the Department of Financial Services within the state of New York.

As part of a plea bargain where the bank admitted guilt to end the tax probe, Credit Suisse got to keep its license to operate its bank within New York.

The U.S. government is going after not only banks but also individual bankers at many of the financial institutions who were known for helping U.S. investors hide money from the government. 

This crackdown is having an effect as banks and bankers agree to give up client names as part of plea deals. Individuals can also be prosecuted and fined for not reporting their offshore accounts and once a bank turns over your name and you are under investigation, it may be too late to participate in voluntary disclosure programs. You need to consult with a New Jersey International Tax Attorney for help deciding how to proceed if you have undeclared offshore accounts.


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