Major Israeli bank admits helping with U.S. tax fraud

A major Israeli international bank admitted that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns to the Internal Revenue Service by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world.

A deferred prosecution agreement between the Bank Leumi Group and the Department of Justice was filed Monday in the Central District of California that defers prosecution on a criminal information 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 10 years 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.

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.

According to documents filed in the case, to account for their criminal conduct, Bank Leumi Group will pay the United States $270 million. Of this total payment, $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland. The agreement further provides that Bank Leumi Luxembourg and Leumi Private Bank will cease to provide banking and investment services for all accounts held or beneficially owned by U.S. taxpayers.

“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.”

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