The New York State Department of Financial Services or DFS said that Israel's Bank Leumi will pay $130 million to DFS, move to terminate and ban individual senior employees who engaged in misconduct, and admit its violations of law for conducting an illegal cross-border scheme to assist U.S. clients in evading federal and state taxes.
Bank Leumi will also install an independent monitor, selected by DFS, to conduct a comprehensive review of the Bank's compliance programs, policies, and procedures.
From at least 2000 through 2011, Bank Leumi-Israel and its subsidiaries, including Bank Leumi USA, a New York State-chartered bank, knowingly and willfully aided and assisted U.S. clients, including New York clients, in opening and maintaining undeclared accounts in a foreign country, concealing their offshore assets and income from the Internal Revenue Service and other federal and state authorities, and filing false tax returns and other documents with such authorities.
In an effort to facilitate this tax evasion scheme, Bank Leumi offered several products to U.S. clients who maintained funds in undeclared accounts abroad, which enabled the customers to gain access to the funds without repatriating the funds or creating a paper trail that would disclose the existence of the undeclared accounts to the U.S. authorities.
Bank Leumi will take all steps necessary to terminate the current Head of Bank Leumi Trust, who served as a Regional Manager during the relevant time period.
In light of NYDFS' investigation, two individuals who played a central role in the improper conduct have also recently resigned: a former Branch Manager, who remained employed by Bank Leumi-Israel as a credit officer in the workout unit; and a former Senior Relationship Manager, who remained employed by Bank Leumi-Israel as an operation officer in the private banking branch.
The Bank shall also ban its former Bank Leumi USA Chief Compliance Officer, who is currently Chief Administrative Officer, from conducting any activities related to compliance.
Separately, the U.S Department of Justice said Bank Leumi admitted that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns to the Internal Revenue Service (IRS) by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world.
According to documents filed in the case, to account for their criminal conduct, Bank Leumi Group will pay the United States a total of $270 million. Of this total payment, $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland.
The $157 million penalty is consistent with the department's Swiss Bank Program, which permits certain Swiss Banks to avoid prosecution by making a full and complete disclosure of their U.S. taxpayer-held accounts and paying substantial penalties. 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.
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