Bank Leumi to Pay $400m for U.S. Tax Settlement

'Bank Leumi employees engaged in a series of egregious schemes to help its U.S. clients shirk their responsibility to pay taxes,' authorities report.

Sudarshan Varadhan
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Pedestrians are reflected in the windows of a Bank Leumi branch in Tel Aviv in this May 30, 2013.
Pedestrians are reflected in the windows of a Bank Leumi branch in Tel Aviv in this May 30, 2013. Credit: Reuters
Sudarshan Varadhan

REUTERS -- Bank Leumi Le Israel BM, Israel's second largest bank, will pay $400 million to settle two separate investigations into whether it helped its U.S. clients evade taxes.

The lender also fired some senior employees who engaged in misconduct and agreed to have an independent monitor review its compliance programs, the New York State Department of Financial Services said in a statement.

Bank Leumi had been negotiating for months with the U.S. Department of Justice and New York state to settle an investigation of possible tax evasion.
The bank will pay the U.S. government a total of $270 million and the state department will receive $130 million.

"Bank Leumi employees engaged in a series of egregious schemes - including creating complex, sham loan arrangements - to help its U.S. clients shirk their responsibility to pay taxes," the state department's Superintendent Benjamin Lawsky said in a statement.

"What's worse, when certain Swiss banks began to put the brakes on this type of misconduct, Bank Leumi instead hit the accelerator even harder - viewing it as a 'golden opportunity' to pick up new business," Lawsky said.

Bank Leumi officials were not immediately available for comment.

Bank Leumi Luxembourg and Leumi Private Bank will also cease to provide banking and investment services for all accounts held by U.S. taxpayers, the Justice Department said in a statement.

U.S. efforts to crack down on Americans using offshore banks to evade taxes have largely focused on Swiss banks, but lenders in other countries are also under scrutiny.

The investigation of Israeli banks started in 2011, two years after Swiss bank UBS AG was fined $780 million and it had to hand over client data to the United States.
Credit Suisse agreed in May to pay more than $2.5 billion in penalties for helping Americans dodge taxes.

Israel's largest bank Hapoalim and fourth-largest lender Mizrahi-Tefahot are also being investigated.

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