N.Y. Regulator Said to Seek $300 Million From Bank Leumi in Tax Probe

Israel's second-largest bank has been negotiating with U.S. authorities to settle investigation of possible tax evasion by American clients.

Bloomberg

REUTERS - New York state's financial regulator is seeking more than $300 million from Bank Leumi as part of a probe of whether the Israeli bank assisted U.S. citizens in evading taxes, according to a person familiar with the matter.

Bank Leumi, Israel's second-largest bank, has been negotiating with U.S. authorities for months to settle an investigation of possible tax evasion by the bank's American clients.

The penalty from New York state's Department of Financial Services, which regulates certain banks in the state, is separate from demands by federal authorities.

The New York state's penalty stems from the structures the bank set up for its clients, which the regulator views as egregious, according to the person, who did not want to be identified because negotiations are not public.

The bank used sham loan arrangements to allow clients to avoid taxes and still have access to the funds, the person said. There is no agreement yet between the regulator and the bank, the person said.

A spokesman for the bank in Tel Aviv did not immediately respond to a request for comment outside regular business hours.

A spokeswoman for New York's Department of Financial Services declined comment.

The possible penalty was first reported on Tuesday by Bloomberg.

Bank Leumi said in June it was close to a deal to pay nearly $238 million to the U.S. Justice Department in the accord related to its Swiss unit. The bank also made provisions for the settlement, it said in August.

Bank Leumi's negotiations are part of a wide-ranging campaign to crack down on Americans using offshore banks to evade taxes.

In May, New York's Department of Financial Services, headed by superintendent Benjamin Lawsky, obtained $715 million from Credit Suisse as part of an agreement for Switzerland's second-largest bank to pay more than $2.5 billion in penalties to U.S. authorities for helping Americans evade taxes.

Credit Suisse also pleaded guilty to resolve its long-running dispute with the United States over the probe, marking a rare criminal indictment for a major financial institution. As part of the deal, Lawsky agreed to not revoke Credit Suisse's license to operate in New York.

On Oct. 21, lawyers representing 73 Swiss banks wrote a joint letter to the U.S. Department of Justice questioning the terms of a proposed non-prosecution agreement over how banks can achieve amnesty through a disclosure program announced last year.