Banks Under Investigation By U.S. Authorities

The second largest bank in Israel, Bank Leumi, faces millions of dollars in potential penalties as part of a probe into whether the bank helped U.S. investors hide money and avoid paying the full amount of income taxes due to the United States government.

Bank Leumi is not the first bank to be targeted and the millions in penalties they face do not represent the largest amount of money collected by U.S. authorities due to banks helping clients to avoid their income tax obligations.

Many banks are providing information to U.S. authorities when they are accused of helping to facilitate tax evasion. This means investors are at risk that their names and account details will be turned over to the U.S. government when a bank or banker makes a deal.  It is important to contact a Boston international tax attorney as soon as possible if you believe you might have undeclared offshore accounts the government could discover.

Banks Targeted in Crackdown on Tax Evasion

Bank Leumi is being targeted both by federal authorities as well as by regulators from the New York Department of Financial Services.  The bank allegedly helped U.S. investors to avoid paying their taxes by structuring sham loan arrangements that allowed investors not to pay taxes even though they were able to access their funds.

The bank may be fined around $300 million to settle its probe with the New York regulators. In addition, the bank also almost reached an agreement with the Department of Justice in June to pay $238 million to settle a tax evasion investigation that was launched by the federal government in relation to a Swiss branch of its bank.

Although these fines are large, they are not the biggest penalties imposed on banks as a result of helping U.S. investors avoid taxes. Just recently, Credit Suisse settled its own tax evasion investigation with U.S. authorities. In settling the tax probe, Credit Suisse agreed to pay around $2.5 billion to U.S. authorities. The bank also agreed to pay $715 million to the New York Department of Financial Services.

Although many banks pay fines when caught facilitating tax evasion, most are able to avoid admitting guilt. The Credit Suisse deal with the government was unique because the bank actually admitted guilt and was indicted.  However, as a part of its deal, the bank was able to keep its license to operate in New York.

When banks and bankers are targeted, they frequently try to make deals to avoid the worst of the potential penalties they could face. Unfortunately, this often means that they turn over investor information. This is true despite the fact that there is a long tradition of secrecy in Swiss banking.

Investors will find it increasingly difficult to keep their offshore accounts secret as the government continues going after banks. If you have money offshore and the U.S. government does not know about it, you need to contact a Boston International Tax Attorney for help.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989