The largest banking system in Israel, Bank Hapoalim, pled guilty in Manhattan's federal court on April 30 for helping its U.S. clients hide approximately $7.6 billion from the Internal Revenue Service. According to the U.S. Department of Justice, the bank and its BHI Swiss subsidiary, were fined $874 million for helping clients conceal their U.S. assets in secret bank accounts. Several high-ranking bank officials engaged in this fraudulent activity from 2002 to 2014 by providing false identities and pseudonyms for their clients according to an article in
U.S. clients participating in this fraud were able to avoid the IRS by limiting their transactions to $10,000 or less. To prevent any information from the secret accounts being sent to the IRS, the bank provided clients with a "hold mail" service.
As part of its plea agreement, the bank agreed to comply with the Department of Justice's Swiss Bank Program that provides Swiss banks an opportunity to avoid criminal prosecution by providing information to the IRS. As a stipulation in this agreement, the bank will turn over any information regarding accounts that were closed between 2009 to 2019. As long as the bank continues to work with the DOJ for the next three years on further investigations into hidden accounts, the bank will avoid further prosecution. Once it has met all stipulations of the agreement, the bank's fraud charges will be dismissed, however, bank clients involved in using the bank to defraud the IRS are not protected by the agreement and can face civil or criminal charges.
"Today's resolution serves as proof that financial institutions engaging in tax fraud face dire criminal and financial consequences for their behavior," said Don Fort, chief of the IRS Criminal Investigation Division in a statement.
As of press time for this publication, Bank Hapoalim did not respond to a request to comment on the fraud or plea agreement.
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