The IRS announced charges against Israel’s largest bank on Thursday for helping wealthy New Yorkers and other U.S. citizens shelter assets in offshore accounts.
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The tax agency’s criminal division filed charges against Bank Hapoalim B.M. and registered a guilty plea from its Swiss subsidiary for conspiring with U.S. taxpayers to hide more than $7.6 billion throughout more than 5,500 accounts, along with the income generated by those accounts, from U.S. tax authorities. The alleged scheme took place between 2002 and 2014.
Authorities said the bank failed to prevent wealthy U.S. citizens from hiding their cash in these offshore accounts, but actively helped them facilitate the fraudulent activity – including helping U.S. taxpayers file false returns and opening accounts under pseudonyms.
New Yorkers were particularly singled out for their role in the scheme – the bank has global outposts in both New York and Miami. The bank is paying the state a $220 million penalty. No other specific states were mentioned or appear to be receiving a penalty.
“There is no excuse for a foreign financial institution to unlawfully assist wealthy Americans in flouting their responsibilities to pay their taxes,” IRS Criminal Investigation Chief Don Fort said in a statement.
It is unclear what action, if any, will be taken against the individuals involved.
Overall, the Israeli bank and its Swiss subsidiary will cough up $874.27 million – marking the second-largest recovery by the Department of Justice since it began honing in on individuals and entities unlawfully sheltering assets in tax havens.
The IRS began an extensive crackdown on offshore accounts in the mid- to late-2000s, after a whistleblower revealed that Swiss Bank UBS was helping U.S. taxpayers avoid payments.
In 2018, the IRS ended its Offshore Voluntary Disclosure Program, which allowed taxpayers to confess their secret accounts and pay a heavy fine in exchange for potential protection from criminal liability.