Bank Hapoalim B.M. (BHBM), headquartered in Israel and operating in the United States, was assessed a $37.35 million civil money penalty (CMP) by the Federal Reserve Board Thursday over “unsafe and unsound practices” resulting in violations of U.S. tax laws, the Fed announced.
That was part of an overall $874 million assessed by the Fed, the Department of Justice (DoJ), and New York State Department of Financial Services based on findings of an investigation into the bank’s facilitation of tax evasion, according to the enforcement order.
Among the allegations noted in the Fed’s consent order with the bank was that BHBM, from at least 2002 through 2014, offered certain products and services that U.S. taxpayers used to conceal their assets from U.S. tax authorities, including back-to-back loans offered through U.S. branches. These back-to-back loans, it states, frequently involved a loan from the U.S. branches to a U.S. taxpayer that was secured by an undeclared offshore account owned or controlled by the same taxpayer at BHBM or Bank Hapoalim (Switzerland) Ltd. (BHS), a Swiss-incorporated banking institution that is a subsidiary of BHBM.
The order states that these loans allowed U.S. taxpayers to access the economic value of the undeclared offshore funds without actually transferring them to the United States, preventing a paper trail that could alert U.S. tax authorities to the funds.
The Fed order says that BHS entered a guilty plea and consented to the issuance of a criminal penalty for conspiracy to aid or assist customers with filing a false tax return in violation of federal tax laws; and that BHBM entered into a consent order with the New York regulator, which found that BHBM operated an illegal cross-border banking business “that knowingly facilitated U.S. clients in concealing offshore assets and income from the IRS.”
“The Board is requiring the firm to address deficiencies in its oversight, management, and controls governing compliance with U.S. laws,” the central bank noted\. “Additionally, the Board is requiring the firm to implement controls governing the retention and management of bank records.”