Bank Hapoalim to pay over $900m. in tax evasion, FIFA conspiracy cases

The bank conspired with US customers to open hidden offshore accounts and avoid scrutiny by the IRS.

A woman uses an automated teller machine (ATM) outside a Bank Hapoalim branch in Tel Aviv, Israel May 30, 2013 (photo credit: REUTERS/NIR ELIAS/FILE PHOTO)
A woman uses an automated teller machine (ATM) outside a Bank Hapoalim branch in Tel Aviv, Israel May 30, 2013
Israel’s largest bank, Bank Hapoalim B.M., and its Swiss subsidiary have agreed to pay over $874 million to the US Treasury, the Federal Reserve and the New York State Financial Services Department after admitting to conspiring with US taxpayers to hide over $7.6 billion in secret offshore accounts, the US Department of Justice (DOJ) announced.
Swiss subsidiary Bank Hapoalim (Switzerland) pleaded guilty and criminal charges have been filed against Bank Hapoalim B.M., the DOJ said, after the bank hid assets in more than 5,500 secret Swiss and Israeli bank accounts, while hiding income generated in the accounts from the Internal Revenue Service (IRS).
The resolution is the second-largest recovery by the DOJ in connection with investigations into facilitation of offshore US tax evasion by foreign banks.
“There is no excuse for a foreign financial institution to unlawfully assist wealthy Americans in flouting their responsibilities to pay their taxes,” said IRS Criminal Investigation Chief Don Fort.
“With today’s guilty plea, Bank Hapoalim is taking responsibility for their role in deliberately breaking the law and undermining the integrity of this nation’s tax system. Offshore tax evasion is a top priority for IRS Criminal Investigation and we are wholeheartedly committed to bringing offenders to justice. Today’s resolution serves as proof that financial institutions engaging in tax fraud face dire criminal and financial consequences for their behavior.”
According to documents filed on Thursday in a Manhattan federal court, Bank Hapoalim conspired with employees, US customers and others between 2002 and 2014 to defraud the United States with respect to taxes; file false federal tax returns; and commit tax evasion.
The bank helped its US customers open and maintain hidden offshore accounts under pseudonyms, code names, trust accounts, and offshore nominee entities. They additionally opened their accounts with non-US forms of identification, as well as letting them evade US reporting requirements on securities’ earnings. The latter is a direct violation of the bank’s agreements with the IRS.
Bank Hapoalim assisted its US customers who had hidden offshore accounts in holding mail so that they could avoid correspondence regarding the undeclared accounts sent to the US. The bank also helped avoid scrutiny by completing wire transfers and issuing checks valued at less than $10,000 each from the accounts of US residents.
At least four senior executives of the bank, including two former directors, were “directly involved in aiding abetting tax evasion” of US taxpayers.
Also on Thursday, the DOJ said Bank Hapoalim agreed to pay more than $30m. for its role in the money laundering conspiracy surrounding FIFA, the world governing body for soccer.
The Israeli bank and its Swiss subsidiary admitted they, through employees, conspired to launder over $20m. in bribes and kickbacks to soccer officials with Fédération Internationale de Football Association (FIFA) and other soccer federations, the DOJ said in its statement.
The agreement between the US government and the bank is the latest development to spring from a sprawling corruption probe unveiled in 2015. The firm admitted that from December 2010 to February 2015, bank employees agreed to launder bribes and kickbacks, which were given in exchange for broadcasting rights for sports marketing executives, US prosecutors said.
“For nearly five years, Bank Hapoalim employees used the US financial system to launder tens of millions of dollars in bribe payments to corrupt soccer officials in multiple countries,” Assistant Attorney-General Brian A. Benczkowski of the Justice Department’s Criminal Division said in Thursday’s statement.
Bank executives admitted they allowed the illicit activity to continue even after employees reported it, according to the DOJ and Federal Bureau of Investigation (FBI). As part of the deal, US prosecutors have agreed they will not prosecute the bank for three years in return for cooperation from the bank and other remedial efforts, the DOJ said.
“This announcement illustrates another aspect in the spider web of bribery, corruption and backroom deals going on behind the scenes as soccer games were played on the field,” said Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office.
“Bank Hapoalim admits executives looked the other way, and allowed illicit activity to continue even when employees discovered the scheme and reported it. The New York FBI Eurasian Organized Crime Task Force and our law enforcement partners have doggedly pursued every strand uncovered in this criminal investigation, and will keep at it until they root out all of the bad actors.”
Bank Hapoalim refused to comment on the matter.