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Jersey mentioned in Bank Hapoalim Criminal Misconduct of Tax Evasion case

05/05/2020

Israel’s Largest Bank, Bank Hapoalim, Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts. Bank Hapoalim (Switzerland) Pleads Guilty and Bank Hapoalim B.M [BHBM]. Enters into Deferred Prosecution Agreement for Criminal Misconduct & Agree to Pay Nearly $875 Million. From at least (in or about) 2002, and continuing until at least (in or about) 2014 the Bank conspired with employees, U.S. customers, and others to:

  • defraud the United States of taxes;
  • file false federal tax returns; and
  • committ tax evasion.
According to documents filed today in Manhattan federal court:
  1. Outside Israel, BHBM owned BHS, a Swiss subsidiary that provided private banking. BHS is headquartered in Zurich and at times during the prosecution period had branches in Geneva, Luxembourg, and Singapore
  2. BHBM is Israel’s largest Bank and operates primarily as a retail bank with approximately 250 branches throughout Israel and more than 2.5 million accounts.
  3. In addition to retail banking services, BHBM offered private banking services for onshore and offshore customers through its retail branches and its Global Private Banking Centre. BHBM also wholly-owned Poalim Trust Services Ltd., which provided trust formation and management services.
  4. BHBM had branches in New York, Miami, the Cayman Islands, the United Kingdom, and Jersey.
Where does Jersey fit in
  1. BHBM had a branch in Jersey and owned Hapoalim Fiduciary Services Limited, a Jersey fiduciary (http://www.privatebanking.com/directory/europe-channel-islands-jersey-st-helier/other-financial-firms/hapoalim-fiduciary-services-limited).
  2. In 2011 Basel Trust Group acquired Hapoalim Fiduciary Services Limited  http://www.blglobal.co.uk/BusinessNews.aspx?id=basel-trust-group-makes-acquisition.
  3. And in 2013 First Names Group announced the completion of its acquisition of The Basel Group. http://www.blglobal.co.uk/BusinessNews.aspx?id=first-names-group-concludes-basel-acquisition
Hapoalim Fiduciary Services Limited.
  1. According to the “CONSENT ORDER UNDER NEW YORK BANKING LAW” [§§ 39 and 44] - [https://www.dfs.ny.gov/system/files/documents/2020/04/ea20200430__bhbm.pdf]
    1. Between 2002 and 2008, the Bank opened accounts in the names of trusts and suggested that U.S. Persons open trust accounts at entities that were wholly-owned subsidiaries of
      • BHBM
        • Poalim Trust Services Ltd., known as Pashan,
      • BHS
        • Trinel Ltd. and
        • Hapoalim Fiduciary Services Limited, formerly known as Hapoalim Trustees Limited and later known as BHI Trust Company,
      • or other structures.
    2. This practice involved at least 46 accounts, including one for a New York resident.
What Did They Do

Employees of BHBM and BHS assisted U.S. customers in concealing their ownership and control of assets and funds held at the Bank, which enabled those U.S. customers to evade their U.S. tax obligations, by engaging in the following conduct:

  1. Assisting U.S. customers with opening and maintaining accounts in the names of pseudonyms, code names, trust accounts, and offshore nominee entities;
  2. Opening customer accounts for known U.S. customers using non-U.S. forms of identification;
  3. Enabling U.S. taxpayers to evade U.S reporting requirements on securities’ earnings in violation of the Bank’s agreements with the IRS;
  4. Providing “hold mail” services for a fee, avoiding any correspondence regarding the undeclared account being sent to the U.S.;
  5. Offering back-to-back loans for U.S. taxpayers to enable them to access funds in the United States that were held in offshore accounts at the Bank in Switzerland and Israel; and
  6. Processing wire transfers or issuing checks in amounts of less than $10,000 that were drawn on the accounts of U.S. taxpayers or entities in order to avoid triggering scrutiny.
To effectuate this scheme, Bank Hapoalim, independently or through its Swiss subsidiary:  
  1. Opened and maintained “coded,” “numbered,” and “encrypted” accounts, for which the name of the account holder (including for U.S. citizens and permanent residents) would not appear on any correspondence or account statements; instead, a code or a pseudonym was used;
  2. Opened and maintained accounts in the names of trusts and suggested that U.S. citizens open trust accounts at entities that were wholly-owned subsidiaries of the Bank, its Swiss subsidiary, or other structures;
  3. Opened accounts for customers known to be U.S. citizens or permanent residents using non-U.S. forms of identification so that the citizenship of the account holder would not be apparent to compliance officials or regulators;
  4. Opened accounts in the name of offshore entities without indicating that the beneficial owner of the entity was a U.S. citizen or permanent resident;
  5. Provided a “hold mail” service, which provided for the holding of every statement of account, notice, or other document associated with the account at the branch where the foreign account was maintained instead of those documents being sent to the customer’s address; and
  6. Issued interest-bearing loans through its U.S. branches, including the New York Branches, that were secured with the assets in the overseas accounts, effectively giving U.S. citizens and permanent residents access to their assets held overseas.

At least four senior executives of the Bank, including two former members of BHS’s board of directors, were directly involved in aiding and abetting tax evasion of U.S. taxpayers.

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