According to an exclusive report by Reuters, U.S. authorities are focusing on Bank Hapoalim, Bank Leumi, and Mizrahi-Tefahot. The three Israeli banks have Swiss outposts and were sent a letter dated August 31, 2011 from Deputy Attorney James Cole of the DOJ giving them until September 23, 2011 to produce broad statistical information on their Swiss operations with U.S. clients.
As reported by Tax Notes Today, the initial request had demanded data by September 6 and sought information related to private U.S. taxpayers who deposited at least $ 50,000 in Swiss accounts between January 1, 2002, and July 31, 2010, but Aviram Cohen, a spokesman in Tel Aviv for Bank Leumi le-Israel BM, said in a September 15 statement that the request is for “general statistical data.” He went on to say “It appears that this data was to serve as a basis for a comprehensive arrangement between the Swiss and American authorities. Obviously, Bank Leumi Switzerland is cooperating fully with the authorities, in accordance with Swiss Law under legal advisement.”
The investigation is in earlier stages than other banks like HSBC or Credit Suisse. With HSBC the DOJ has petitioned a federal court to allow the IRS to serve what is known as a “John Doe” summons back in April of this year. Credit Suisse on the other hand, said on September 11 that in response to a DOJ request, it has given U.S. official’s statistical data on its U.S. accountholders. The bank, Switzerland’s second largest, said the transfer was made the week of September 5.
The initial probe focusing on Hapoalim, Leumi, and Mizrah-Tafahot does not appear to ask for specific client names just yet, but instead asks for broad statistical information regarding U.S. taxpayers.
U.S. probes of foreign banks began with UBS, Switzerland’s largest bank in 2007. Following the success of the UBS campaign which resulted in a $780 million settlement and a list of specific client names in order to avoid prosecution, the Justice Department is now pursing banks all over the world to reign in US tax evaders and banks that assist them.
The Reuters report also reveals that U.S. taxpayers were getting calls from Bank Leumi telling them to close their accounts and to open them elsewhere. However, this suggestion can actually compound penalties and taxes instead of mitigating them. The government can trace the flow of money from closed accounts and the move may show a conscious and willful intent to continue to evade taxes and filing of FBARs.
Taxpayers who are out of compliance and at risk have several choices in how to move forward depending on their individual circumstances. Not all offshore accounts are out of compliance and not all accounts constitute a willful violation of foreign bank reporting requirements. Specifically, Bank Leumi seems to have taken the approach of compliance with reported letters to clients as early as November of last year advising them to report their accounts to taxing authorities.
Vic Abajian, a former IRS tax attorney, continues to assist taxpayers with foreign account and asset issues before the IRS and Franchise Tax Board. He currently represents several clients with foreign accounts both within the IRS offshore voluntary disclosure initiate (OVDI) and those that are involved in civil audits. He also represents several clients who have received grand jury subpoenas requesting information related to offshore bank accounts. To learn more about options and how to make a voluntary disclosure of an offshore bank account, please contact Los Angeles Tax Attorney Vic at 818-396-5059. We have offices in Irvine and Glendale, California and represent taxpayers throughout the nation and those located in foreign countries.