Bank Leumi Negotiating with New York Banking Regulator About US Tax Evasion Enablement (10/29/14)

Bank Leumi is in the sights of the NY banking regulator who has lowered the boom of offshore bank enablers of tax evasion.  See David Voreacos and Greg Farrel, Bank Leumi Said to Face $300 Million Demand in Tax Case (Bloomberg 10/29/14), here.  Excerpts:

New York’s banking regulator will ask for more than $300 million to settle an investigation into whether Bank Leumi Le-Israel (LUMI) BM helped Americans evade taxes, a person familiar with the matter said.\ 

Benjamin Lawsky, head of the state’s Department of Financial Services, is seeking more than what the bank set aside to resolve a separate criminal investigation by the U.S. Justice Department. In June, Leumi said it allotted 950 million shekels ($254 million) for the federal matter, which would make it the first Israeli bank to settle a tax probe with the U.S. 

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Bank Leumi, Israel’s second largest lender by assets, said today it’s in talks with Lawsky’s department on a settlement, according to a filing with the Tel-Aviv Stock Exchange. It’s too early to estimate if an accord may be reached and a final settlement may be “significantly higher” than the provisions it’s already set aside to cover those costs, the bank said. 

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Lawsky’s Leverage 

Lawsky, the banking superintendent since 2011, has leverage over Leumi because it holds a New York banking license and he can threaten to revoke it for violations of the law. He has used that power to extract other settlements. 

In August 2012, he struck a $340 million accord with Standard Chartered Plc (STAN) after threatening to pull its license. The London-based bank was accused of evading U.S. sanctions laws by stripping the names of Iranian clients from billions of dollars in wire transfers. Lawsky required the bank to hire an outside monitor to oversee the controls for handling transactions with sanctioned nations. 

Lawsky’s settlement with Credit Suisse also required the bank to hire a monitor. 

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Legal Liability 

The bank said in June that it sought to resolve its legal liability for activities on behalf of U.S. taxpayers from 2002 to 2010. Leumi is “working towards a resolution” with the Justice Department “in accordance with the outline and the sum” proposed by the federal agency, according to its statement.