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US Justice Department attempts to crack down on tax evaders

It is a criminal offense for Americans to avoid paying taxes through unreported bank accounts. The trail of wealthy U.S. tax evaders usually leads investigators to Swiss banks.

But now the U.S. Justice Department’s criminal tax division is scrutinizing three of Israel’s largest banks over suspicions their Swiss outposts helped Americans evade taxes. That’s according to an exclusive Reuters report. The Justice Department is reportedly focused on Bank Hapoalim, Bank Leumi le-Israel BM and Mizrahi-Tefahot. 

For years the Justice Department has focused on Switzerland as the source for offshore private banking secrecy. The probe began in 2007 with UBS AG, Switzerland’s largest bank. The shift to Israel reportedly signals the broadening of the probe. Credit Suisse and other banks, also are suspected of providing unlicensed banking services to American clients and lying to the U.S. Federal Reserve. 

Other than tax evasion, at issue is an already strained, but historically close relationship between the US and Israel. Israel is a key diplomatic and military ally in the Middle East and the biggest recipient of U.S. aid — $3.1 billion last year. 

Middle East Analyst Richard Hellman says the investigation may also be an effort by the US government to put pressure on Israel before next weeks United Nation’s vote on Palestinian statehood. 

The Justice Department’s scrutiny of the Israeli banks is at an early stage. Currently, the Justice Department is attempting to force nearly a dozen Swiss banks to pay billions of dollars in fines and admit to criminal wrongdoing. 

The Justice Department has given the three Israeli banks, along with seven Swiss banks, until Sept. 23 to produce broad statistical information on their Swiss operations with U.S. clients. In a 2009settlement with the Justice Department, UBS paid a $780 dollar million fine, admitted to criminal wrongdoing, and turned over client names.

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