BHBM Provided Banking Services that Facilitated Tax Evasion by U. S. Clients BHBM offered a variety of offshore private banking services that it knew or should have known could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS. Awareness by BHBM that its services could assist U.S. clients to evade their U.S. taxes is reflected in a memorandum drafted in 1991, which was circulated among some senior BHBM managers (the “1991 Memo”). The 1991 Memo noted that, at that time, BHBM employees solicited deposits from U.S. clients for accounts at BHBM in Israel. The 1991 Memo further discussed how U.S. clients could use accounts in Israel to facilitate income tax and inheritance tax evasion, and how loans that provided U.S. taxpayers access to undeclared funds held in offshore accounts could aid in tax evasion. The 1991 Memo is referenced in materials circulated at BHBM, including among certain senior managers, through at least 1998. Despite this awareness of potential liability under U.S. criminal laws and the consequent need to take appropriate steps to avoid this exposure, BHBM did not take adequate steps to curtail its activities and services involving U.S. taxpayers. The most significant of these services are set forth below, and some are described in more detail in the sections that follow. BHBM offered code name or numbered account services, which allowed an account holder to replace his or her identity with a code name or number on bank statements and other documentation sent to the client. These services helped U.S. clients to eliminate the paper trail associated with the undeclared assets and income they held at BHBM. By accepting and maintaining such accounts, BHBM assisted some U.S. taxpayers in evading their U.S. tax obligations. By January 2015, BHBM either blocked or converted to the actual name of the account holder all coded or numbered accounts. BHBM held 566 coded and/or numbered accounts that were U.S. Penalty Accounts. Prior to 2007, BHBM employees also opened “encrypted” accounts for which the identities of the account holder and other customers associated with the account were known to BHBM and registered in BHBM’s systems, but where the access to such information was restricted to a limited number of bank employees. During the Relevant Period, BHBM had approximately 160 encrypted accounts that were U.S. Penalty Accounts. The last encrypted account for a U.S. customer was opened in November 2007. By January 2015, BHBM blocked all encrypted accounts that had not ...
