The lender also fired some senior employees who engaged in misconduct and agreed to have an independent monitor review its compliance programs, the New York State Department of Financial Services said in a statement.
“Bank Leumi employees engaged in a series of egregious schemes – including creating complex, sham loan arrangements – to help its U.S. clients shirk their responsibility to pay taxes,” the state department’s Superintendent Benjamin Lawsky said in a statement.
“What’s worse, when certain Swiss banks began to put the brakes on this type of misconduct, Bank Leumi instead hit the accelerator even harder – viewing it as a ‘golden opportunity’ to pick up new business,” Lawsky said.
Bank Leumi Luxembourg and Leumi Private Bank will also cease to provide banking and investment services for all accounts held by U.S. taxpayers, the Justice Department said in a statement.
U.S. efforts to crack down on Americans using offshore banks to evade taxes have largely focused on Swiss banks, but lenders in other countries are also under scrutiny.
Credit Suisse agreed in May to pay more than $2.5 billion in penalties for helping Americans dodge taxes.
(This story and its headline were updated with new information)