In a Police investigation concerning staggering sums of money, 28 Israelis have been arrested in connection with their undisclosed accounts with Swiss bank UBS. In a tax evasion story that started small, it is alleged that some 6,500 Israelis have bank accounts totaling over $10 billion in the Geneva branch of the HSBC.

The investigation has also uncovered 55 people registered in the Palestinian Authorities in the West Bank and Gaza with accounts over $148 million.

According to CBS’ “60 Minutes,” a 37-year-old computer security specialist named Hervé Falciani stole a huge cache of data in 2007 from HSBC, the second largest commercial bank in the world. He handed the data over to the French government, and it is being used by world governments to catch tax cheats. He said the methods for managing some data would help tax evaders. He said his suggested reforms had been rejected by management. In response to the report, HSBC said standards in those days were lower both for the bank and the financial-services industry. It said that in recent years it has taken steps to ensure that its clients are not using banking secrecy as a way of evading taxes in their home countries.

The list was part of a wider exposé of about 81,000 accounts held at HSBC in Geneva by about 106,000 people from 211 countries during those years. In the final year of the period, the accounts held more than $102 billion. As of September 2006, 23,000 of the accounts were active.

Israelis on the list include Beny Steinmetz and his brother Daniel, heirs to a diamond fortune. They were listed as having scores of accounts totaling more than $100 million. Another is Rabbi David Pinto, who runs a network of nonprofit institutions, who had $2.3 million in a Swiss account. Zadik Bino, controlling shareholder of First International Bank of Israel, is on a Virgin Islands company account with $22 million. The beneficiaries are his children. According to Haaretz, 17 Israeli accounts held more than $100 million each, some 200 had $10 million or more, and 1,350 had at least $1 million.

“As a rule, the representative of a foreign bank that has no branch in Israel who comes here is prohibited from engaging in the activities conducted by a banking corporation, under the Banking Law (Registration),” said a Bank of Israel spokesman, Yoav Soffer. “Nevertheless, from the Banking Law’s perspective, providing information or advice is permissible.”

Steinmetz has been in negotiations with Israeli tax authorities about his liability for 2003-2007; about a year ago he was ordered by a court to make available documents detailing the structure of his businesses.

“The investigation continues and more arrests are expected,” Israeli authorities said in a statement.

“During the investigation it was revealed … that at UBS in Switzerland, thousands of accounts held by Israelis are being managed, and it is suspected that the vast majority of money held in the accounts is not reported to the Tax Authority,” it said.

The probe began last June, when officials began investigating two Israelis suspected of operating clinics treating impotency overseas and failing to report their income from it. The investigation found the two were supposed to meet with their banker from UBS, Roni Elias – an Israeli citizen – at a Tel Aviv hotel. Elias was arrested as were 11 others, including the comptroller of the clinics. A search of Elias’ hotel room and the local UBS offices turned up a list of other Israeli accounts at the bank.

A UBS spokesman in Zurich told Reuters that the bank and its Israel office are not part of the investigation and would not be commenting further. Sharon Fishman, an attorney for Elias, said her client had not been an Israeli citizen for 40 years and denied that he had helped anyone hide assets.

This comes after a similar move by the United States to track accounts held by Americans abroad, which led to Bank Leumi being investigated and paying a $400 million penalty.

There have been no indictments yet and the investigation is ongoing.