Offices of Germany’s Largest bank, Deutsche Bank, have been raided by German Police and financial investigators earlier this week as part of an investigation by German authorities around information supplied from the Panama Papers, released in late 2017.
170 police officers and investigators searched 6 of the bank’s buildings in the city of Frankfurt on Thursday, in connection to information which suggests that the bank has been involved in money laundering as far back as 2013 to present day.
A spokesperson for Deutsche Bank stated that they are fully cooperating with the authorities and that the information being investigated is related to information gathered from the Panama Papers.
German Police have said they are specifically investigating two employees of the bank who are believed to be connected with helping clients set up offshore companies to commit tax evasion, where it has been found that in the year of 2016 alone, 900 customers were served by a subsidiary of the bank registered in the British Virgin Islands, a known tax-haven, generating an estimated 311 million euros. Additionally, the German Police accuse the bank itself of neglecting to report laundering suspicions about their clients in tax evasion schemes.
The Panama Papers were a leaked cache of financial information from the law firm Appleby, that was involved in hundreds of tax evasion and tax avoidance schemes for hundreds of clients across the world.
The cache contained around 11.5 million financial documents relating to offshore tax havens, and was sent anonymously to the German newspaper Süddeutsche Zeitung in 2016, before being analysed over the course of the next two years by a consortium of over 100 independent journalist organisations, followed shortly after by a leak of a further 13.4 million documents in the Paradise Papers leak in 2017.
The papers made international headlines in 2016, and many high-profile figures were implicated, including 12 current and former world leaders, and an illicit money laundering trade associated with the Russian President Vladimir Putin that allegedly involved over $2 billion travelling through international banks and companies.
Other people involved in the papers were the King of Saudi Arabia, and the now former Prime Minister of Pakistan, Nawaz Sharif, who was ousted from his position on corruption charges and has since been sentenced to 10 years in prison over information resulting from the Panama Papers.
The papers also led to the United States government blacklisting 33 individuals and companies from trading within the country due to evidence from the papers that they have been involved in money laundering with and financing of terrorist organisations, the drugs trade, and countries such as North Korea and Iran.
This is not the first time Deutsche Bank has been involved with the Panama Papers, where it was found that Deutsche Bank helped to process the majority of over 200 billion euros in suspicious payments from 2007 to 2017 through Danske Bank’s Estonian branch.
In 2016, Deutsche Bank was also fined a collective $630 million for failing to prevent $10 billion of Laundered Russian money from entering the United Kingdom and the United States.
The United Kingdom’s Financial Conduct Authority imposed the largest fine it had ever imposed on Deutsche Bank, to a total of £163 million, and the New York Department of Financial Services, an independent auditor organisation, fined the Bank $425 million.
The New York Department of Financial Services even found that one senior compliance officer in the Bank remarked to investigators that he had to “beg, borrow and steal” in order to get the finances and resources to deal with money laundering investigations within Deutsche Bank.
Deutsche Bank’s history with money laundering stretches even further back into 2016, when they were forced to pay a $7.2 billion settlement to the United States Department of Justice after intentionally complex and misleading packaging of home loans were ruled unlawful, which was common practice among banks in the United States before the 2008 financial crash.
In 2017, a German investment watchdog, BaFin, called for Deutsche Bank to do more to prevent the possibility of terrorist financing and money-laundering by clients within the Bank.
The regulator also called for more European regulators to step up their scrutiny of banks and their clients, and appointed an independent auditor, KPMG, to assess Deutsche Bank’s progress in improving their investigation of money laundering.
BaFin clarified that these developments were not in response to any recent events but was instead the advice of an investigation into the Bank by the regulator
While the long-term implications of the Panama Papers in the United Kingdom have been relatively minor, in other countries- especially those who have very strict laws on tax evasion such as Germany- the implications have seen drastic changes in politics and commerce. In Germany, negligent tax evasion, the act of evading the payment of taxes by individuals or organisations, is highly illegal.
While the outsourcing of finances to offshore companies and banks in tax havens isn’t inherently illegal, hiding the transfers is illegal and seen as tax evasion under German tax laws. In the past, there has been a stereotype developed around the “Swiss bank account” that can make tax evaders completely anonymous to auditing organisations. Switzerland has had privacy laws around financial accounts that nearly entirely prevented auditors from identifying recipients of Swiss accounts, but in recent years Switzerland has agreed to cooperate with foreign governments in identifying account holders, leading to a rise in other tax havens, that fill in the role of the anonymous tax haven such as Panama and countries within the Caribbean.
The Panama Papers was a distinct revelation across the world on the methods many international organisations and individuals employ to evade paying their taxes, and in a more sinister way, the methods employed to transfer illegitimate money to and from terrorist groups, and the international black market.
It is not currently known whether the raid is due to alleged illegality before or after the independent regulator KPMG began advising the Bank on regulating its own clients. If it is found that the money laundering had occurred after KPMG became involved with Deutsche Bank, it could suggest a decisive failing in effectively equipping the Banks investigation process.
For Deutsche Bank itself, this represents another damaging development from a history of money laundering issues.