German prosecutors raided several Deutsche Bank offices in the Frankfurt area Thursday over suspicions of money laundering based on revelations from the 2016 “Panama Papers” data leak.
Prosecutors said they were investigating allegations that Germany’s biggest lender helped clients set up offshore companies in tax havens to “transfer money from criminal activities” to Deutsche Bank accounts.
The raid was a new blow to the financial institution that has been hammered by a string of scandals linked to its pre-2008 crisis attempts to compete with Wall Street investment banking giants.
Some 170 police officers and investigators from the Frankfurt prosecutor’s office searched the bank’s headquarters as well as four other offices and one private home.
Deutsche Bank said it would “cooperate closely” with the prosecutors but added that it had “already provided the authorities with all the relevant information regarding Panama Papers”.
The Panama Papers scandal that erupted in 2016 with a massive data leak from Panamanian legal firm Mossack Fonseca exposed large-scale tax evasion, laying bare how the world’s wealthy and powerful stashed their assets in offshore businesses.
Deutsche Bank was among hundreds of financial institutions whose names cropped up in the media reports.
The Frankfurt prosecutors said their probe was focussed on two Deutsche Bank employees aged 50 and 46, and that they were also looking at several unnamed senior staff members.
Based on information from the Panama Papers, the suspects are accused of “failing to report suspicions of money laundering” linked to offshore firms involved in tax fraud “even though there was sufficient evidence” to suggest illegal activity, prosecutors said in a statement.
The Handelsblatt financial daily, citing sources close to the matter, reported that those targeted in the probe work at Deutsche’s compliance unit and its private wealth banking arm.
Frankfurt prosecutor Nadja Niesen said one of Deutsche Bank’s offshore branches on the British Virgin Islands handled transaction volumes worth 311 million euros ($354 million) for more than 900 clients.
“There is currently suspicion that most of the money stems from foreign tax offences,” she said, adding that the probe covered the period between 2013 and 2018.
Shares in Deutsche Bank closed down 3.4 per cent at 8.30 euros, making them the worst performing stock on a DAX blue-chip index that was down 0.01 per cent.
‘Lax money laundering checks’
The raids are the latest embarrassment for embattled Deutsche Bank, which has repeatedly been rapped by regulators for lax money laundering controls.
Markus Meinzer, director of the Financial Secrecy Tax Justice Network, said the “raid is long overdue because the Panama Papers have amply illustrated how offshore law firms cooperated with banks in setting up structures with one single aim: to help clients hide their true identities.”
“As banks in Germany manage roughly three trillion euros of interest yielding assets, the potential for abuse is enormous… Germany owes to the world to clamp down on this dark side of its economy.”
In September, Germany’s financial supervisor BaFin took the unusual step of embedding auditors from KPMG at Deutsche to monitor the bank’s progress in battling illegal transactions such as money laundering, terrorist financing and dealings with organised crime.
In 2017, Deutsche already had to pay a fine of almost $630 million after an investigation by British and American authorities into laundering of money originating in Russia.
Soon afterwards, the US Federal Reserve ordered a further fine of $41 million over gaps in the bank’s money laundering surveillance.
Deutsche Bank has also come under scrutiny over its activities as a correspondent for scandal-plagued Danske Bank, Denmark’s largest lender.
Citing people familiar with the matter, Bloomberg News had reported that Deutsche was the unnamed bank a Danske whistleblower said had handled almost $150 billion of suspect transactions originating in the Danish firm’s Estonian branch.
Deutsche Bank is in the throes of a major restructuring plan, with 7,000 jobs to go by the end of 2019.
The bank said at the end of October that it expected to report a net profit for the first time since 2014, not least because no legal settlements in the hundreds of millions or even billions were on the horizon as in previous years.