German police and tax authorities raided more than 20 banks, tax advisers, asset management companies and the homes of eight suspects on Wednesday, in an investigation related to the police search of Deutsche Bank’s headquarters in Frankfurt on 29 and 30 Nov. 2018.
The November raid, involving 170 officers, focussed on clients of a former Deutsche Bank unit in the British Virgin Islands.
“The defendants are wealthy individuals who are subject to German taxation,” prosecutors said in a statement. “They are believed to have set up trusts in the British Virgin Islands with the support of a former subsidiary of a large German lender to hide investment income from German tax authorities and evaded paying tax.”
The Financial Times reported last year that Regula Limited was the targeted BVI unit of Deutsche Bank’s Global Trust Solutions. Deutsche Bank has since sold its trust business outside of the United States to Butterfield.
Regula was named in the ‘Panama Papers’ leak of documents from Panamanian law firm Mossack Fonseca. In 2016, Regula operated trusts for about 900 clients based mainly in Asia and Latin America, with approximately EUR311 million (US$349 million) in assets, the Financial Times reported in November 2018. At the time, the company generated revenue of less than EUR10 million (US$11.2 million) and contributed an operating profit of US$1.1 million, the financial newspaper said.
Wednesday’s raids were not directed against Deutsche Bank, which is cooperating with the public prosecutor’s office and has provided all documents requested, the German lender said.
Prosecutors said the goal of the searches is to find evidence of income on which no tax was paid and to clarify the business dealings of the offshore entities.
In February, Deutsche Bank said negative news coverage, including that on the raid by state prosecutors on the bank’s premises in November, was a factor contributing to the lender’s fourth-quarter loss.
This investigation centred on two unidentified employees of the bank, who were accused of failing to report suspicious transactions.
“Deutsche Bank helped customers found offshore organisations in tax havens by transferring illegally acquired money without alerting authorities to suspected money laundering,” prosecutors said in a statement in November.
The International Consortium of Investigative Journalists first wrote about Regula Limited in 2013 in its Panama Papers coverage, alleging that Deutsche Bank helped its customers maintain more than 300 secretive offshore companies and trusts through its Singapore branch.
At the time a spokesman for the bank said, “Deutsche Bank is not offering any tax advice or any service offering registration of companies in tax havens,” adding that the bank takes “extensive precautions to obstruct the misuse of the bank’s products and services for money laundering”.
Deutsche Bank sold its Global Trust Solutions business outside of the United States to Butterfield in March 2018, after the deal was announced in October 2017. Butterfield said the GTS portfolio consisted of some 1,000 trust structures for approximately 900 clients. More than 60 Deutsche Bank employees joined Butterfield as part of the acquisition.
All trust and fiduciary services for former Deutsche trust clients are conducted from Butterfield locations in Cayman, Guernsey, Switzerland, Singapore and Mauritius.