German prosecutors have closed an investigation related to Regula Ltd, a former Deutsche Bank subsidiary in the British Virgin Islands, that in March 2018 was sold to Butterfield.
However, Deutsche Bank has been fined about US$16 million for compliance failures.
The probe prompted a police raid of Deutsche Bank’s headquarters in Frankfurt, Germany, on 28 Nov. 2018. The investigation focussed on two employees of the bank, who were accused of failing to report suspicious transactions.
Prosecutors alleged that Deutsche Bank had helped customers found offshore entities in tax havens and transferred illegally acquired money without alerting authorities to suspected money laundering.
These allegations of aiding and abetting tax evasion and money laundering have now been dropped, Deutsche Bank said in a press statement. The Frankfurt public prosecutor’s office has closed investigations “due to lack of sufficient suspicion”, the bank said.
A spokesman for the bank said, “With the closure of these proceedings it is clear that the prosecutors have not found any instances of criminal misconduct on the part of Deutsche Bank employees following the raid of our Frankfurt office in November 2018.
“The investigation that has now been closed due to lack of sufficient suspicion had a heavy impact on Deutsche Bank last year,” he added.
At the same time, Deutsche Bank accepted a separate fine of 5 million euros as well as the confiscation of 10 million euros of avoided expenses because of shortcomings in its control environment.
“It is true that the bank had weaknesses in its control environment in the past. We identified these weaknesses and we have addressed them in a disciplined manner,” the spokesman said.
In a statement, the prosecutor’s office said the fines were imposed over the failure to promptly report suspected money laundering related to Regula, inadequate oversight and understaffing of the bank’s anti-money-laundering team from 2015 until early 2018.
Deutsche Bank said it had increased the number of employees in its anti-financial crime unit threefold and invested 700 million euros since 2016 to modernise its key controls.
While the investigation into the Deutsche Bank employees has been dropped, public prosecutors said they would continue their investigation of German customers of Regula suspected of tax evasion.
In May, German police and tax authorities raided more than 20 banks, tax advisers, asset management companies and the homes of eight suspects.
At the time, prosecutors said the defendants were wealthy individuals who are believed to have set up trusts in the British Virgin Islands with Regula’s support to hide investment income from German tax authorities and evade paying tax.
The prosecutor’s office is also still in talks with Deutsche Bank in connection with an investigation of Danske Bank’s money-laundering scandal.
Regula Ltd. 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 311 million euros (US$349 million) in assets, the Financial Times reported in November 2018. At the time, the company generated revenue of less than 10 million euros (US$11.2 million) and contributed an operating profit of US$1.1 million.
Deutsche Bank sold Regula Ltd. to Butterfield in March 2018 as part of its Global Trust Solutions business outside of the US.