On December 6, according to the Financial Times, Frankfurt prosecutors announced that they were ending a criminal investigation of two Deutsche Bank employees for suspected money laundering and tax evasion via a former Deutsche Bank subsidiary, but were requiring the bank to pay €15 million “for shortcomings in money-laundering controls.”
This action ends, at least for Deutsche Bank, a lengthy investigation by the prosecutors that focused on potential misconduct at the former Deutsche subsidiary, Regula, in the British Virgin Islands. By far the most visible facet of that investigation was a two-day raid on Deutsche Bank headquarters and other premises in November 2018 “by 170 armed police looking for evidence of suspected wrongdoing.” Worldwide media reporting on that raid had what a Deutsche Bank spokesperson recently described as a “heavy impact” on the bank, including plummeting share prices and mounting funding costs.
At the time, according to the Financial Times,
German law enforcement authorities suspected that Deutsche Bank clients transferred money linked to illegal activities to offshore accounts and that the bank failed in its legal duty to flag those transactions as suspicious between 2013 and 2018.
The criminal investigation focused on two managing directors in the bank’s compliance and wealth management units.
A Deutsche Bank statement reported that the investigation was ended “due to lack of sufficient suspicion.” Prosecutors nonetheless required Deutsche Bank to pay €5 million for shortcomings in its control environment, and confiscated €10 million in financial gains that they asserted the Regula-related transactions had generated for the bank. The Frankfurt prosecutors reportedly plan to continue to investigate German customers of Regula that they suspect of tax evasion.
N.B.: The Frankfurt prosecutors’ announcement brings to an abrupt and puzzling end a highly visible criminal investigation, in which the prosecutors, only six months ago, reportedly had considered about 80 current and former Deutsche Bank employees, including senior executives, to be suspects. How long the prosecutors will sustain their interest in other German lenders’ and individuals’ possible involvement in tax evasion remains to be seen.