04/05/2013 01:04 PM

'Secrecy-Cloaked Companies' - Deutsche Bank Criticized for Offshore Operations

As part of an international reporting project on offshore companies and trusts, two German newspapers are reporting that Deutsche Bank helped to establish some 300 such entities through its operations in Singapore. The news isn't entirely new, but criticism of the company is growing.

Of the institutions under scrutiny by an international consortium of investigative journalists, Germany's Deutsche Bank appears to be a significant European player in the flow of offshore money. Research by German public broadcaster NDR and the Süddeutsche Zeitung newspaper has found that the company has helped to maintain more than 300 secretive offshore companies and trusts through its Singapore branch. Most of these are located in the British Virgin Islands.

The information comes from records obtained by the International Consortium of Investigative Journalists (ICIJ) in a reporting project that has been jointly published by media in 46 counties.

The records include details on more than 122,000 offshore companies or trusts spread across over more than 170 countries and territories and the names of 130,000 people who have allegedly parked their money in offshore tax havens. They involve a "well-paid industry of accountants, middlemen and other operatives" who have "helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct," the ICIJ wrote. This network includes "many of the world's top banks -- including UBS, Clariden and Deutsche Bank," which it accuses of having "aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways."

Bank Defends Operations

In response to questions by journalists, a Deutsche Bank spokesman said the company offers "services to wealthy clients on the basis that these customers fully comply with all tax rules and reporting requirements." He said the bank's operations in Southeast Asia primarily offer services to customers based in the region.

The bank has also said that it "is not offering any tax advice or any service offering registration of companies in tax havens" and that Deutsche Bank takes "extensive precautions to obstruct misuse of the bank's products and services for money laundering."

A brochure posted on the website of Deutsche Bank's Private Wealth Management unit advertises "the creation, management and administration" of "trusts, companies, foundations" in several countries. On its website dboffshore.com, the bank advertises its businesses in tax havens like the Cayman Islands or Mauritius, offering a "variety of professional services which best suit your financial objectives."

According to a Thursday report in the Süddeutsche, the records reviewed showed that up until 2010, Deutsche Bank's Singapore unit had established 309 offshore companies and trusts. Under its tutelage, entities were formed with names like Roseburn or White River Holdings Group Ltd. The bank would not comment on what the businesses were used for.

Merkel 'At Least Tolerates Illegal Structures'

As the Süddeutsche itself reports, news that Deutsche Bank conducts offshore operations isn't new. As the paper notes, such activities aren't as prolific at Deutsche as at Switzerland's UBS, where the records traced at least 2,900 offshore entities. Back in 2009, it was already public knowledge that Deutsche Bank had some 500 subsidiaries in places known to be tax havens.

Still, the paper claims, the government has done little to stop a German firm from engaging in the kind of financial behavior Berlin has been aggressively combatting in countries like Luxembourg, Switzerland and Cyprus. The paper quotes the financial policy point man in parliament for the Green Party, Gerhard Schick, criticizing both the government and the business model of firms like Deutsche Bank. He alleges the banks may be contributing to the shielding of money laundering activities, tax evasion and money linked to corruption. He also alleges that Chancellor Angela Merkel's conservative government "at the very least tolerates these illegal structures and is possibly protecting them."

In an interview with SPIEGEL ONLINE published on Friday, the head of Germany's Federal Financial Supervisory Authority (BaFin), Elke König, said her authority, although not responsible for taxes, would investigate if banks appeared to be systematically violating or helping people to violate tax law. "Banks have a special responsibility," she said.

For Deutsche Bank, Germany's largest bank, the revelations are creating a second wave of unwelcome scrutiny this week. On Wednesday, the Financial Times reported that Germany's central bank, the Bundesbank, has launched an investigation into claims the bank hid billions of dollars of losses on credit derivatives during the financial crisis. Bundesbank investigators plan to fly to New York next week as part of the inquiry into claims that the bank misvalued credit derivatives in order to hide losses as high as $12 billion and avoid a government bailout.

dsl -- with wires

URL:

• http://www.spiegel.de/international/business/deutsche-bank-criticized-for-offshore-operations-a-892739.html