Money Laundering Watch: Will More Chickens Come Home to Roost Following Deutsche Bank Raid?
The Panama Papers fallout continues with a massive early morning raid on Deutsche Bank headquarters in Frankfurt, Germany. Some 170 officers searched for evidence of the bank’s role in over $350m worth of suspected money-laundering through organizations in the British Virgin Islands. Deutsche Bank confirms the investigation is related to the Panama Papers: the April 2016 release of over 11 million files about 200,000+ offshore shell companies. The documents revealed the hidden dealings of corporate entities and powerful individuals, some of whom were involved in corruption and crimes, including drug trafficking, arms dealing, and tax evasion.
As to Deutsche Bank, the Panama Papers exposed the tax-dodging of over 900 of its customers using offshore accounts. The raid yesterday focused on two employees and other unnamed “people in positions of authority” who allegedly helped clients set up the accounts and, importantly failed to report suspected money laundering.
While funneling money through offshore companies does not automatically amount to money laundering, Deutsche Bank has an obligation to report when it has knowledge of actions that raise suspicions of money laundering. This duty is even more acute following the bank’s January 2017 fine of $630M by U.S. and U.K. regulators for laundering Russian money via “mirror trades” in Moscow and London. Deutsche Bank was also Danske Bank’s key correspondent bank until 2015; Danske Bank’s Estonian Branch allegedly laundered billions of dollars of Russian money from 2007 – 2015.
The search of Deutsche Bank is only the most recent event in a long series of enforcement actions seeking to hold companies accountable since the release of the Panama Papers. Multiple criminal investigations across the world are ongoing and high-profile resignations have resulted. The world awaits the ultimate reckoning of Deutsche Bank.
The Panama Papers and the companion release of the Paradise Papers exposed the staggering magnitude of illegal activity related to illicit offshore tax havens. Whistleblowers were behind both releases. Whistleblowing to reveal such difficult-to-detect crime and corruption should be encouraged and rewarded. Despite the available whistleblower reward programs, the U.S. has none that squarely rewards information about money laundering. Rather, such allegations generally must to fit into the SEC or IRS reward programs. While these existing programs can reach money-laundering under the right circumstances, a broader program that rewards exposure of the full breadth of money-laundering activity is needed for complete accountability.
Tagged in: Abusive Tax Shelters, Financial and Investment Fraud, Financial Institution Fraud, Importance of Whistleblowers, International Whistleblowers, Money Laundering,