Germany Steps Up Offshore Bank Probe
Friday, February 25, 2011

German prosecutors have this week stepped up their investigations into Swiss bank Credit Suisse employees and customers, targeting those suspected of tax evasion.

Credit Suisse offices in Frankfurt, Colonge, Hanover, Hamburg and two smaller, undisclosed locations, were raided by German authorities on February 23. Four employees in particular were under suspicion of tax evasion, but little further is known at this stage regarding either the suspects themselves or the scale of their alleged crimes.

Germany began this stage of its investigation in December 2010, but in July 2010 raids were also carried out on 13 branches of Credit Suisse, and the following month clients of the bank were asked to provide prosecuting authorities with information on their bank accounts. The investigations were triggered last year when the German state of North Rhine-Westphalia purchased a stolen tax data disk, containing details of alleged tax evaders.

The German authorities have been crusading against the use of offshore accounts and investment structures by the country's citizens since early 2008, when a major tax scandal involving Klaus Zumwinkel, Chief Executive of Deutsche Post, hit the national headlines. Zumwinkel was accused of having EUR1m in undecalred money in a Liechtenstein account. Since then, various regional governments have sanctioned the purchase of data stolen by various, mainly disgruntled, ex-employees of banks in Liechtestein and Switzerland. By the end of last year, it was said that this highly controversial practive had yeilded in the region of EUR1.8bn for the German state.

At a cost to the German state of just a few million euros, the decision to purchase the information appears to have proven highly lucrative for the authorities. Indeed, approximately EUR1.6bn was reportedly generated in back payments in 2010 alone, with a further EUR200m expected this year.

The purchase of the tax data discs by the country’s authorities led to a wave of voluntary disclosures throughout Germany from individuals fearing prosecution. Although it was initially unclear as to whether or not the purchase was legal, Germany’s Federal Constitutional Court finally permitted the use of the tax information contained on data discs for criminal prosecutions at the end of last year.

The court ruled that information regarding alleged tax evaders, contained on discs provided by informants, may indeed be used during criminal investigations, irrespective of whether or not the original means by which the data was obtained was deemed to be lawful.

Determined to clamp down on tax evasion and money laundering in Germany, the German Finance Ministry also recently announced details of a draft new law designed to toughen existing rules on voluntary disclosure.