German tax fraud investigation into Deutsche Bank, Santander and Macquarie

A Reuters investigation gas revealed that Santander may have played a significant role in an arrangement to carry out trades, an illegal scheme that misled government into paying tax refunds.

They are also looking into Australia’s Macquarie Bank and Germany’s Deutsche Bank and their role in this scheme.

A letter from prosecutors to Santander’s lawyers sent on June 4 shows that they suspect Santander of having “planned and executed trades” that facilitated “severe tax evasion” from 2007 through 2011.

Santander’s response was a “cooperative” one. A spokesman said that the bank is cooperating with German authorities and conducting its own internal investigation. It said that such misconduct is not tolerated. “If our investigations do identify misconduct, we will take appropriate action.”

Reuters spoke to bankers and officials involved in the probe, obtained internal bank files and legal papers via a European media investigation entitled the “cum-ex files”, coordinated by the German non-profit newsroom Correctiv.

Part of the misconduct, prosecutors argue, involved misleading the German government into believing that a stock had multiple owners on its dividend payday who were each owed a dividend and a dividend tax credit.

Other banks, including Unicredit’s German operation, have acknowledged that they were also involved in such trading. Deutsche Bank however denied participating in an organised share-trading scheme but have admitted to being involved in some of its clients unpalatable transactions.

According to the prosecutors, the scheme was promoted by German tax inspector-turned-tax adviser Hanno Berger and others. Berger, the central suspect in the investigation who is living in exile in the Swiss Alps, said the banks used a legitimate loophole, which was closed in 2012, and did not break the law. He told Reuters that “they (the German state) cannot punish others for their mistakes.”

According to German authorities, the scheme cost the state €5.6 billion in tax rebates that should have never been paid.

If the prosecution follows through, Santander and others would have to pay approximately €100 million in total legal settlements from the trades.