FRANKFURT (Reuters) - German prosecutors are escalating a money laundering inquiry involving Deutsche Bank DBKGn.DE, including planned raids on wealthy former clients, a person with direct knowledge of the matter told Reuters.
Frankfurt’s state prosecutors will in the coming months search the homes of people who it suspects of using a company formerly owned by Germany’s biggest bank for tax evasion and money laundering, the person said.
The intensified scrutiny of Deutsche Bank, which has said it has no indication of any misconduct, comes at a delicate time as the Frankfurt-based bank seeks to revamp its struggling business and repair a reputation ravaged by a series of scandals.
Deutsche Bank declined to comment on the investigation but referred to earlier comments by a senior official in which he defended its record, saying that it has invested in fighting money laundering and that it is cooperating with investigators.
Police searched the homes of eight people in Germany as part of the investigation in May, after a two-day search of Deutsche Bank’s headquarters by 170 police and investigators in November.
That high-profile raid tainted it for months, hitting its share price as well shaking confidence in the bank among government officials and its customers.
During the raid, police obtained the names of 900 clients suspected of using its Regula subsidiary to avoid taxes, the person said.
Prosecutors said at the time that they suspected Deutsche Bank had helped clients shift criminal money, identifying more than 300 million euros ($339 million) that had flowed to a British Virgin Islands registered vehicle in 2016.
The prosecutors also said they were investigating two members of Deutsche Bank staff.
Deutsche Bank executive Karl von Rohr said in February that it had acted to ensure the “tax honesty” of clients, and had no indication of any misconduct by the bank or staff.
Regula was highlighted in data leaks including the Panama Papers, which were uncovered by a consortium of journalists.
The regional government in the German state of Hesse and German federal police bought this data, which includes almost 290,000 documents relating to 1,500 offshore firms, in 2017. It is now in the hands of Frankfurt public prosecutors.
Although Deutsche Bank sold Regula in early 2018 to a Bermuda-based bank, the evolving investigation puts it under further pressure following years of scrutiny and billions of dollars in fines for schemes, including so-called mirror trades.
Deutsche has agreed to pay more than $600 million in fines to the New York and British authorities for that scheme, one of its most recent scandals, that regulators said allowed Russian clients to covertly move money abroad.
That prompted lawmakers in the United States to send the bank a questionnaire asking about its money laundering controls.
“Deutsche Bank has been a flagrant offender of our money laundering laws,” U.S. Democratic Senator Chris Van Hollen told Reuters. “They are in a league of their own. So we want to look at it for that reason.”
Von Rohr said in a speech that Deutsche Bank had improved controls, tripling staff who fight money laundering and financial crime since 2015 and was maintaining close contact with regulators.
U.S. lawmakers have also asked questions about the bank’s relationship with Donald Trump, but Deutsche’s response has been held up by a legal challenge by the U.S. president, in which he accused House leaders of harassment.
In addition, the U.S. lawmakers are also seeking information about Deutsche Bank’s links to prominent Russians as well as its money laundering controls, one person with direct knowledge of the matter said.
The German bank has also come under pressure in a separate money laundering scandal involving Danske Bank DANSKE.CO, prompting European lawmakers to call for it to reappear before the European Parliament over its money laundering controls.
Ana Gomes, a Portuguese EU parliamentarian, and Sven Giegold, a German EU lawmaker, said they were disappointed by an earlier appearance in parliament by Deutsche Bank.
“They did not answer in a way that would suggest they were reforming,” Gomes said.
($1 = 0.8861 euros)
Editing by Alexander Smith
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