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Deutsche Bank To Pay USD550m Tax Shelter Fine

by Mike Godfrey,, Washington

27 December 2010

Deutsche Bank, the leading German bank, has disclosed that it has entered into a non-prosecution agreement with the United States Attorney, and a closing agreement with the Internal Revenue Service (IRS), to resolve an investigation related to the bank’s participation in various tax-oriented transactions for clients from approximately 1996 to 2002.

It was announced by the US Attorney for the Southern District of New York, the IRS and the Tax Division of the Department of Justice that Deutsche Bank has agreed to pay USD553.6m, and also admitted criminal wrongdoing, in connection with its participation in financial transactions which furthered fraudulent tax shelters that helped a reported 2,100 customers of the bank to generate some USD29bn in fraudulent US tax losses.

The payment represents the total of the fees that the bank earned from its participation in the tax shelter activity, the amount of taxes and interest the IRS was unable to collect from taxpayers because of the misconduct, and a civil penalty of more than USD149m that the bank is paying to settle the IRS's promoter penalty examination.

The US Attorney also revealed that, as part of the resolution, Deutsche Bank has entered into a non-prosecution agreement (NPA) requiring its continued cooperation, and also agreed to the appointment of a government-appointed independent expert who will review the implementation and effectiveness of the bank’s compliance measures designed to ensure that Deutsche Bank does not participate in future transactions that may be used to defraud the IRS.

As part of the NPA, Deutsche Bank has provided a detailed statement of facts setting forth its wrongful conduct. In addition, the NPA bans the bank’s further involvement with any pre-packaged tax products, which were the type of tax shelters it previously offered. In addition, the bank has agreed to provide its full cooperation to the US, including the voluntary provision of information and documents.

On its part, in a statement, Deutsche Bank confirmed that it is “pleased that this investigation, which concerned transactions that ceased more than eight years ago, has come to a resolution. Since 2002, the bank has significantly strengthened its policies and procedures as part of an ongoing effort to ensure strict adherence to the law and the highest standards of ethical conduct.”

As it has previously taken appropriate provisions for the full amount of the fine, the bank pointed out that its payment will not have any impact on its current net income.

TAGS: court | compliance | tax | investment | tax compliance | tax avoidance | interest | law | banking | Internal Revenue Service (IRS) | enforcement | United States | standards

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