The allegations were so massive that the two were even in prison. There were two ex-managing directors of a tiny bank, the North Channel Bank from Mainz. Inconspicuous, insignificant, hardly known to anyone even in financial circles. But they had gone wild and were allegedly deeply involved in Europe’s biggest tax scandal. On behalf of American backers, they are said to have laundered hundreds of millions of euros as bank bosses, which had previously been stolen from the tax authorities in Denmark and Belgium. From a Danish perspective, the former bankers were thus part of a state affair, a case of tax crime such as the country had never seen before.
That’s why the Koblenz public prosecutor’s office was so sure of their case. Investigators applied for arrest warrants and held the two in custody from February to August 2020. Two years later, they presented charges against the managers and five other people: gang and commercial money laundering in 27 cases, that was the allegation. It was about a sum in the billions and dozens of accounts in Mainz, through which a good portion is said to have flowed abroad. The indictments described an international network of front companies and, above all, fictitious stock deals to collect illegal tax refunds.
But the effort was apparently in vain. The allegations came to nothing, and for the time being there is nothing more to negotiate in court. The district court of Koblenz did not admit the charges. Last week, the fourth major criminal chamber sent a corresponding decision, according to which it rejected the “opening of the main hearing for legal reasons”. The two ex-bank bosses should be compensated for both the detention and the search measures, it said.
Tax offenses abroad are excluded as a predicate offense for money laundering
There would have been much to discuss in court. One could have taken apart the roles of the Mainzer Bank and its bosses, talked about the network of alleged tax thieves and about the whereabouts of the millions of euros in tax money. This has now failed for one reason in particular: tax offenses against foreign countries are not punishable in Germany – and according to the criminal judges, are therefore eliminated as a so-called predicate offense for money laundering. But that is necessary, because according to the rules of the penal code, money laundering always follows from a previous crime.
The decision of the district court is not yet final. The Koblenz public prosecutor’s office had lodged a complaint, a spokeswoman for the authority said on Monday on request. Accordingly, the Higher Regional Court will deal with the decision again.
The North Channel Bank case was difficult from the start. The scale and complexity eclipsed even most cum-ex cases in Germany. Banks, stockbrokers and lawyers had traded large blocks of shares in circles in such a way that they could recover previously unpaid capital gains taxes. By the end of 2011, damage of more than ten billion euros is said to have occurred in Germany. The Federal Court of Justice has meanwhile condemned the transactions as criminal tax evasion.
The equivalent of almost 1.7 billion euros smuggled from Denmark alone
The alleged tax thieves didn’t leave it in Germany, they went on a European tour. Probably no other country was hit as hard as Denmark. From 2012 to 2015, the equivalent of almost 1.7 billion euros flowed out of the Danish treasury. Based on Germany’s economic output, that would be more than 19 billion euros.
Similar to Germany, a technical process in the Danish tax system contained weaknesses for years that investors from abroad could exploit. Particularly brazen: The suspects are said to have only faked stock transactions to the Danish tax authorities and never received dividends, but still collected tax refunds – at a time when Cum-Ex had long been investigated in Germany. A German investigator put it that it had nothing to do with the trading patterns known from the Cum-Ex affair: “It was pure fraud.”
A good three years ago, the SZ, together with the Danish broadcaster TV2, the Copenhagen daily newspaper politics and the Belgian magazine crack first reported on the backers of North Channel Bank. At the same time determined the Koblenz public prosecutor’s office against the former managing directors and several employees of the bank. The masterminds are said to have used pension funds in the US to obtain dividend certificates with fictitious share deals and submit them to the tax authorities in Denmark and Belgium. They are said to have stolen the equivalent of at least 550 million euros in Denmark and around 70 million euros in Belgium.
In addition to legal hurdles, there is also a lack of precision
In Denmark the allegation is tax fraud, in Belgium fraud. The former does not exist under German law, and fraud and tax evasion are mutually exclusive in this country: According to the Criminal Code, fraud is always at the expense of individual assets. Tax evasion as an offense is punishable only to the detriment of the German tax authorities – anyone who evades taxes in Denmark cannot be prosecuted for it in Germany. At least as things stood at the time, German money laundering law did not state tax fraud in the Danish sense as a predicate offense for money laundering.
In addition, there were apparently other inconsistencies: the judges wrote that the predicate offenses in Denmark and Belgium were not specified in the indictments. Accordingly, according to the court, this procedure would have failed – initially – also due to a lack of precision on the part of the prosecutors.