Under the deal with the US Attorney’s office in New York and the Internal Revenue Service, Deutsche Bank will not be prosecuted for its participation in the 15 tax shelters used by 2,100 clients between 1996 and 2002, according to news agency Bloomberg.
“Deutsche Bank is pleased that this investigation, which concerned transactions that ceased more than eight years ago, has come to a resolution,” the bank said in a statement.
“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.”
The US Justice Department said the scheme helped rich Americans avoid $5.9 billion in taxes by reporting $29 billion in bogus tax benefits on their tax returns.
The $553.6 million (€420 million) payment represents the fees the bank collected during the period, plus the taxes and interest that the IRS was unable to collect during the period, as well as a civil penalty of just over $149 million, Bloomberg reported.
As part of the agreement, Deutsche Bank admitted that it knew or should have known that its participation in the deals was meant to create the appearance of legitimate investment activity, even though their “primary purpose” was to avoid taxes. The bank also said it knew that documents falsely describing the transactions would be used by taxpayers and promoters of the shelters.
The illegal tax shelters were sold by accounting firm KPMG LLP. The US Justice Department previously brought criminal charges against former KPMG executives. A US judge threw out the charges on the grounds that prosecutors had violated their rights to counsel by pressuring the accounting firm not to advance them defence costs.
The firm admitted fraudulently selling the tax shelters and paid a $456 million fine.
Deutsche Bank said in its statement that it had “previously taken appropriate provisions for the full amount of the fine, so the payment will not have any impact on current net income.”