Monday, October 26, 2020

Deutsche Bank London trader charged in Germany for VAT fraud

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A trader who worked at Deutsche Bank in London has been charged by German prosecutors for his suspected role in VAT fraud.

A 48-year-old Austrian is “accused of having participated as a member of a gang in a VAT carousel” connected to €145m of evaded tax, a statement from the Frankfurt Attorney General’s office said.

Prosecutors declined to identify the trader although the Bureau understands the man charged is Hector Freitas, a former employee at Deutsche Bank’s London office who was named in a Bureau investigation into VAT fraud earlier this year.

The bank repaid €145m (£124m) during the course of an investigation which found employees had helped fraudsters escape with vast sums of VAT owed to German tax authorities. Seven of its employees were prosecuted in 2016 and one was handed a three-year prison sentence.

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Freitas is the first employee of the Deutsche Bank’s London office to be charged in connection to the investigation by Frankfurt’s Attorney General.

The Bureau is a member of a collective of 35 newsrooms across Europe coordinated by the German non-profit CORRECTIV which scoured thousands of leaked documents related to VAT fraud as part of a project called Grand Theft Europe.

Related: Deutsche Bank Pays $197 Million to Settle Dutch Bribery Case

The scam ran in Germany from September 2009 to April 2010, coming to an end when police raided hundreds of offices and homes across Germany, including Deutsche Bank’s Frankfurt headquarters.

But the fraud had its seeds in the UK, where through the summer of 2009 fraudsters stole an estimated £300m from HMRC. A decade later, lawyers are still chasing the money through the courts, the Bureau recently reported.

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Fraudsters pocketed the VAT from the sale of permits allowing companies to emit greenhouse gases, known as carbon credits. The scheme was intended to encourage companies to lower their carbon footprint but was dogged by fraud.

Fraudsters imported the credits VAT-free and then passed them from sham company to sham company, charging VAT each time. They then sold them to a major bank at a discount rate, who exported the credits and claimed the VAT – which had never been paid – back from the Revenue.

Freitas was working as a trader at Deutsche Bank’s London office at the time. He was named in UK court documents filed by lawyers from administrators Grant Thornton seeking to recover the stolen VAT from Deutsche Bank.

After HMRC clamped down on the fraud at the end of July, the fraud migrated to Germany. Freitas was “instrumental” in this switch in trading, Grant Thornton’s lawyers alleged in the UK court documents. Freitas left the bank in 2011 and Deutsche Bank settled the case for an undisclosed sum last year.

Related: Deutsche Bank faces investigation for potential money-laundering lapses

The statement released by Frankfurt prosecutors claims that Freitas “used his prominent position within the bank to play down the doubts that had been expressed in order to finally ensure the continuation of the lucrative trading transactions.”

Freitas did not respond to a request for comment.

Grant Thornton was also seeking to recover missing VAT from London-based stock broker SVS Securities, which traded carbon credits with Deutsche Bank at the time, the Bureau reported earlier this year.

The Financial Conduct Authority announced on Monday that SVS had gone into administration and it has launched an investigation after it “identified serious concerns about the way in which the business was operating”.

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