Deutsche Bank offices raided over money laundering and carbon trading investigation

By Christine Duhaime | December 12th, 2012

Carbon market fraud investigation

The offices of Deutsche Bank were raided today in Frankfurt by German authorities in connection with an investigation commenced in 2010 over carbon market trading fraud, tax evasion, money laundering and obstruction of justice. Approximately 500 police and tax officials participated in the raid at the headquarters of Deutsche Bank in Frankfurt and the homes of several bank executives in Berlin, Dusseldorf and Frankfurt.

Deutsche Bank issued a statement that the investigation involves, among others, its CEO and CFO, Jurgen Fitschen and Stefan Krause, who executed VAT statements on behalf of the Deutsche Bank. It also stated that the VAT statement was subsequently voluntarily restated. Five of its employees have been arrested thus far.

In December 2011, a Frankfurt Regional Court sentenced six men to jail for tax evasion in connection with $230 million in VAT that was collected but not remitted on the trade of carbon permits to foreign entities. According to news reports, the trades were conducted through Deutsche Bank and during the trial, the Court noted that Deutsche Bank had facilitated the transactions.

Timeline on Carbon Trading Issues

The carbon market in Europe has been plagued with legal issues since inception, as highlighted by Reuters, below:

  • July 2009 – France opens an investigation into suspected VAT fraud in the French spot emissions market, which subsequently spreads across EU member states. Europol estimates tax revenue losses at more than $5 billion;
  • February 2010 – Cyber criminals target emissions registries through a “phishing” scam to steal emissions permits from companies and sell them illegally;
  • March 2010 – Spot trade suspended by BlueNext and Nordpool after  re-used offsets are traded on BlueNext;
  • May 2010 – EC introduces “setting aside”, or withholding from the market, a share of carbon permits to be auctioned from 2013 to address the problem of low prices and oversupply in the EUETS;
  • December 2010 -One million EU carbon permits go missing from Holcim, Romania’s emissions registry account due to a computer virus;
  • December 2010 – Italy’s Gestore Mercati Energetici suspends spot trade after a record number of permits trade at deep discounts;
  • January 2011 – EC suspends spot trading after allegations that permits worth millions of euros were stolen from a Czech registry account. Carbon exchanges halt spot trade;
  • February 2011 -EU member state registries and exchanges reopen for spot trading;
  • March 2011 – Dutch emissions exchange Climex exits secondary trading of carbon allowances on the spot market;
  • December 2011 – A German court sentences six men to jail for fraud in the EU carbon market. Deutsche Bank is criticised by the Court for the way it conducted emissions trading with some of convicted men;
  • June 2012 – Three U.K. men are jailed for a combined 35 years after being found guilty of a $38 million tax fraud in the EU carbon market;
  • June 2012  – EC activates new, single emissions registry after a near six-month delay, replacing national platforms and including measures to combat theft, but software glitches cause delays in spot trades;
  • August 2012 – A German court identifies 150 carbon tax fraud suspects;
  • October 2012 – Registry software upgrades are completed and the common registry is reopened;
  • October 2012 – Czech authorities accuse two men of a 378 million crown tax fraud related to the EUETS;
  • November 2012 – EU carbon permits hit fresh record low after the EC delayed a vote to next year on a plan to help boost prices by withdrawing units from the market;
  • December 2012 – BlueNext, once the market’s main spot carbon exchange, closes due to lack of liquidity;
  • December 2012 – ICE Futures Europe, the largest emissions exchange,  relaunches spot carbon trade, ending a freeze which lasted nearly two years; and
  • December 2012 – German state prosecutors raid offices of Deutsche Bank and private residences in Frankfurt, Dusseldorf and Berlin in a probe related to tax evasion, money laundering and obstruction of justice in the carbon market.

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