Switzerland’s powerful financial institutions fear him. The German state of North-Rhine Westphalia is probably cheering him on.
Norbert Reifferscheidt leads the crack-down on tax evaders by this western German state, which has been more aggressive than any other state in Germany when it comes to going after offenders and taking the banks that helped to task.
Rumor has it that at least 30 Swiss banks are now being investigated by his office. Mr. Reifferscheidt himself won’t give away the exact number.
“There are many,” Mr. Reifferscheidt, a senior public prosecutor, told Handelsblatt. “Confidentiality is the highest precept in our work.”
His office has been in full attack mode since January. Now on the defensive, some Swiss banks have paid fines to North-Rhine Westphalia to avoid prosecution. Basler Kantonalbank paid out €38.7 million, or $43.7 million, for its alleged role in aiding and abetting German tax evaders. According to Handelsblatt’s sources, other Swiss financial institutions have also now agreed to settle with the state.
These big fines could have been avoided, however, if only Swiss banks had cooperated earlier.
At the end of 2013, tax authorities in North-Rhine Westphalia reached out to the Swiss Bankers Association, offering to wipe the slate clean in return for cooperation, Handelsblatt has learned. It was an offer that encouraged banks, their employees and the evaders themselves to come forward.
The banking association never acted on the offer. Some of its members now view that as a missed opportunity.
“In the most extreme cases, employees or executives of a bank could be arrested when they leave Switzerland. ”
Dieter Bohnert, a 67-year-old German tax lawyer, acted as the go-between on the 2013 offer. Mr. Bohnert’s firm has worked on some 2,000 voluntary disclosure cases for German tax evaders. His office is located on the same street in Zürich as many of the financial institutions targeted by Düsseldorf, the capital of North-Rhine Westphalia. He’s well connected with the tax authorities in the state.
It’s not the first time this western German state has been at the center of a crackdown on tax evaders. In the 1990s, dozens of German savings banks and credit unions allegedly helped customers evade taxes by stashing their money in neighboring Luxembourg.
The banks reacted differently back then: To avoid a drawn out legal process, they cooperated with Düsseldorf, convincing both their employees and customers to disclose any wrongdoing. Neither the employees, nor the customers, nor the banks were penalized. According to Mr. Bohnert, the deal “saved the authorities a lot of work.”
A spokesman for the Swiss Bankers Association confirmed Mr. Bohnert’s proposal, but said the authorities in North-Rhine Westphalia never made an official offer. Still, they acknowledge they did not respond positively. According to the spokesman, “cooperation would not have been legally possible.”
The banks themselves don’t necessarily see it that way: “It’s was a missed chance,” the head of a mid-sized Swiss private bank told Handelsblatt on the condition of anonymity. “They should have at least been willing to talk.”
Given the informal support of the authorities in Düsseldorf, the proposal had a real chance of succeeding, according to Mr. Bohnert. Instead, the targeted financial institutions will now have to pay stiff penalties to avoid prosecution.
“The Swiss Bankers Association could have possibly saved its members these costs,” Mr. Bohnert said.
But lawyers disagree about whether the model used with the savings banks in the 1990s, known as the “Monheimer model,” would have worked due to the sheer number of tax evasion cases this time around.
In the last few years, German authorities have encouraged tax evaders to come forward, offering them amnesty if they did. Nearly 40,000 Germans submitted voluntary disclosures in 2014, admitting that they had stashed money in Switzerland. Well over 100,000 remorseful tax evaders have turned themselves in since 2010.
The Luxembourg cases from the 1990s were on a smaller scale.
“Submitting voluntary disclosures in exchange for immunity was much easier at that time,” Jörg Schauf, who advises Swiss banks in tax evasion disputes, told Handelsblatt.
The complexity this time would have been immense: “You’d have to simultaneously submit complete voluntary disclosures from all the relevant customers and financial advisors – that’s practically impossible,” said Mr. Schauf, with the law firm Flick Glocke Schaumburg.
Now in damage control, most Swiss banks have begun to open up to the tax authorities in Düsseldorf. According to Mr. Reifferscheidt, “cooperation is always worthwhile.”
Some financial institutions are still refusing to cooperate. According to a lawyer for one of these banks, “the evidence is at times questionable.” While that may be the case, Mr. Bohnert warned that the costs will only continue to rise for those institutions that remain stubborn.
“In the most extreme cases, employees or executives of a bank could be arrested when they leave Switzerland,” Mr. Bohnert said. “When legally valid penalty notices are out there in the world, assets are normally frozen by institutions like the European Central Bank.”
Holger Alich is Handelsblatt’s correspondent in Switzerland. Volker Votsmeier is a member of Handelsblatt’s investigative team and focuses on financial firms. To contact the authors: firstname.lastname@example.org and email@example.com