offshore banking

Guilty by Association

July 17, 2013 - Tampa, Florida, U.S. - With a sea of Panama hats in the foreground, the sign reading Panama is visible during a news conference at Tampa International Airport to announce that Copa Airlines will begin flying from TIA to Panama City, Panama starting in December [ Rechtehinweis: usage Germany only, Verwendung nur in Deutschland ]
German banks are facing increased regulation followign the Panama papers revelations.
  • Why it matters

    Why it matters

    The German government is planning to introduce a registers of offshore accounts and tighter laws and in a crackdown against tax evasion.

  • Facts


    • Hans-Walter Peters replaced Deutsche Bank co-CEO Jürgen Fitschen as president of the Association of German Banks on Monday.
    • Mr. Peters is a partner at Berenberg Bank, which was caught up in the Panama Papers scandal.
    • Banks welcome Mr. Schäuble’s transparency initiative but they argue that opening accounts in tax havens is legal.
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Banks have been a major casualty of the revelations surrounding the so-called Panama Papers. German finance minister Wolfgang Schäuble has been just one vocal critic of the seeming willingness of banks to open up offshore accounts and shell companies in tax havens.

But now Germany’s private banking association has decided to go on the offensive and fight back against a “blanket rush to judgment” aimed at branding banks as accomplices of tax evaders.

Hans-Walter Peters, who was inaugurated as the new president of the Association of German Banks on Monday, taking over from Deutsche Bank co-CEO Jürgen Fitschen, certainly could have wished for a better start to his tenure, however.

The banker, a personally liable partner at Berenberg Bank, had already come under pressure before taking office, thanks to the Panama Papers. The deeply traditional private bank was apparently involved in the establishment of shell companies, according to research by the International Consortium of Investigative Journalists, which broke the story.

“Shell companies may raise questions about motives, but they are neither banned nor fundamentally illegitimate.”

Michael Kemmer, general manager, Association of German Banks

“Tax evasion and money laundering are unacceptable to us,” Mr. Peters said at a joint press conference with Mr. Fitschen before his inauguration. “It makes no sense for banks to participate in the possible tax evasion of their customers.” Anyone who does participate cannot be helped. “They don’t belong to us,” Mr. Fitschen added.

Mr. Peters added that these were criminal acts, and noted that Berenberg would notify the police if it had any information about such activities. In the final analysis, he said, the bank would terminate its business relationship with the customer.

Still, the two men added, banks do not wish to dictate to customers what they should do. If someone wants to open an account in Panama, on the Cayman Islands or the Isle of Man (all considered tax havens), he has every right to do so, said Mr. Fitschen. And if someone viewed this as immoral, the outgoing association president added: “I would have a problem with that.”

Still, he explained, this does not absolve banks from doing their homework. They need to determine who the economic beneficiary is and whether the funds in question were taxed.

But it was unfortunate for the pair that Mr. Schäuble was scheduled to be the guest speaker at Mr. Peters’ later inauguration. While he refrained from directly criticizing the banker, Mr. Schäuble made clear that Berlin had no intention of backing down on banking regulation or tightening laws in light of the Panama Papers.

“We need implementable solutions,” Mr. Schäuble, who has released a 10-point plan to crack down on tax evasion, told the gathering.

Most important were universal standards that would prevent companies and investors from hiding behind offshore firms in future.

While Mr. Peters insists he has done nothing illegal, the banking association said it welcomed Mr. Schäuble’s proposals, which among other things include establishing a register of all offshore firms that would be accessible to national tax authorities.


Hans-Walter Peters is a partner at Berenberg Bank. Source: DPA/Ann-Christine Krings Photography


The Süddeutsche Zeitung newspaper has learned that at least 28 German banks used the services of Panamanian commercial law firm Mossack Fonseca, and that they have established or manage more than 1,200 shell companies. This information was leaked to the German newspaper. According to the Panama Papers, Deutsche Bank provided 426 shell companies, while Berenberg Bank provided 13 shell companies and 76 offshore accounts.

In an interview with the Frankfurter Allgemeine Sonntagszeitung, Mr. Peters stressed that the Panama deals were “100 percent clean.” He pointed out that there was not a single account for which the bank was unaware of the economic beneficiary.

It is not illegal to establish offshore companies. “Shell companies may raise questions about motives, but they are neither banned nor fundamentally illegitimate,” said Michael Kemmer, general manager of the Association of German Banks. And when it comes to the offshore transactions in Panama, he added, each case needs to be examined individually.

The problems of possible tax evasion and money laundering are not new, said Mr. Fitschen. He noted that German banks had filed 25,000 reports of suspected money laundering in 2014, twice as many as in 2012.

Lawmakers are taking advantage of the revelations to take action against tax havens. Mr. Schäuble’s ten-point plan would include registers listing the economic beneficiaries of offshore companies, for example, and these national registers would be globally accessible. Countries that refused to participate in this transparency offensive would be placed on a blacklist. The finance minister is also a supporter of tougher laws, noting that it is not the job of banks to facilitate aggressive tax structuring.

His intention is not to ban offshore firms altogether, he said at the inauguration. Instead, the goal is simply to make using them for tax evasion too great a risk for banks and their consultants.

With banks, Mr. Schäuble is preaching to the converted. A year ago, they welcomed the possible introduction of a transparency register for companies, and they are also undeterred by higher penalties. “Misconduct must be sanctioned,” Mr. Peters said.


Frank Drost is a Handelsblatt editor in Berlin, covering financial supervision and banks. To contact the author:

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