UBS Probe

Return of the Tax Raid

33568160 UBS Frankfurt HQ AP Photo
That's a lot of floors to search through. Source: AP Photo

It’s a sight that banks in Frankfurt have become all too familiar with over the past few years. Investigators for the state prosecutors office swooped into the German headquarters of Swiss bank UBS on Tuesday. They were looking for evidence of tax evasion by the bank’s clients.

And not just in Frankfurt. Around 130 attorneys and investigators fanned out across Germany to gather evidence against the customers, according to the state prosecutor’s office in Bochum, which is coordinating the probe. UBS confirmed the raid and said no UBS employees are under investigation. The bank said it was cooperating, but wouldn’t comment further about an ongoing investigation.

UBS probably thought they were done with such raids. The bank paid a fine of €300 million back in 2014 to settle charges of aiding tax evaders. It also says it has overhauled the way it operates, requiring clients to prove that the assets they leave with the bank has been taxed. And yet, here we are.

North Rhine-Westphalia has turned confronting tax evaders into something of a business.

The latest raid was based on what has become a time-honored tradition in Germany and a massive headache for its banks: The western state of North-Rhine Westphalia acquired a CD with the names of some 2,000 potential tax evaders from a whistleblower. The details have been handed off to state prosecutors – and to authorities in other European countries, since the trove doesn’t only include German citizens.

North-Rhine Westphalia has turned confronting tax evaders into something of a business. So far it has bought 11 such data troves and paid about €19 million to get them. In exchange it has earned back about €782 million in fines and back taxes – the lion’s share from Swiss banks.

Exactly how much the latest UBS trove cost the state has yet to be revealed. The clients are alleged to have failed to report earnings from capital gains at UBS’s subsidiary in Luxembourg. Bochum prosecutors would not comment on whether they plan to go after the bank itself again as well.

Banks in Germany have been subjected to raids for well more than just your simple garden variety case of tax evasion over the past few years. Dozens of banks have been embroiled in a massive tax scandal that involved exploiting tax loopholes in dividend stripping. Deutsche Bank, meanwhile, has been subject to various raids for wrongdoing before and after the financial crisis that cost it more than €10 billion in fines.

No doubt German politicians will be hoping the latest raid of UBS doesn’t mark a return to past form for Germany’s financiers.

Michael Brächer, Volker Votsmeier and Leonard Kehnscharper of Handelsblatt contributed to this story. Christopher Cermak contributed and adapted this story for Handelsblatt Global. To contact the authors: cermak@handelsblatt.com

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