FirstFT: Deutsche Bank broke its own rules to enable tax fraud, probe finds

Deutsche Bank staff broke regulatory rules and company policy to enable clients to siphon off millions of euros in government revenues, according to an internal investigation of its role in one of Europe’s biggest tax scandals.

More than 70 current and former employees are under investigation by public prosecutors in Cologne over the multibillion-euro “cum ex” tax fraud scandal, which is the subject of a sprawling law enforcement inquiry.

Public prosecutors are investigating 1,500 people as part of the broader inquiry into the scheme, which misappropriated government revenues in a long-running fraud that involved banks including Barclays, Macquarie and UniCredit’s HypoVereinsbank.

Deutsche’s tax department early on tried to keep the bank away from cum-ex activities after its investment bankers requested permission to directly engage in the trades at the heart of the scheme. However, London-based investment bankers at Deutsche worked around that ban, according to the internal probe from 2015 that was conducted by law firm Freshfields.

Prosecutors have been investigating the scandal for years, but the inquiry stepped up this month when a former senior banker from Fortis bank was arrested in Mallorca at the behest of Frankfurt prosecutors.

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Five more stories in the news

1. West eases off on Russian oil restrictions European governments have eased efforts to curb trade in Russian oil, delaying plans to shut Moscow out of the vital Lloyd’s of London maritime insurance market and allowing some international shipments amid fears of rising crude prices and tighter global supplies.

2. BoE considers biggest rate rise for more than 25 years Policymakers will be under pressure to step up the pace of monetary tightening on Thursday, following the lead of the European Central Bank and US Federal Reserve. Bank of England governor Andrew Bailey has said a 0.5 percentage point increase will be “among the choices”.

3. Rishi Sunak’s income tax cut plans The former UK chancellor sought to burnish his tax-cutting credentials in the race to be the next prime minister, pledging yesterday to slash the basic income tax rate in 2024 from 20 per cent to 19 per cent, followed by further cuts to reach 16 per cent by 2029.

4. ‘Candyland’ estate sold for £125mn Property tycoon Christian Candy sells has sold his luxury estate west of London for about £125mn, one of the biggest housing deals this year, according to people briefed on the transaction.

5. England crowned Euro 2022 champions England’s women’s football team have won their first major trophy, beating Germany 2-1 in extra time. The Lionesses’ win is the most significant for English football since the men’s team won in extra-time win at the 1966 World Cup.

The day ahead

Nancy Pelosi in Asia The US Speaker of the House will hold an in-person event with the American Chamber of Commerce in Singapore today. She heads to Malaysia, South Korea and Japan this week — but has not confirmed whether she will visit Taiwan.

BT workers strike Thousands of staff will walk out for the second of two strikes, led by the Communication Workers Union, in a dispute over pay. In response to BT’s £1,500 pay deal offered to staff in April, the CWU said company bosses had “stuck two fingers up” to workers.

UK property register launch A new register, which launches today, will disclose the anonymous owners of overseas companies that control land in the UK in an effort to crack down on the flow of “dirty money”.

Energy moves Germany will stop buying Russian coal in a bid to end its energy reliance on Moscow. Hungary will stop exporting fossil fuels to its neighbours as it faces supply shortages.

Economic data S&P Global July manufacturing purchasing managers’ indices are out for the eurozone, France, Germany, the UK and US. The EU has June employment, while Germany releases retail trade data for the same month. The US is forecast to report that construction spending increased in June. (FT, WSJ)

Jamaica Emancipation Day The country commemorates the day African slaves in British colonies were freed.

What else we’re reading

Venture capital’s silent crash Investors of all stripes have crashed the clubby world of VC, drawn by the potential of technology start-ups. But there are signs the party is over: the market downtown will have profound implications, and loose rules that require only sporadic writedowns have allowed many in the industry to turn the other way.

How the great British sandwich trade was derailed The sandwich industry was once a symbol of the changes in the British economy over four decades, from the humble kitchen to hyper-efficient factories. Now it faces a perfect storm of labour shortages, souring economic conditions and changing workplaces.

The triple whammy for office real estate Few bosses would dispute that the lasting legacy of Covid-19 will be less time in headquarters for most office workers. Now, rising interest rates and the push for greener buildings suggest an even bleaker outlook for the commercial property market, writes Patrick Jenkins.

The nightmare of modern air travel Air travel is the only form of transport to have gone backwards over the past 20 years, writes Pilita Clark. Trains go faster. Buses pollute less. Cars are smarter and electric. Flying may be cheaper and safer, but it is considerably more horrible than it used to be.

‘It’s chaos there now’ Last week, the secretive Kuwait Investment Authority was dragged into the spotlight after sacking the head of its London investment arm. Financial Times reporters peek inside one of the most powerful sovereign wealth funds, riven by internal conflict.

Gardens

As the threat of an insect apocalypse looms, a wave of apps and artificial intelligence wizardry is helping gardeners encourage bees, butterflies and more. Check out these high-tech ways to welcome insects into your garden.