Irish banks and shell companies were used in transactions worth millions of euro involving companies and individuals under investigation for significant tax fraud in Germany and elsewhere.
Leaked files reveal that clients of both Bank of Ireland and Ulster Bank had dealings with counterparties suspected of involvement in tax fraud associated with the trading of carbon credits.
A client also received funds into a Bank of Ireland account from a payment processor suspected by police of handling millions of euro in transactions for fraudsters.
An Irish shell company, owned by a Czech broker of carbon credits, was involved in processing transactions with companies which had been investigated for fraud spanning several European jurisdictions, and which allegedly led to the loss of tens of millions of euro.
The documents are part of a cache of files leaked to German non-profit newsroom Correctiv and shared with publishers around Europe, including The Irish Times. The files, which extend to 315,000 pages, detail how alleged fraudsters used opaque markets, lightning fast transactions and complex chains of companies for suspected tax evasion which runs into the billions.
Complex chains
The European system of carbon trading was infiltrated in 2009 and 2010 by fraudsters who took advantage of the fact that carbon credits could be traded without VAT between EU countries. The fraudsters then constructed complex commercial chains, often with the involvement of innocent entities, charging VAT on the credits and also claiming tax back from local tax authorities.
Sources told The Irish Times that the tax treatment of the certificates and flaws in the construction of the markets left trading wide open to abuse by highly organised criminals, who used identity theft, among other methods, to further their aims.
The investigation of the tax scams has led to high-profile arrests in recent years, including at leading German lender Deutsche Bank, where an employee was jailed for his role in a permit-trading scheme. For the first time, the Correctiv files reveal the extent and complexity of the frauds, and how multiple schemes spread across the continent.
Money-laundering
The involvement of Irish banks in the transactions, which date to 2009 and 2010, has raised questions over how well-prepared the financial system is to tackle financial crime. Banks must adhere to stringent rules concerning the identity of their customers and their business models, as well as the transactions they are involved in.
However, both of the banks which appear in the files have been fined in recent years for failing to fully adhere to anti-money-laundering guidelines. The State has also been threatened with legal action by the European Commission for failing to implement anti-money-laundering directives.
Bank of Ireland said it “adheres to all legislative and regulatory requirements in all jurisdictions in which it operates. This includes all requirements emanating from the European Union, the United Nations and the US department of the treasury’s office of foreign assets control.”
Ulster Bank said its anti-money-laundering process “is a crucial element of our regulatory and legislative obligations and also serves to protect our customers and our bank”.
