Insurers and banks settle dispute over aiding and abetting tax evasion with millions in fines

– Employees and customers are still surprised by international arrest warrants –


Insurers’ and banks’ agreement with judiciary does not prevent prosecution of employees

Although some banks, as well as insurers, have settled their dispute with the US judiciary by pleading guilty to criminal charges, the individual employees involved remain under investigation. No employee (whether from Germany, Switzerland, Luxembourg or Liechtenstein) or customer knows whether he or she is not already on the international wanted list and will be arrested at the next foreign airport for subsequent extradition to the US judiciary. This is what happened recently to a high-ranking employee of a Swiss private bank when he was arrested on holiday, unsuspecting, during a routine check at Mallorca airport.


Defendants become whistleblowers and provide sales pitches for evasion

In order to reduce their own punishment, or perhaps to collect a government reward at a later date, accused sales employees and customers like to unpack completely – and thus deliver banks and insurers to the tax authorities. This usually ensures access to the data of other sales employees as well as their customers – including the delivery of data carriers to law enforcement and tax authorities in various countries. Banks and insurers then seek cooperation and negotiate their own penalties, but only for themselves.


Employees still become pawns of the distribution system years later

One has probably only thought of the company – but the individuals are sacrificed, possibly an oversight. The company would then no longer be allowed to claim that the allegations were not true, otherwise this would be a breach of the agreement with the State on the penalty payment, and this provision, which is conclusive in this respect, would also lapse.


The companies have had to cooperate, and disclose everything – in other words, in particular, provide the US authorities with the material that is now being used to further investigate their own employees and customers. It is possible that many (including former and retired) employees do not even know that their employer has already given evidence – and what evidence – and other investigative leads – such as the identities of the clients involved for their interrogation, for example, about the exact procedures and specific tax evasion advisors – to U.S. law enforcement. This can then, as here, even more than 5 years after the settlement of the dispute with the bank or the insurer unexpectedly strike, for example at the airport during the Mallorca holiday, with extradition to the USA.

Arrestees will have their sentences increased or pre-trial detention extended if they do not cooperate and assist in the investigation of others as well. In that case, they will probably be fired for good, because, conversely, an employer is of course entitled to insist on the loyalty of its employees and the protection of its trade secrets.


Deferred Prosecution Agreement (DPA) – the horse-trading or deal to avoid indictment

A DPA with the state cost many a renowned financial house up to more than three-digit millions as a freely agreed penalty payment. Such DPA agreements are also posted quite publicly on the Internet as a deterrent. The penalty is only deferred if the company complies with the conditions. Employees (including former employees) are usually left uninformed as to whether they might be personally affected by further prosecution – unless they make an effort to find out the details themselves. And they should take this seriously, for example by no longer leaving their home country unsuspectingly for a foreign country where an international arrest warrant is already awaiting them.


Life insurance wrappers in particular have proved to be highly liable and have been promoted to international clients and advisors, also through “specialist publications” from abroad, as the ideal way to protect assets. This as a supposedly viable alternative, after the banks and their products had already come into the sights of not only the US criminal justice system.


Falsely promised tax exemption leads banks and insurers up the garden path

Many a foreign financial institution only became aware of the Lugano Convention (LugÜ) with regard to Switzerland when the client sued for damages at his place of residence. Similarly, insurers and banks domiciled in the EU are affected if a German court has jurisdiction, for example under the “Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters – Regulation No. 1215/2021” (EugVVO); cf. BGH judgment of 11.07.2012, Az. IV ZR 164/11.

Finally, financial houses and their advisors could be liable for levies, penalties and defence costs incurred by their clients under prospectus liability – as well as being liable in the event of reversal. The proof that one’s own customer, contrary to the promises in sales documents, nevertheless wanted to evade taxes will rarely succeed – in order to then escape one’s own liability for damages as a bank, insurer or advisor; see BGH judgment of 15.04.2010, Az. IX ZR 189/09. Because of course, at least to the layman, the products were credibly advertised as a perfectly legal way to save taxes.


Falsely promised choice of law misleads customers

Some clients also believe in effective protection against seizure of their life insurance from Switzerland or Liechtenstein; and effective insurance secrecy to keep their stash protected. If the insured risk is located in Germany, e.g. at the domicile of the policyholder, a German court will also apply German insurance contract law (VVG) if the place of jurisdiction is German in accordance with the Rome I Regulation. Even a trip with the intermediary for the conclusion of the contract to the financial house abroad would have been mostly for nothing.


It is precarious for sales staff and their customers to blindly trust in legal and tax opinions from abroad, which do not even take into account how investment models are to be assessed from a German or international legal perspective. A second opinion independent of the sales department protects against surprises and a possibly later necessary flight from criminal justice abroad – also of some German tax advisors; cf. BGH judgement of 28.07.2021, Az. 1 StR 519/20 (Cum-Ex). Maybe it’s better to go to a country that doesn’t extradite.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published in ExpertenReport 10/21, page 86 and 87)


and (published 13.09.2021)






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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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