Details are emerging of how suspected fraudsters are believed to have stashed hundreds of millions of dollars into a bank owned by Bermuda millionaire oil tycoon John Deuss after deploying elaborate scams to defraud European governments.

And prosecutors in Europe are reportedly seeking to question Mr. Deuss about the bank.

However, Mr. Deuss remains adamant his bank on the Caribbean island of Curacao, as well as a number of his other companies raided by authorities in Europe ?have at all times conducted their business in full compliance with all applicable laws, regulations and rules?.

It was not clear last night to what extent the multi-nation investigation will impact Bermuda but Mr. Deuss? First Curacao International Bank in Curacao, which has had hundreds of millions of dollars in assets frozen by European authorities, is the largest shareholder of Bermuda Commercial Bank.

Bermuda Commercial Bank has already had its reputation affected by international investors? service Moody?s downgrading its rating of the bank because of the shareholding-link between the banks.

Mr. Deuss has stepped down temporarily as a director of the BCB until the matter is resolved. In a statement the bank said it did not believe its business would be affected by the investigations in Curacao.

Two other directors and officers of the bank Tinke Deuss and Timothy Ulrich are also directors of the FCIB and have also temporarily stepped down from their responsibilities at the Bermuda Commercial Bank.

Dutch businessman Mr. Deuss, 64, who has offices in Flatts Village, has not been implicated in the alleged frauds and yesterday maintained he and his companies have not broken any rules of regulations. His business interests in Bermuda are not being investigated.

?FCIB and its affiliated companies have at all times conducted their business in full compliance with all applicable laws, regulations and rules,? he said.

?Accordingly, the companies deny any wrongdoing in connection with this matter and will vigorously defend their interests.?

It was reported by The Guardian newspaper in London yesterday that HM Revenue and Customs had uncovered a trail of money leading from carousel fraudsters to the bank in Curacao.

The career of well-known entrepreneur and trader Mr. Deuss has included controversial sales of oil to South Africa during the Apartheid years, a lengthy legal dispute with the former USSR over a $100 million oil deal and wrangles involving piping oil from the former Soviet state of Kazakhstan.

Now his Curacao-based bank is thought to have been used by suspected fraudsters seeking a place to hide hundreds of millions of dollars used in an alleged international ?carousel fraud? ? an elaborate tax scam ? affecting a number of European countries including the UK, Germany and Holland.

The Guardian said the so-called ?carousel fraud? works by the repeated importing and exporting of goods across national borders with value added tax payments skimmed off and placed into untraceable bank accounts.

Governments across the European Union are estimated to collectively lose as much as 50 billion ($64.5 billion) each year as a result of fraudsters transferring goods such as mobile phones across national borders to bogus companies controlled by themselves and then re-exported again and again each time scooping value added tax payments rather than paying them to the respective Government.

The system is said to have evolved to a fine art where transactions can be done purely electronically with the goods not needing to be physically moved.

Investigators in the UK and Holland were alerted to Mr. Deuss? Curacao bank when they followed a paper trail of money from suspected fraudsters to the Caribbean. An extraordinary number of the suspects were found to have accounts at the bank, which is reported to have seen its business rocket from $60 million to $6.5 billion in the past two years.

The accounts of 2,500 British citizens at FCIB were frozen last Friday following a September 5 raid on the offices by Dutch Ministry of Justice officials and police at the same time as a simultaneous raid on the bank?s offices in Holland.

An unnamed British Government source is quoted in The Guardian saying: ?We think the carousel fraud industry has been holed below the waterline.?

Mr. Deuss? sister Martina was reportedly arrested during the raid in Holland, and her holiday home in Wales is said to have been searched by British authorities.

Dutch prosecutors are believed to be hoping to question Mr. Deuss about his Curacao-based bank.

The London office of Mr. Deuss? company Transworld Payment Solutions was also raided by Customs officers who suspect it performed a role in vetting customers of the bank in Curacao.

There is a Transworld Payment Solutions office in Bermuda, also owned by Mr. Deuss. Mr. Deuss told yesterday: ?Although the offices in London and Bermuda share the same name, they are distinct corporate entities and fulfil completely different roles.?

And relating to the investigation of his bank in Curacao, he said: ?The offices of the FIBC in Curaco and its administrative services provider in Holland were visited by Dutch and local authorities for the purpose of gathering information in an investigation of allegations of money laundering in connection with the activities in Berg en Dal, Holland, which might require a Dutch banking licence.?

A Bermuda Police Service spokesman said it had not been called upon to make any investigations on the Island relating to the alleged carousel frauds.

Pat Phillip-Bassett, assistant director at the Bermuda Monetary Authority, said: ?Since the Bermuda Commercial Bank is a separate institution from First Curacao International Bank with separate business we have not been asked to assist in the FCIB investigation and have no direct knowledge of the nature of the issues under investigation.?

And Finance Ministry Permanent Secretary Donald Scott confirmed the Government was aware of the VAT fraud investigation but understood the Bermuda Commercial Bank was not subject to the European-based investigation.

In a statement, the Bermuda Commercial Bank said its operations should not be affected by the investigations of FCIB as their business is ?entirely unconnected? and added: ?However, the fact that FCIB is BCB?s largest shareholder has resulted in scrutiny by the rating agencies and the downgrading by Moody?s. If nothing else, this does affect the reputation of BCB.

?We will be contacting our clients to assure them of the bank?s unimpaired financial strength.?