Key takeaways:
- French officials searched the Paris headquarters of five banks on Tuesday on suspicion of tax fraud.
- According to the PNF, searches on Tuesday also targeted Exane, a subsidiary of BNP Paribas, and Natixis, the investment bank division of the French banking conglomerate BPCE.
In an extensive European investigation into the evasion of dividend tax payments, Reuters reports that French officials on Tuesday searched the Paris offices of five banks, including Societe Generale, BNP Paribas, and HSBC, on suspicion of fiscal fraud.
As similar inquiries have been carried out in Germany and other European nations, the French prosecutors’ activities are the most recent to target multinational banks regarding the dividend tax fraud scheme.
The so-called “cum-ex” dividend stripping, a trading strategy in which banks and investors quickly trade shares of businesses around their dividend payout day, was a factor in the investigation, according to a statement from the PNF Financial Prosecution Office. The practice enables multiple parties to fraudulently claim income tax refunds by obscuring stock ownership.
According to the PNF, which corroborated an earlier story in the newspaper Le Monde, searches on Tuesday also targeted Exane, a subsidiary of BNP Paribas, and Natixis, the investment bank division of the French banking conglomerate BPCE.
Although it was impossible to pinpoint the precise size of the fraud, a French financial prosecution office spokesperson said that the banks collectively would be subject to a total restitution request of more than $1 billion, including fines and unpaid interest. The earliest instance under investigation dates from 2014, and it was unclear when the practice ended.
Hanno Berger, a tax attorney, was allegedly the mastermind of one of Germany’s largest post-war frauds through a dividend-stripping scheme that cost German taxpayers, according to some estimates, around 10 billion euros. A German judge sentenced him to eight years in prison in December.
In a string of cases that also resulted in the conviction of British bankers, it was the most high-profile prosecution and longest sentence to date. In its announcement, the PNF stated:
“The ongoing operations, which have required several months of preparation, are being carried out by 16 investigating judges and over 150 investigation agents,”
The investigations take place at a time when the global banking sector is in disarray as a result of this month’s failures of Silicon Valley Bank and Signature Bank in the US as well as the government-approved acquisition of rival UBS by Credit Suisse.
