French authorities conducted a raid on the offices of five major banks in Paris today as part of an ongoing investigation into fraud and money laundering allegations. The banks targeted in the raids include HSBC, BNP Paribas, and Société Générale, with Natixis and BNP Paribas-owned brokerage Exane also being investigated. The investigation is related to the so-called ‘cum ex’ tax fraud scandal, which is centred around allegations of tax evasion in relation to money owed on dividends. The fraud office claims that foreign shareholders in French listed companies temporarily transferred shares they own to accounts in France to avoid paying tax on dividends. The investigation was launched by France’s Parquet National Financier (PNF) fraud office following complaints from the country’s tax authorities. German authorities started investigating the scandal back in 2017 following reports from investigative journalists.
The French investigation, which has been in preparation for months, involves 16 local magistrates, more than 150 investigators, and six prosecutors from Cologne. The avoidance of tax payments on dividends in Germany has been an ongoing scandal for almost a decade, with a similar scheme, known as Cum-Ex, allowing short-sellers and the actual holder of shares to all claim tax credits on a dividend paid only once.
Cum-Cum, on the other hand, has been widely practised because it was believed to not raise any legal issues in the same way that Cum-Ex did. However, it is far more widespread, especially in interbanking trading, as the legal risks were deemed to be much lower. The French prosecutor has invited anyone with further information related to the French inquiry to come forward. The raids add to further negative sentiment around the banking industry in both the U.S. and Europe, where investors have been hit by the emergency rescue of Credit Suisse Group AG and seizure by regulators of Silicon Valley Bank. At the time of writing, the banks targeted in the raids have not responded to requests for comment.
