The Prosecutor’s Office searched the offices of the French bank BNP Paribas in Frankfurt since yesterday on suspicion of tax fraud through operations with shares, the newspaper “Handelsblatt” reports on Wednesday. The raid is related to tax fraud through share-purchase cum-ex transactions that some banks obtained by taking advantage of a legal loophole in Germany for years, the Cologne public prosecutor’s office said.
The investigation is directed against 58 people, among whom are current employees at the bank and others already retired and their private homes in the federal states of Hesse, North Rhine Westphalia and Rhineland Palatinate have been searched.
BNP Paribas obtained the record from the Cologne Public Prosecutor’s Office at its offices in Germany in connection with investigations into cum-ex transactions. Likewise, BNP Paribas says that since the beginning of 2017 it has been cooperating with the German authorities.
Around the day of the payment of dividends, shares with the right to dividends (cum) and shares without the right to payment (ex) are sold and bought very quickly between banks, funds and other investors. The German tax authorities do not know who owns the shares and return capital income tax to investors who do not pay it because they do not have the shares entitled to a dividend.
To carry out these transactions, short sales are used, in which an investor sells shares that he does not own, but rather borrows them. The buyer of these shares appears as the holder of the titles and receives from his deposit bank a certificate that he is entitled to the return of capital income tax, the same as the actual holder of the shares at the time of the transaction.
The police have already registered in Frankfurt the American banks JP Morgan, Morgan Stanley, Merrill Lynch, the British Barclays, the Swedish SEB and the German Deutsche Bank and Dekabank, as well as the auditor and consultant KPMG.