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28 Mar, 2023 15:00

French banks raided in tax evasion sting

The lenders are suspected of helping investors avoid paying taxes on dividends
French banks raided in tax evasion sting

The Paris offices of five major banks were searched on Tuesday amid a probe into suspected money laundering and tax evasion related to dividend payments, several media outlets have reported.

The raids in question took place at the offices of Societe Generale, BNP Paribas, Exane and Natixis, as well as those of British banking giant HSBC, according to Le Monde, which was the first to break the news.

Societe Generale confirmed the searches to Reuters, but abstained from further comments. The other four banks did not comment on the reports.

France’s National Financial Prosecutor’s Office (PNF) later confirmed reports of the raids in a statement, adding that the investigation was linked to the so-called “cum-cum” dividend strategy, a scheme whereby a bank temporarily transfers shares of a stock to a foreign investor ahead of a dividend payout to avoid paying the dividend tax. 

The dividends are either not taxed or the taxes are refunded to the foreign investor. The shares are subsequently returned to the original owner and the two parties split the amount saved – an amount that would have been taxed had the securities remained with the original owner.

PNF said the ongoing probe, which was opened back in 2021, is being carried out by 16 investigating judges and over 150 agents. According to a Bloomberg report, the five banks face collective fines of more than €1 billion ($1.1 billion) in connection with the investigation.

The searches came as yet another hit to the global banking industry, which is still reeling from bank failures in the US and the government-brokered rescue takeover of Switzerland’s Credit Suisse by rival UBS.

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