French prosecutors raided the Paris offices of BNP Paribas, Société Générale and several other large banks on Tuesday as part of an investigation into alleged tax evasion tied to dividend payments.
In the biggest raid ever orchestrated by French financial prosecutors, investigators said they had dispatched 150 agents to search emails and documentation at the banks, which also included HSBC, Natixis and BNP-owned brokerage Exane.
France’s financial prosecutor’s office said in a statement that the raids were linked to five investigations launched in 2021 over alleged money laundering and fiscal fraud charges. Separately, French tax authorities have sought to levy fines totalling more than €1 billion on the banks, according to a person familiar with the investigation by prosecutors.
The investigations centre on so-called “cum-cum” trades, or controversial transactions designed to seek tax advantages tied to the payment of dividends. In the deals under investigation in France, the banks allegedly helped foreign clients by temporarily taking the shares they held in French companies around dividend days to avoid tax being levied on them, prosecutors said.
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SocGen and BNP Paribas confirmed the searches. The other banks did not return requests for comment.
The probes follow related dividend scandals in Germany, including around so-called “cum-ex” trades in which governments were duped into reimbursing taxes on dividends that were never paid in the first place.
Those trades have led to a wave of raids in Germany, including at international banks such as JPMorgan Chase, Barclays and Morgan Stanley, while several bankers and a senior tax inspector have already received jail sentences. Related searches have also been conducted at banks in Britain at the behest of German investigators, who are examining the role of 100 banks on four continents.
Six prosecutors from Cologne, in Germany, also helped co-ordinate the French searches, authorities in France said. However, the investigation by French prosecutors is not yet close to a resolution.
The raids on Tuesday were designed to collect evidence about the way the dividend trades were orchestrated and if there had been deliberate efforts to help clients evade tax, according to a person familiar with the investigation.
“It’s to find a trace of the financial flows and to get a sense of people’s intentions – if there was an organised and conscious construction of these trades,” the person added.
Magistrates will then have to decide whether to seek a trial or abandon the investigation. A negotiated outcome with the banks is also a possibility, raising the prospect of potentially large settlements.
The more than €1bn sought by tax authorities has been contested by the banks, the person said. France’s economy ministry declined to comment. – Copyright The Financial Times Limited 2023
