The raids were part of a larger investigation spanning four continents and involving dozens of banks in an alleged tax evasion scheme.
French financial prosecutors raided several of France’s largest banks on Tuesday, including Société Générale and BNP Paribas, as part of a multi-country investigation into one of Europe’s largest tax evasions, according to authorities.
In an early-morning raid, more than 150 financial investigators and 16 local magistrates swarmed the Paris-area headquarters of the French banks, as well as the offices of HSBC Holdings, Natixis, and BNP’s Exane unit, to gather evidence for an investigation into a tax avoidance scheme in which the banks allegedly bilked the French treasury out of vast sums.
The raids were part of what European authorities previously described as an ongoing investigation involving four continents, dozens of banks, and up to 1,500 suspects.
The French banks under investigation were allegedly involved in a scheme known as “cum-cum trading,” derived from the Latin for “with-with,” in which individuals pocketed hundreds of millions of euros by evading French dividend taxes.
Tax refunds
The French prosecutors’ office said in a statement that the banks raided on Tuesday used a strategy in which shareholders transferred stock for a short period of time to investors abroad to avoid paying dividend taxes and, in some cases, received tax refunds.
Investors then sold the shares back to the original owner, who divided the proceeds.
According to the prosecutors’ office, the government is attempting to reclaim at least one billion euros.
The French raids, which prosecutors said had been meticulously planned for months, also included six prosecutors from Germany, where authorities have been fighting for nearly a decade to bring to justice a ring of financial traders and bankers accused of defrauding the government of billions of euros in tax revenue through a similar scheme.
The scheme in Germany was based on “cum-ex trading,” which is Latin for “with-without,” a monetary maneuver used by savvy investors to generate two refunds for dividend tax paid on a single basket of stocks.
Several European countries are seeking justice in what has been dubbed “the robbery of the century” by the French daily Le Monde, which first reported the French scheme in 2018.
Hundreds of bankers, lawyers, and investors were able to siphon an estimated $55 billion from European countries’ state coffers through the schemes for years.
Overall, Germany has suffered the most, with an estimated $30 billion in losses, followed by France, which has suffered an estimated $17 billion in losses.
Smaller sums were sucked out of Spain, Italy, Belgium, Austria, Norway, Finland, Poland, and other countries.
Many European countries were targeted by cum-ex traders, with much of the activity beginning in the early 2000s and gaining popularity in the aftermath of the Great Recession, when much of the financial industry was in disarray.
In recent years, countries have closed the loophole that allowed cum-ex trades but frequently failed to notify their neighbors’ tax authorities.
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