German prosecutors raid homes of HSBC employees over tax fraud scam

GERMAN prosecutors raided the homes of 16 HSBC Holdings employees as part of their vast probe into the Cum-Ex tax dividend scandal.

Cum-Ex was a trading strategy across Europe that siphoned off billions of euros in government revenue, by taking advantage of tax laws that seemed to allow multiple investors to claim refunds of a tax on dividends that was paid only once. Germany moved to abolish the practice in 2012.  

The searches started on Tuesday (Feb 28) morning, people familiar with the matter said. Cologne prosecutors confirmed they are conducting searches in the Dusseldorf area over Cum-Ex, but declined to disclose any names, citing office policy. A spokesman for HSBC said the bank wasn’t raided and declined to comment further.

While dating back more than a decade, the scandal still roils the financial industry. Prosecutors in Cologne are investigating more than 1,500 people and are ramping up the pressure on international banks. A long line of institutions were targeted by officials in recent months, including BNP Paribas, Bank of America’s Merrill Lynch, and Barclay. 

Separately, Frankfurt prosecutors said they charged a 57-year-old ex-managing director of a German Fortis unit, who in July was arrested in Spain over allegations he orchestrated Cum-Ex transactions that cost German taxpayers US$54 million. While they didn’t identify the man or the bank, people familiar with the issue at the time of his arrest said he worked for Fortis.  

Fortis, parts of which were merged with ABN Amro, has long been targeted by Frankfurt prosecutors for its role in the tax scandal. ABN Amro’s Frankfurt offices were raided in 2019 as part of the probe. BLOOMBERG