Offices of German DZ Bank searched in Cum-Ex scandal

Source: Xinhua | 2018-08-31

State prosecutors have searched the premises of DZ Bank in connection with the so-called "Cum-Ex" financial scandal, Germany's second largest lender confirmed on Thursday.

According to Sueddeutsche Zeitung newspaper (SZ), the Frankfurt-based institute stands accused of causing 149 million euros (174 million U.S. dollars) in damage to fiscal authorities with the same illicit method which has previously already been discovered at other major banks during Cum Ex investigations.

The scandal, which originally came to light in Die Zeit newspaper, is widely considered to be the largest tax fraud scheme in the history of Germany. Domestic and international banks and some investment funds used loopholes in stock trading regulations over the course of several years to strip the German state of billions of euros.

Official estimates put the total damage caused by the fraudulent practices at as high as 31.8 billion euros.

Scores of lawyers, lobbyists, and banking staff were found to have assisted their clients with two lucrative "Cum-Cum" and "Cum-Ex" methods of diverting funds from taxpayers.

Cum-Cum is a practice whereby financial institutions help foreign investors secure tax rebates they are not entitled to.

Cum-Ex is more complex and was formally outlawed in 2015. A tax bill is settled by the owner of stocks once before being claimed as a refund twice, or even multiple times. The profit thus achieved is then split again between the parties to the transaction.

A long list of major banks were found to have participated in and benefited from the multibillion-Euro scheme. However, the latest revelations that DZ Bank was among them was described as particularly unsettling by SZ given the lender's history and ethos.

DZ Bank is the flagship institute of Germany's "Volks and Raiffeisen" banking sector, a group of cooperative credit organizations which were set up in the 19th century to assist impoverished farmers.

After first encountering evidence of Cum-Ex practices by staff, the bank's management fired two employees and repaid the taxman 149 million euros. Nevertheless, SZ reported that the recent raid highlights that the Frankfurt State Prosecution Office is not fully satisfied with internal disciplinary procedures at DZ bank.