JPMorgan raided by German prosecutors as part of tax evasion probe

JPMorgan Chase has become the latest bank to be raided by prosecutors in Germany as part of a probe into the multibillion “cum-ex” tax evasion scandal.

The raid on the bank’s Frankfurt office by Cologne prosecutors is the latest step in a sprawling investigation into the dividend tax scandal, which dates back more than a decade. Prosecutors and police in Germany have this year also raided the offices of foreign lenders Barclays, Bank of America and Morgan Stanley.

“We can confirm that our Frankfurt offices were visited this week. We continue to co-operate with the German authorities on their ongoing investigation,” the US bank said on Wednesday.

The Cologne Public Prosecutor’s Office said that it has been executing search warrants against an unnamed banking institution in the city, as well as separate audit firms and searching the homes of four suspects, all in relation to cum-ex tax evasion schemes.

The fraud, which took advantage of a flaw in the German tax code, is estimated to have cost the continent’s taxpayers more than €10bn. It involved share deals executed before and after a stock’s dividend payment that duped governments to reimburse taxes that were never paid in the first place.

In Germany, tax authorities refunded at least €3.9bn in illicit tax refunds between 2001 and 2011, according to the finance ministry.

The fraud has been dubbed cum-ex, which is derived from Latin meaning “with without”, and refers to the disappearing nature of the dividend payments.

The raids in Frankfurt are being carried out to locate emails and written correspondence, the Cologne prosecutors added. More than 50 investigators and IT experts from the local police and tax investigation offices are also involved in the operation.

Cologne public prosecutors are investigating 1,500 people as part of a broader inquiry into the long-running fraud involving international lenders ranging from Deutsche Bank, Barclays, Macquarie to UniCredit’s HypoVereinsbank.

Prosecutors have been investigating the scandal for years, but the inquiry was stepped up last month when a former senior banker from Fortis bank was arrested in Mallorca at the request of Frankfurt prosecutors.

Fortis, which collapsed in the financial crisis and was acquired by Dutch peer ABN Amro, was allegedly one of the first lenders to exploit the design flaw in the German tax code. Frankfurt prosecutors raided ABN Amro’s offices in Frankfurt in 2019 and 2020.

Source: Financial Times

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