Deutsche Bank’s Frankfurt headquarters and the homes of ten current and former employees were raided by police on Tuesday as part of an investigation by prosecutors into the bank’s role in one of Europe’s biggest tax scandals.
The raid, which was ordered by criminal prosecutors in Cologne, is the second Deutsche Bank has faced over the so-called “cum-ex” scandal, in which billions of euros of government revenues were misappropriated. Frankfurt prosecutors raided one of the bank’s offices in 2017.
Cologne prosecutors said on Tuesday that more than 114 police and tax inspectors took part in the raids which were undertaken “in the context with cum-tax deals and related tax fraud schemes”.
The sprawling tax fraud is estimated to have cost the continent’s taxpayers billions of euros and involves 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. 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 Financial Times reported in August that an internal investigation by Deutsche Bank in 2015 found that some staff broke regulatory rules and company policy to enable clients to siphon off millions of euros in government revenues.
In a statement on Tuesday, Deutsche Bank said that “we confirm that, as part of the investigation into the bank in relation to cum-ex, which has been ongoing since 2017, the Cologne Public Prosecutor’s Office is currently carrying out an inquiry at our offices in Frankfurt.”
Cologne prosecutors are probing more than 70 current and former Deutsche Bank employees, including former executives, over the matter.
After years of arguments over the legality of such transactions, Germany’s highest court ruled last year that they have always been illegal. While the bank’s own internal lawyers at Deutsche Bank had reached the same conclusion years earlier, the lender still generated millions of euros in fees by providing investment banking services to clients who specialised in cum-ex trading, the bank’s internal investigation found.
Between 2008 and 2011, Deutsche also held a 5 per cent stake in Luxembourg Financial Group Holding, the owner of one of the cum-ex focused investment funds that was also an investment banking client of Deutsche.
In August, Deutsche Bank told the Financial Times that it now “takes a very critical view of these financing activities and is co-operating with the investigations by the authorities in this regard.”
The raids were first reported by Handelsblatt.