Tuesday, December 1, 2020

Are Bankers Mobsters Becomes Question in German Cum-Ex Probe

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Germany’s biggest tax scandal has landed the masters of the financial universe with an unflattering label: criminal organizations.

It’s an allegation not leveled by finger-wagging populist crusaders, but prosecutors seeking to push their case beyond a probe of lost revenue.

Now two dozen financial institutions caught up in the so-called Cum-Ex dragnet are suspected of forming criminal organizations, money laundering, and in some cases investor fraud, a court document shows.

Equating bankers with behavior associated with mobsters lets prosecutors pack more punch into a case exploring whether financial institutions and wealthy individuals illegally engaged in controversial transactions that allowed multiple dividend-tax refunds.

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The Cum-Ex deals, which peaked between 2007 and 2011 before the government shut them down, cost the German treasury more than 10 billion euros ($11 billion) in lost revenue, lawmakers estimate.

While tax crimes remain the central issue, prosecutors have also found evidence that some private investors may have been duped and that the trading strategy may have entailed money laundering by sharing illicit profits, the ruling, an search warrant, seen by Bloomberg News says.

The warrant was used by the authorities to raid the offices of Deutsche Boerse AG’s Clearstream unit last month, the central depository for any shares in Germany. The court document mentioned more than 50 probes by Cologne prosecutors.

Adding Crimes

The investigations focus on banks, brokers and asset managers over various roles that were necessary for the Cum-Ex transactions, including buyer, short-seller, custody bank and providers of leverage.

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According to the latest findings, affiliated companies within a group often took on several of these roles, according to the document. Besides brokers and investment companies, the warrant list more than 20 lenders, among them Morgan Stanley, JPMorgan Chase & Co. and Bank of America Merrill Lynch.

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