Deutsche Bank is said to set­tle cum-ex probe

Gulf Times Business - - BUSINESS -

Deutsche Bank AG set­tled a Frank­furt Gen­eral Pros­e­cu­tor’s Of­fice in­ves­ti­ga­tion into its role in help­ing clients do con­tro­ver­sial tax deals, peo­ple with knowl­edge of the is­sue said.

Un­der the deal, the lender agreed to pay €4mn ($4.5mn) to end a probe into the so­called cum-ex deals, ac­cord­ing to the peo­ple, who asked not to be iden­ti­fied as they weren’t au­tho­rised to speak about the agree­ment. The bank was drawn into the probe be­cause it acted as cus­to­dian bank in deals done by in­di­vid­u­als in­ves­ti­gated in the case.

Deutsche Bank de­clined to com­ment on whether it set­tled.

The pros­e­cu­tor’s of­fice con­firmed that it ended parts of a cum-ex in­ves­ti­ga­tion in June that was re­lated to raids in Septem­ber 2015. The cases against three of six in­di­vid­ual sus­pects were dropped af­ter a pay­ment of €540,000. Sep­a­rately, €4mn of profit was seized. The of­fice de­clined to iden­tify the sus­pects or the com­pa­nies in­volved. The in­ves­ti­ga­tion is one of eight cumex probes cur­rently han­dled by the agency.

Pros­e­cu­tors in Cologne, Frank­furt and Mu­nich are look­ing at some of the big­gest names in fi­nance, re­view­ing the in­volve­ment of banks, fi­nan­cial ser­vice providers and law firms across Europe and the US in re- la­tion to the trades that have come to be known as cum-ex — a Latin phrase that means “with­with­out,” a ref­er­ence to the van­ish­ing div­i­dend pay­ments in the trans­ac­tions. The prac­tice is be­lieved to have cost Ger­man tax­pay­ers more than €10bn.

Cum-ex trans­ac­tions took ad­van­tage of how Ger­many once han­dled tax re­funds on div­i­dends. At the time, cer­tifi­cates used for tax re­pay­ments weren’t is­sued cen­trally. Deals were set up around div­i­dend day in a way that en­abled a short seller of a stock and its ac­tual owner to both get a cer­tifi­cate stat­ing that the div­i­dend tax was paid. While the tax was paid only once, both could use the cer­tifi­cates to claim full re­funds, ac­cord­ing to the find- ings. The prac­tice ended in 2012 when Ger­many re­vised its tax laws.

Banks have come un­der scru­tiny in these probes for var­i­ous rea­sons — do­ing the deals them­selves, fi­nanc­ing trans­ac­tions or act­ing as cus­to­di­ans that is­sued the cer­tifi­cates. Deutsche Bank has said it didn’t par­tic­i­pate in cum-ex trades as a short seller or buyer, but was in­volved in some of its clients’ deals and that it’s co-op­er­at­ing with the au­thor­i­ties.

In the probe re­sult­ing in the Deutsche Bank set­tle­ment, no tax was evaded be­cause au­thor­i­ties re­fused to pay out re­funds when the cer­tifi­cates were pre­sented. In 2015, pros­e­cu­tors said the peo­ple un­der scru­tiny tried to get €37mn in re­funds. The lender last year re­tracted the tax cer­tifi­cates its had is­sued.

The case cen­tred around for­mer Deutsche Bank em­ploy­ees who left the bank to cre­ate a com­pany called Num­mus, which car­ried out cum-ex deals, ac­cord­ing to the peo­ple. Pros­e­cu­tors started to in­ves­ti­gate them in 2012 and three years later they raided 10 premises, in­clud­ing those of Deutsche Bank.

The agree­ment only ends the re­view by Frank­furt pros­e­cu­tors and has no ef­fect on other po­ten­tial probes else­where in Ger­many.

The case isn’t re­lated to last week’s raids at Deutsche Bank, which are part of a money-laun­der­ing in­ves­ti­ga­tion that is han­dled by a sep­a­rate pros­e­cu­tors’ of­fice.

A view of Deutsche Bank head­quar­ters at night in Frank­furt. Un­der the deal, Deutsche Bank agreed to pay €4mn ($4.5mn) to end a probe into the so-called cum-ex deals, ac­cord­ing to sources.

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