French authorities have raided the Paris offices of five banks, including Societe Generale, BNP Paribas, and HSBC, on suspicion of fiscal fraud as part of a wide-ranging European investigation into the avoidance of dividend tax payments.
Societe Generale and BNP Paribas have acknowledged the searches but declined to comment further. Other affected institutions did not respond immediately to requests for comment.
The actions of the French prosecutors are the most recent to target global banks in connection with the dividend tax evasion scheme, as similar investigations have already been conducted in Germany and other European nations.
The PNF financial prosecution office stated in a statement that the investigation was related to so-called “cum-ex” dividend stripping, a trading scheme in which banks and investors rapidly trade company shares around the dividend payment date.
The purpose of the practice is to obscure stock ownership and enable multiple parties to illegally claim dividend tax credits.
Exane, a subsidiary of BNP Paribas, and Natixis, the investment banking branch of French banking group BPCE, were also the targets of Tuesday’s raids, according to the PNF, confirming an earlier report in Le Monde.
A spokesperson for the French financial prosecution office stated that it was impossible to provide a precise estimate of the magnitude of the fraud, but that the banks collectively faced a compensation demand of more than $1 billion, including penalties and late interest payments.
The investigation’s oldest case traced back to 2014, and it was impossible to determine when the practice ceased.