As part of an investigation into tax fraud and money laundering related to dividend payments, some of France’s largest banks were raided by the country’s financial prosecutor.
The institutions being searched include Societe Generale, BNP Paribas, HSBC, Natixis, and BNP’s Exane, according to the prosecutors’ office in Paris.
The investigation was initiated in December 2021 and relates to the cum-ex scheme, a dividend arbitrage strategy used to avoid dividend taxes.
Under this scheme, shareholders transfer stock to foreign investors to avoid taxation, with the amount saved being divided between the parties. BNP, HSBC, and Natixis representatives did not respond to requests for comment, but a spokesperson for Societe Generale confirmed that the bank is part of the investigation.
Following the raids in France as part of an investigation into tax fraud and money laundering related to dividend payments, bank shares have taken a hit.
Societe Generale, BNP Paribas, HSBC, Natixis, and BNP’s Exane are all being searched, according to the prosecutor’s office in Paris. Societe Generale saw a decline of up to 2.4%, before trading down 1.8% in Paris. BNP was 1.4% lower, and HSBC fell approximately 0.6% in London.
The French banks could potentially face collective fines exceeding €1bn (£880m) as part of the probe, which began preliminary investigations in December 2021.
The raids relate to the cum-ex scheme, a dividend arbitrage strategy used to avoid dividend taxes. These raids added to the negative sentiment surrounding the banking industry in both the US and Europe, where investors have been impacted by the emergency rescue of Credit Suisse and the seizure by regulators of Silicon Valley Bank.
