Two Ex-London Bankers Cooperating With German Cum-Ex Probe

Two ex-London bankers are cooperating with German prosecutors in the investigation of controversial Cum-ex tax scandal, according to a Bloomberg report.

The two former bankers have worked with the prosecutors for more than a year now and helped them understand the complex financial deals involving a number of investment banks, brokers, and other market players.

What is Cum-Ex Scandal?

Cum-ex is one of Germany’s largest financial and tax-related scandal pulled off so far. Bankers used the previously banned cum-ex trading and scammed the system to generate tax-returns to their clients for taxes which they did not even pay in the first place.

“A bank would agree to sell company stock, for example to a pension fund, before the dividend payout but delivered it after it had been paid. The bank and the fund would both reclaim withholding tax,” Reuters explained.

“Sometimes banks sold shares they did not own and agreed to buy them later in a practice known as short selling. The stock was traded rapidly around a syndicate of banks, investors and hedge funds to create the impression of numerous owners, prosecutors say. The profits from the deals were shared.”

More than 100 banks are under investigation by the German authorities in relation to Cum-ex deals. The deals involving illicit tax refunds may have cost the German State more than €10 billion.

The two cooperating bankers worked for a company which was involved in many deals when the scandal was at its peak.

Strict Laws

According to German laws, schemes involving tax frauds with an amount of more than €1 million calls for a jail term without any possibility of suspension. The jail term is based on the amount involved in the fraud.

The two accused ex-London bankers are hoping to get lenient sentencing by the court in return of their cooperation.

However, there the final decision for the sentencing will be taken by the judge.

“The two are betting that by providing information the authorities couldn’t have obtained otherwise, they’ll win a lighter punishment even with a guilty verdict. But there’s no legally binding quid pro quo,” Bloomberg noted.

Source: Read Full Article