Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

UK watchdog narrows dividend-stripping investigation

UK watchdog narrows dividend-stripping investigation

A British investigation into a trading scheme that claimed multiple tax rebates on dividend payments, said by European countries to have siphoned billions of euros from state coffers, is now focused on nine companies and three individuals, a Freedom of Information (FOI) request shows.

Britain's market watchdog, the Financial Conduct Authority (FCA), has been part of the cross-border 'cum-ex' inquiry for seven years, although the current scope of its operation - reported here for the first time - is dwarfed by sprawling fraud investigations led by Germany and Denmark.

A German court this week sentenced tax lawyer Hanno Berger, alleged to have masterminded one of the country's biggest post-war frauds, to eight years in jail. It is the highest-profile prosecution and longest sentence to date in a series of trials that have also convicted British bankers.

Although Britain was not impacted by cum-ex trading, much of the structuring and organising of the scheme took place in London, according to lawyers and authorities, some of whom turned to the country for help unpicking what had happened.

The FCA said in 2020 that it had been working with European authorities to investigate "substantial and suspected abusive share trading" in London markets that allegedly supported dividend stripping tax avoidance schemes in Denmark, Germany, France and Italy.

The watchdog, which has fined three small brokerages a combined 2.9 million pounds ($3.5 million) to date, said inquiries into eight individuals had been closed because of a lack of evidence by mid-November. It has also discontinued an investigation into one company.

"We have already achieved a number of outcomes and we are continuing to progress the remaining investigations into individuals and firms to conclusion," the FCA said, without naming those still under investigation.

The watchdog's inquiries are regulatory and have focused on penalties for financial crime control failings to date. It does not have the power to investigate tax fraud, but can investigate civil and criminal market abuse.

Reuters could not determine whether other British agencies are conducting criminal inquiries and the Serious Fraud Office and tax authority HMRC, which might prosecute such cases, declined to comment.

"(A British criminal investigation) would send an important signal: Even if we were not the ones plundered, we will not allow such conduct from our shores," said Konrad Duffy of Finanzwende, a German group campaigning for financial transparency.

But two London lawyers said drawn-out investigations into cum-ex trading, that some experts estimate has cost German taxpayers alone around 10 billion euros ($11 billion), did not appear to be a high priority for British authorities.

"There has been an inertia by British agencies in relation to cum-ex," noted Zoe Osborne, a partner focusing on financial crime, contentious regulatory investigations and litigation at law firm Steptoe & Johnson.


CRACKDOWN


Cum-ex trading, also known as dividend stripping, involved banks and investors swiftly dealing shares of companies around dividend payout days, blurring stock ownership and allowing multiple parties to claim tax rebates.

The scheme flourished after the 2008 credit crisis when banks, traders and hedge funds devised strategies to trade vast volumes of stock to cash in on a now-closed loophole.

Labelling it "a collective case of thievery", a German judge sentenced two British bankers in 2020. German prosecutors have since secured 11 convictions and government officials say the probe spans around 1,500 suspects and 100 banks on four continents.

Danish prosecutors last year charged eight British and U.S. citizens and the Danish tax authority SKAT is separately pursuing almost 80 defendants in London over alleged tax fraud in a civil case that centres on Sanjay Shah, a Briton based in Dubai, and his hedge fund Solo Capital Partners.

The alleged fraud is said to have been principally orchestrated from, or carried out through, British-based entities, Court of Appeal judges noted in a February judgment.

Shah has denied wrongdoing. His lawyer said last year that he and his businesses had acted lawfully and in accordance with Danish tax rules in force at the time. A spokesman declined to comment further.

Wanted by Denmark and Germany, Shah seemed beyond authorities' reach until Denmark signed an extradition treaty with the UAE in March.


THE $148 BLN QUESTION


The three brokerages fined by the FCA to date - The TJM Partnership, Sunrise Brokers and Sapien Capital - traded a total of 121.2 billion pounds of Danish and Belgian equities for Solo Capital and connected companies between January 2014 and November 2015, FCA documents show.

All three brokerages qualified for a discount to their fines for cooperating with the investigation.

The FCA had also issued five warning notices to companies and one to an individual about impending regulatory action over cum-ex trading by mid-November, according to the FOI request.

One warning notice was sent in June 2020 to an unnamed former chief executive, according to a 2021 High Court judgment.

The individual challenged the FCA notice in court and proceedings have been halted pending preliminary rulings in the estimated 1.44 billion pound case brought by SKAT against Shah and others in London.

($1 = 7.0672 Danish crowns)

($1 = 0.8207 pounds)

($1 = 0.9428 euros)

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
×