Dividend Stripping

Deutsche Bank in Tax Fraud Probe

Deutsche Bank Polizei
The police keep showing up at Deutsche Bank's Frankfurt headquarters.
  • Why it matters

    Why it matters

    Deutsche Bank may have only been involved indirectly in the alleged tax fraud, but the scandal could further dent Germany’s largest bank’s reputation at a time when new CEO John Cryan is hoping to move forward.

  • Facts

    Facts

    • Nummus Financial, a fund company, exploited a legal loophole to reclaim capital gains tax several times, having paid it only once – a practice known as dividend stripping.
    • Deutsche Bank acted as the custodian bank for these transactions. Its subsidiary Postbank also owns a 27-percent stake in Nummus’ parent company.
    • Nummus bought and resold shares worth €4 billion within just four months.
  • Audio

    Audio

  • Pdf

When news first broke of a dawn raid at Deutsche Bank’s headquarters in Frankfurt, it seemed the bank might narrowly escape the scandal this time. The Frankfurt-based financial institution put out a statement saying the raid was to investigate customers – not the bank’s own employees.

Now it has emerged that Germany’s largest bank, while not directly the focus of investigators, was more deeply entangled in the questionable tax deals brokered by a client than previously believed.

The case involves dividend stripping, a form of tax fraud that prosecutors across the country have been cracking down on over the last few years.

According to information received by Handelsblatt, Tuesday’s raid by the public prosecutor’s office was targeting possible tax fraud conducted by the fund company Nummus Financial. The fund was a customer of Deutsche Bank. The bank, documents show, was aware and likely profited from the fund’s questionable dealings.

In total 10 locations, including offices and homes of various companies across the country, were searched by the authorities on Tuesday, looking for information on Nummus’ alleged dealings. About 70 officials were involved, including federal police, tax authorities, and prosecutors.

The fund is at the center of the latest investigation into a form of alleged tax fraud known as dividend stripping, which has also engulfed a number of other German banks and funds, including Germany’s third-largest bank HypoVereinsbank, now owned by Italy’s Unicredit.

Over just one four-month period, Nummus bought and then immediately resold shares worth €4 billion. The action was designed to avoid paying tens of millions in taxes.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.