French banks raided over tax fraud allegations

France’s financial prosecutor raided some of the country’s biggest banks as part of an investigation into tax fraud and money laundering related to dividend payments.

Societe Generale, BNP Paribas, HSBC, Natixis and BNP’s Exane are being searched as part of the investigation, according to the prosecutors office in Paris.

Preliminary investigations related to the raids were opened in December 2021, the prosecutor said.

The raids relate to a so-called dividend arbitrage strategy known as the cum-ex scheme.

It involves shareholders transferring stock for a short period to investors based abroad to avoid a dividend tax.

Investors then hold the shares during the period when dividends are paid out and either are not taxed or taxes are refunded.

They then sell the securities back to the original owner and the amount saved was split between the parties.

BNP, HSBC, and Natixis representatives did not immediately respond to requests for comment. A spokesman for SocGen confirmed that the bank is part of the investigation.