Two More Bankers Arrested in Germany Over Tax Scandal Investigation

(Bloomberg) --

Two former managers of a German bank were arrested in a money-laundering probe linked to Denmark’s $2 billion Cum-Ex tax scandal.

The two North Channel Bank managers were taken into custody on Feb. 4, prosecutors in the German city of Koblenz said Thursday in a statement. It’s part of a probe into the actions of the pair and five other former and current bank employees on allegations they have helped U.S. pension funds doing Cum-Ex deals at the expense of the Danish tax coffers.

The arrests came as the Scandinavian country ramped up its efforts to address the scandal, which has been wreaking havoc in the European financial community for years. Earlier this week, Danish prosecutors seized a London house that belonged to a hedge fund manager and the country’s tax authority said it was seeking about 900 million kroner ($132 million) from nine foreign banks that participated in the controversial tax-refund scheme.

A spokeswoman for North Channel Bank said the lender has been cooperating with authorities, closed the unit and fired the people involved. Should the investigation find that current bank employees were also involved, the lender will take appropriate steps, she said.

North Channel Bank in September was fined 110 million kroner in Denmark as part of the country’s probe into the vast dividend tax scandal. The lender was found guilty of aiding other parties in defrauding Denmark of 1.1 billion kroner.

The German money laundering probe led to raids of homes in 2018. The authorities are looking into whether the mangers transferred money they knew came from illicit trades, according to the statement. Some of the bankers are suspected to have recorded fake transactions and issued wrong dividend statements, prosecutors said.

Cum-Ex transactions took advantage of European rules and practices on the taxing of dividends, which made it possible to get two refunds on a tax paid only once by using a combination of short sales and future transactions, investigators say. In Germany, authorities are probing major banks allegedly involved in helping international financiers rob state coffers.

As part of the German probe, Frankfurt prosecutors arrested two bankers in December when they filed charges against seven people over now-bankrupt Maple Bank GmbH’s Cum-Ex transactions. The duo is still in custody.

Ulf Johannemann, the former head of global tax at Freshfields Bruckhaus Deringer LLP, was arrested as part of that case in November. He was released before Christmas after posting bail of 4 million euros ($4.4 million).

Denmark is cooperating with other countries to clean up what it says was a fraudulent scheme costing taxpayers billions.

©2020 Bloomberg L.P.

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