Criminal Law: New Investigations in the Cum-Ex Proceedings

At the beginning of September 2019, banks in Frankfurt were searched again. According to media reports, the public prosecutor’s office is said to have expanded its criminal investigations against bank employees in the Cum-Ex proceedings.

1. Criminal searches for tax evasion

On 10.09.2019, officers of the public prosecutor’s office in Cologne searched the head office of Commerzbank in Frankfurt am Main. The background is the suspicion that the bank was involved in a criminal trade in shares at the expense of German taxpayers.

The investigations are to be based on internal investigations by the bank as well as voluntary reports by the bank. Due to German tax secrecy, the Cologne public prosecutor’s office did not want to disclose further details on this matter.

2. The Controversy over Cum-Ex Deals

The Cum-Ex proceedings are regarded as the biggest tax scandal in German history. Lawyers and tax advisors had found a gap in the law, which made it possible to receive tax refunds several times from the state. Shares with (cum) and without (ex) distribution claims were shifted back and forth between several participants. The system was handled so cleverly that it was not possible for the tax officials to easily identify which capital gains taxes were actually refundable and which were not.

3. Crown Witnesses in a Criminal Trial?

Only a few weeks ago, the first public criminal trial against two British securities traders in connection with Cum-Ex transactions began. In their defence, they have spoken extensively on the matter as a kind of leniency witnesses. However, a judgement is not expected for several months.

4. Criminal Intent of Tax Evasion?

Supreme Court jurisdiction to the question, under which conditions Cum-Ex transactions are punishable in Germany, does not exist yet. One of the problems is that the topic was known to the German authorities for a long time before the legislator intervened. It is controversial, among other things, whether one can accuse those affected of having acted with criminal intent for tax evasion.