ZURICH (Reuters) - Swiss authorities have searched the offices of private Bank J. Safra Sarasin as part of a probe led by German prosecutors into dividend stripping, an investment strategy that can be used to help clients avoid taxes, a Zurich prosecutor said.
Authorities searched Sarasin’s offices in Basel and Zurich on Thursday, as well as others connected to the bank, in a broader investigation into so-called “cum ex” dividend deals, Zurich deputy prosecutor Marcel Strassburger told Reuters.
“I can confirm the raids were related to the cum-ex deals,” Strassburger said, without giving further details.
Bank J. Safra Sarasin said its offices in Zurich and Basel had been searched based on a request for legal assistance by prosecutors in Cologne and Frankfurt related to cum-ex transactions.
“These transactions date back to a time when the bank was still owned by Rabobank. Bank J.Safra Sarasin has never set up or distributed such cum-ex products,” the bank said in an emailed statement, adding it was cooperating fully with the investigation.
Sarasin was taken over by Brazilian-Swiss private bank Safra in 2011.
Cum-ex, or dividend stripping, deals are based on trading shares both with and without entitlement to a dividend payout — hence “cum” and “ex” — a way to lower clients’ tax exposure.
A loophole in the German law that enabled the strategy was closed in 2012. Lawyers are now divided over whether the previous practice was actually illegal or simply objectionable.
Several banks have been caught up in dividend stripping investigations, with public sector lender HSH Nordbank [HSH.UL] saying in 2013 it had set aside 127 million euros ($161 million) to cover possible tax liabilities.
HypoVereinsbank, the German arm of Italy’s UniCredit, said in July that an internal probe concluded that the bank had conducted “cum-ex” transactions.
Strassburger confirmed the raid was coordinated by Zurich prosecutors following an official request for assistance from authorities in Cologne. The prosecutor in the German city declined to comment.
Swiss newspaper Tages-Anzeiger and Germany’s Sueddeutsche Zeitung reported on Friday that Swiss authorities had raided more than 20 offices and homes including those of lawyers and others potentially involved in the scheme.
Reporting by Silke Koltrowitz; Editing by Thomas Atkins and David Clarke