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BlackRock Offices Raided in German Tax Probe (#GotBitcoin?)

Investigation into historical trades has already embroiled several other firms and banks.  BlackRock Offices Raided in German Tax Probe

German prosecutors searched the Munich offices of BlackRock Inc. drawing the world’s largest asset manager into a long running criminal tax-fraud investigation that has already embroiled several other financial firms.

The probe centers on historical so-called cum/ex transactions which are trades executed during the handful of days before and after scheduled dividend-payment dates.

A spokesman for BlackRock said the company was “fully cooperating with a continuing investigation relating to cum/ex transactions in the period 2007-2011.” A person familiar with the investigation said BlackRock, whose offices were raided Tuesday, hasn’t been accused of tax fraud.

Cum/ex transactions typically involve banks, brokerage firms, hedge funds and wealthy individuals entering into agreements to buy, borrow and sell shares during a brief window of time around a dividend payout. The carefully coordinated timing of the transactions has allowed many parties to claim a refund for taxes paid on the dividends.

German officials argue that tax credits have been artificially claimed through these types of trades in ways that could constitute fraud. The German government has moved to prevent such transactions in the country and closed the tax loophole in 2012. German Finance Minister Olaf Scholz said last month that the country is seeking to get money back. The ministry said it is aware of 418 cases worth €5.7 billion ($6.5 billion).

Another prominent financial company embroiled in the scandal, Spanish lender Banco Santander SA, recently said it is being probed and is “fully cooperating with German authorities.” A spokesman said the probe focuses primarily on three former employees based in London. The bank is conducting its own internal investigation.

Some banks have already settled with authorities. Hypovereinsbank, Unicredit ’s unit in Germany, has paid a total €19.8 million in fines under settlements between 2015 and 2017. Separately, five former employees of the bank and a lawyer were charged in Frankfurt this year with pocketing €106 million under the alleged fraud.

Prosecutors in Cologne, Munich and Frankfurt are working on the case in Germany. Probes have also been launched by other countries, including Denmark and Austria.

Lawmakers have called for a Europe-wide probe into the issue, which so far has been dealt with only by local authorities.

“We need a European investigation into the scandal by the financial supervisory authorities,” said Sven Giegold, who represents Germany’s Green Party in the European Parliament. “Politicians must close every known tax loophole and punish illegal activities harshly,” he added.

The raid at BlackRock’s offices in Munich comes at a sensitive time for the unit’s head of the supervisory board, Friedrich Merz, who is a candidate to succeed German Chancellor Angela Merkel as leader of the Christian Democratic Union party. Mr. Merz arrived at BlackRock in 2016, after the period under investigation.

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