Latest news with #Cum-Ex
DW
25-07-2025
- Business
- DW
Cum-Ex: Why Germany's biggest tax fraud scheme can continue – DW – 07/25/2025
So-called Cum-Cum and Cum-Ex tax schemes are still costing many European countries billions in lost revenue. In Germany, questions are mounting why the state is doing so little to stop them. The scandal regarding so-called Cum-Ex and Cum-Cum tax schemes first broke in 2001, and still to this very day exact figures about financial losses are hard to calculate. However, the sums must be enormous given the magnitude of the fraud and what's already been uncovered by the tax authorities of various countries. According to calculations by University of Mannheim in Germany, between 2000 and 2020 alone Germany lost nearly €29 billion ($34.1 billion) due to Cum-Cum fraud — the "little brother of Cum-Ex" as the university's top financial researcher Christoph Spengel once called it. Globally, the revenue loss is estimated at more than €140 billion. What's striking is that despite these tax fraud schemes being publicly known they seem to what you often hear from the authorities is that they are "not aware of that," says Anne Brorhilker. Brorhilker must know because she once was Germany's most prominent senior public prosecutor who brought numerous Cum-Ex cases to court. Speaking to DW, the tax lawyer by profession said she's still bound by a nondiclosure agreement with her former employee, the Cologne public prosecutor's office, and cannot discuss details of the agency's findings in public. But key whistleblowers, who are still working in the finance industry, had testified in court that these schemes are ongoing, and not only in Germany. Now working for nonprofit activist group Finanzwende (Financial Change), Brorhilker says Cum-Ex practices are relevant in Belgium, France, Italy, Austria, the Netherlands, Spain, and Luxembourg. University of Mannheim professor Christoph Spengel says Cum-Ex and Cum-Cum schemes are only possible because of a legal loophole, and understanding wherein the fraud lies is only possible when prosecutors look closer into how those deals are carried out. When German financial institutions — such as banks or investment funds — hold shares that pay dividends, they are required to pay capital gains tax. However, they can get that tax refunded, since they already pay corporate taxes. As foreign financial institutions holding German shares are not entitled to this refund, they've invented a workaround. Foreign institutions temporarily lend their German shares to a German financial institution shortly before the dividend payout deadline. In return, the foreign bank charges a securities lending fee. The German institution now claims the tax refund, then returns the shares to the foreign owner, and the resulting profit from the refund is split between the foreign and the domestic bank. The key legal loophole, Spengel told DW in an interview, is that these securities lending fees are not taxed in Germany or several other countries. In countries where such fees are taxed, Cum-Cum tax fraud doesn't exist. Spengel already warned about continuing Cum-Cum share deals back in 2016, but little seems to have changed. "A change in the law raised transaction costs, but the real legal loophole — and thus the potential for tax arbitrage — still exists," he said. Spengel has repeatedly called for a straightforward legal amendment to close the loophole, and argues the government could at least try to stop the fraud by reviewing refund claims more thoroughly before issuing payments. Cum-Cum deals are still not being effectively stopped, and past deals are rarely prosecuted, claims Anne Brorhilker. "For banks it's a safe bet, because Cum-Ex and Cum-Cum are part of what's called tech trades," she said, with profits being made "purely from tax effects" that are "completely immune to market fluctuations." "The only real risk is getting caught. And that risk stays low as long as authorities remain poorly equipped," she added, which was the case across Europe. According to Brorhilker, one problem is a lack of specialists who are capable of pursuing economic crimes and tax offenses. "There's a chronic shortage of staff in tax audits," she said, noting that in Germany prosecution is further complicated by a job rotation practice under which staff regularly switch departments or responsibilities. "In areas that require deep expertise, which can't be acquired quickly, this is totally counterproductive," said Brorhilker. Inadequate equippment is another weakness that shouldn't be "underestimated," especially since "the other side is very well equipped." This would include data exchange between authorities, as even "sending emails can be complicated" due to the fact that one agency prohibits encryption, while another mandates it. Video calls between departments, Brohrhilker said, are often impossible because each uses a different conference platform. As the fraudulent tax schemes don't stop at Germany's borders. international cooperation between tax authorities is "crucial" for Brorhilker, but often slow and mired in red tape. "In Europe's financial centers, there are especially strict confidentiality rules for lawyers, tax advisors, and auditors," she said, which were the result of "intense lobbying by the financial industry." The financial industry spends heavily to influence politics on both the level of the EU and national states. According to the Finanzwende nonprofit, it spends nearly €40 million annually on lobbying — more than the combined budgets of the auto and chemical industry groups spend on pushing their goals. Germany's parliament, the Bundestag, has currently registered 442 finance industry lobbyists which breaks down to nearly ten lobbyists for each of the 42 members of parliament's finance committee rersponsible for tax laws, financial market regulation, and banking supervision. Unfortunately, lobbyists are often successful, says Monika Heinold, who also works for Finanzwende. A former finance minister in the regional German state of Schleswig-Holstein, Heinold experienced an "intense time" in office from 2012 to 2024 — the period in which German prosecutors gradually exposed the extent of the Cum-Ex scandal. "I saw how lobbyists try to influence tax laws in their favor and block stricter regulations. Sadly, they're often heard," she recalled in an interview with DW. More recently, Finanzwende activists have started to criticize parliament's finance committee, because some of its lawmakers were found to be earning additional income from local savings banks or cooperative banks. "Several MPs hold seats on the boards of these institutions and receive four- to five-figure sums for doing so," Heinold told DW. And while the dubious, and sometimes openly fraudulant Cum-Cum deals continue to soak German state coffers, some brave prosecutors are at least trying to chase down the worst offenders and recover lost funds. Currently, there are 253 suspected cases under investigation in Germany involving a total of €7.3 billion.
Euronews
03-06-2025
- Business
- Euronews
Key figure in Germany's largest tax fraud case avoids jail time
Kai-Uwe Steck, a key figure in a massive tax fraud scheme that plagued Germany until 2012, has been convicted for his role in the scandal. Steck, who has cooperated with the authorities in recent years, received a suspended jail sentence of one year and 10 months, far less than the three years and eight months demanded by the prosecution. The former lawyer was also ordered to repay €24 million, €11 million of which has already been returned. As a "central figure" in the fraud scheme Steck contributed to losses of more than €428 million to the German tax authorities, according to the presiding judge in the case at Bonn Regional Court. The 53-year-old was a tax lawyer who worked alongside Hanno Berger, the so-called "mastermind" of the scandal that became known in Germany as "Cum-Ex". Like Berger, Steck was accused of designing and implementing complex share transactions that allowed multiple parties to claim illegitimate tax refunds on dividend payments. Despite the significant role he played in the scandal between 2007 and 2011, Steck's cooperation with authorities and his role as a whistleblower in the case meant he avoided a stricter sentence. His former colleague Berger was convicted to eight years in prison in 2022. The "Cum-Ex" scandal — considered to be the biggest tax fraud case in German history — prompted an avalanche of lawsuits and cast a shadow on politicians, including former German Chancellor Olaf Scholz. Scholz was accused of protecting a local bank — during his time as the mayor of Hamburg — that was found guilty of participating in the scheme. The former German leader has always denied any wrongdoing, with prosecutors deciding to drop the case against him due to insufficient evidence. German authorities have so far recovered approximately €3.4 billion through several convictions and court cases. However, tens of billions of euros are still missing. Other investigations into the remaining lost funds are ongoing. The British government has threatened legal action against Russian oligarch Roman Abramovich to ensure that the £2.5 billion (€2.97bn) proceeds from his sale of Chelsea Football Club reach Ukrainian victims of Russia's all-out war, now in its fourth year. 'The government is determined to see the proceeds from the sale of Chelsea Football Club reach humanitarian causes in Ukraine, following Russia's illegal full-scale invasion," Chancellor Rachel Reeves and Foreign Secretary David Lammy said in a joint statement on Tuesday. 'We are deeply frustrated that it has not been possible to reach an agreement on this with Mr Abramovich so far,' they added. 'While the door for negotiations will remain open, we are fully prepared to pursue this through the courts if required, to ensure people suffering in Ukraine can benefit from these proceeds as soon as possible.' Abramovich, who has denied allegations that he is a close associate of Russian President Vladimir Putin, was sanctioned in the wake of Moscow's full-scale invasion of Ukraine in February 2022. The oil and gas tycoon sold Chelsea in May 2022 to a consortium led by US investor Todd Boehly and Clearlake Capital, after the British government allowed him to part with the club as long as he did not personally benefit from the deal. The £2.5bn net proceeds have been frozen ever since, but still legally belong to Abramovich. They cannot be moved without a licence from the UK Office of Financial Sanctions Implementation. Three years after Abramovich sold the London-based club, the UK government has threatened to sue him amid an ongoing dispute about how the money should be spent. While the British government insists that all the money must go to humanitarian causes in Ukraine, Abramovich has said it should be 'for the benefit of all victims of the war in Ukraine', including people in Russia. Since Putin's full-scale invasion of Ukraine, the UK has been one of Kyiv's closest allies. In January, London pledged to give it an extra £4.5bn (€5.34bn) in military support.
Yahoo
03-06-2025
- Business
- Yahoo
Key Cum-Ex witness given suspended sentence by German court
One of the key players in the so-called "Cum-Ex" scandal - Germany's biggest tax-fraud case - was convicted on Tuesday. Lawyer Kai-Uwe Steck was sentenced by the Bonn Regional Court to one year and 10 months' imprisonment, suspended on probation, for five counts of serious tax fraud. The court also ordered the confiscation of around €24 million (about $27 million). "Through his actions, the defendant contributed to tax losses of almost half a billion euros," said presiding judge Sebastian Hausen. The judge said Steck was "a central figure" in the tax scandal. Steck was formerly a partner in the law firm of Hanno Berger, described as the architect of the Cum-Ex scandal. While Berger remained convinced of the legality of his actions until the end, Steck appeared remorseful, cooperated with the public prosecutor's office, and acted as a key witness. The judge said that Steck's role as a key witness had a mitigating effect on the ruling. Berger was sentenced to eight years in jail by the Bonn Regional Court in 2022. The Cum-Ex scandal involved financial players shifting shares with (cum in Latin) and without (ex) dividend rights back and forth in order to obtain refunds for taxes that had not been paid. The scam was at its peak between 2006 and 2011. According to estimates, the tax authorities were defrauded of tens of billions of euros.
Bloomberg
03-06-2025
- Business
- Bloomberg
Star Tax Scandal Witness Kai-Uwe Steck Convicted in Bonn Trial
Kai-Uwe Steck, a star witness who exposed the inner workings of the Cum-Ex scandal, was convicted and sentenced to a suspended jail term of 1 year and 10 months for his own role in the tax scheme. Steck was guilty of involvement involving over €428 million ($488 million) in losses to the German tax authorities, the Bonn Regional Court ruled on Tuesday.
Bloomberg
21-05-2025
- Business
- Bloomberg
Hedge Fund Founder's German Tax Fraud Money Laundering Charges Dropped
German money laundering charges against hedge fund founder Sanjay Shah in a €330 million ($374 million) case were dropped after his conviction in a similar Danish prosecution. A Hamburg court agreed to throw out the case with a view to the Danish proceedings, Shah's German lawyer Björn Gercke said in an interview. Shah is also facing a fresh set of separate Cum-Ex charges from Cologne prosecutors which aren't affected by the decision.
