The investigations concern a dividend arbitrage strategy where shareholders transferred stock for a short period to investors based abroad to avoid a dividend tax.

(Updates with BNP Paribas comment.)

A number of French banks including Societe Generale and BNP Paribas could be fined more than €1 billion ($1.1 billion) amid an investigation into tax fraud and money laundering related to dividend payments, Bloomberg and other media reports said yesterday. 

Quoting the prosecutor’s office in Paris, reports said HSBC, Natixis and BNP’s Exane unit are also part of the investigation. 

The probe is being conducted by France’s Parquet National Financier, the fraud office. Preliminary investigations related to the raids were opened in December 2021, the prosecutor was quoted as having said. 

"A search by the French National Financial Prosecutor's Office in several banking institutions is being conducted," a spokesperson for BNP Paribas told WealthBriefing today. "BNP Paribas cannot comment further on an ongoing investigation," the bank added.

Societe Generale confirmed to this news service that has been one of the five financial institutions concerned by the searches made yesterday by the French Parquet National Financier in relation to the "Cum Cum" investigations. The bank made no further comment.

The investigations concern a dividend arbitrage strategy known as Cum-Cum where shareholders transferred stock for a short period to investors based abroad to avoid a dividend tax. Investors held the shares during the period when dividends were paid out and either weren’t taxed or taxes were refunded. They then sold the securities back to the original owner and the amount saved was split between the parties.

The news comes at a difficult time for Europe’s banking industry following the “shotgun wedding” between UBS and Credit Suisse more than a week ago, as well as concerns about the financial strength of Deutsche Bank, Germany’s largest lender.