With Cum-Ex investigations in a number of countries gathering momentum, an increasing number of individuals and financial institutions are likely to come under scrutiny. Their response to this will be vitally important.
Rahman Ravelli represents organisations, their officers and personnel who are affected by Cum-Ex investigations. We were one of the first law firms to identify Cum-Ex as a major issue, have hands-on experience of Cum-Ex investigations and recognise the implications for the financial services industry and those working within it.
We also have in-depth expertise and an enviable track record when it comes to managing and defending investigations that cross borders and involve numerous investigating agencies.
Cum-Ex is a multinational tax fraud probe focused on a large volume of transactions before 2012 that exploited a loophole in dividend payments. Shares were traded in a way that disguised the identity of their owner so that more than one party could claim tax rebates on capital gains tax, even though that tax had only been paid once at most.
This created huge profits for those involved but deprived countries’ treasuries of tens of billions of euros in tax revenue. The investigations into this that are either ongoing or planned could involve many that worked in banking, investment or asset management at the time.
As the details emerge regarding the nature and scale of investigations taking place in Europe and beyond, it is clear that any Institution or individual who has been involved in Cum-Ex trading, directly or indirectly, may find themselves under scrutiny.
Countries may hold differing views regarding the level of Cum-Ex involvement required for an organisation or person to be investigated, but the reach of their investigative bodies extends far beyond their own borders. Given the complexity of the trading and the range of legal issues involved, it is imperative that those who are investigated are represented by experts in this field - who are adept at dealing with the wide array of challenges that arise in investigations involving multiple jurisdictions.
Anybody that has not yet received formal notice of investigation but has concerns relating to their involvement with Cum-Ex would be advised to seek legal advice as early as possible. In all such cases, preparation is key.
The nature of Cum-Ex and the trading it involved mean that many will inevitably come under investigation. While not exhaustive, the list below gives an idea of the positions and roles that may come under scrutiny from investigators because of their likely involvement in Cum-Ex:
The authorities are currently casting their nets far and wide to determine exactly who is worthy of investigation. It will be advantageous for those corporates and individuals who may have had exposure to Cum-Ex to have taken advice on all the relevant legal issues at the earliest possible opportunity.
A specially-tailored defence strategy will be required as soon as the authorities look set to investigate a corporate body and /or its officers.
While we cover the major aspects of Cum-Ex in our detailed guide (see below), it is worth emphasising that most transactions at the time were considered by many to be sensible, typical market behaviour. But with investigations gaining pace and, in some cases, involving more than one country, those coming under scrutiny may have to contend with a fresh retrospective analysis of previous actions - which may take a different view - together with added issues such as extradition and mutual legal assistance between countries.
This all means that those facing investigation need to get their house in order immediately and seek the best available legal advice. We are known for providing a rapid response to existing or potential clients, whatever the circumstances.
To learn more about the issues involved in Cum-Ex and meet our specialist team, please read our detailed guide for financial institutions.
Cum-Ex refers to a form of dividend arbitrage trading strategy that exploits ambiguities in withholding tax rules across European countries to generate multiple refunds on the same underlying dividend payment. By exploiting loopholes in dividend taxation, multiple parties claim tax refunds on capital gains tax that was only paid once. The scheme is estimated to have cost European governments tens of billions of euros in lost tax revenues.
Courts in multiple jurisdictions have found Cum-Ex trading to be illegal. The German Federal Court of Justice ruled in 2021 that Cum-Ex transactions constituted tax evasion. Danish courts have reached similar conclusions. In Germany, the offence is tax fraud, which carries a maximum sentence of 10 years for serious cases. The UK's HMRC, Financial Conduct Authority, and Serious Fraud Office have also investigated UK participants.
Cum-Ex investigations are being conducted across Europe. In Germany, the Cologne public prosecution office has led a major multi-year investigation resulting in numerous prosecutions and asset seizures. In Denmark, the Special Crime Unit (SCU) has pursued individuals and institutions that participated in fraudulent tax reclaim schemes. In the UK, the Serious Fraud Office investigated several individuals and the FCA has taken action against regulated firms. International asset recovery actions have targeted banks, custodians, and individual traders across multiple jurisdictions.
Individuals and institutions at risk include those who participated directly in Cum-Ex trading — including traders, fund managers, and tax advisors — as well as the banks and prime brokers that facilitated the transactions. Legal and accounting advisors who provided opinions supporting the legality of the structures may also face scrutiny. More broadly, any individual or entity that received a dividend withholding tax refund in connection with transactions structured to generate double or multiple reclaims may be exposed to claims for repayment and, in serious cases, criminal prosecution.
Consequences can include criminal prosecution for tax evasion, civil recovery proceedings for repayment of fraudulent tax refunds with interest and penalties, asset freezing and confiscation, regulatory sanctions for those in authorised financial services roles, and significant reputational damage. In Germany, sentences of up to 15 years have been imposed in serious cases. Financial institutions have reached settlements running to hundreds of millions of euros.
Cum-Cum trading also exploited dividend withholding tax rules but by a different mechanism — temporarily lending or transferring shares to an entity entitled to claim a higher withholding tax credit than the actual beneficial owner, typically around the dividend record date. Unlike Cum-Ex, which generated multiple reclaims on a single dividend, Cum-Cum typically resulted in a single reclaim but by an entity that was not the true economic owner of the dividend income. Authorities across Europe have also pursued Cum-Cum cases, though the legal characterisation is in some respects more complex.
Yes. Tax authorities across Europe have actively pursued recovery of refunds obtained through Cum-Ex transactions. Germany's tax authorities have sought repayment from individuals and institutions. Denmark commenced civil recovery proceedings and extradition requests against individuals who received fraudulent refunds through schemes run by Solo Capital and associated entities. Courts have upheld the right to recover these sums with interest, in some cases going back many years.
Cum-Ex investigations are highly complex, multi-jurisdictional proceedings involving specialist areas of tax law, financial regulation, and criminal law across several European legal systems. The evidence base is typically enormous and technically demanding. Strategic decisions about cooperation, disclosure, and settlement must be made with full knowledge of the risks and options in each relevant jurisdiction. Specialist legal representation is essential to protect your interests, manage parallel proceedings, and achieve the best possible outcome.
