Danish prosecutors have confirmed that they have charged two British nationals with unlawfully obtaining more than $1.5 billion through Cum-Ex trading.
Denmark’s acting state prosecutor for serious economic and international crime, Per Fiig, said the two defendants “committed cynical and meticulously planned fraud” and described the case as “extremely serious”. The defendants both face a maximum penalty of up to 12 years imprisonment.
Cum-Ex was a practice that involved exploiting a loophole on dividend payments to enable a number of parties to claim the same tax refund. Banks and stockbrokers rapidly traded shares in a way that meant they could hide the identity of the actual owner. This tactic enabled both parties to claim tax rebates on capital gains tax. Swift trading between various parties could give the appearance of numerous owners, creating large profits.
One of the British nationals charged, Dubai-based Sanjay Shah, has denied any wrongdoing. In March last year, two British bankers were handed suspended jail terms for tax evasion by a German court – with one ordered to pay a €14m fine – for their involvement in Cum-Ex. These were the first criminal convictions relating to Cum-Ex.
Since that case, an increasing number of investigations have been gaining momentum, with many involving two or more countries.
The charges being brought in Denmark are the latest sign that investigations are gathering pace. At this stage there is a lot to be said for being pro-active. Any organisation that may be under scrutiny – or feels it may be investigated in the future - has to have a strategy in place to ensure that it understands the extent of the problem and the legal avenues that are open to it.