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A large-scale criminal investigation into tax fraud in Germany has spread to BlackRock. The group's offices in Munich were searched by prosecutors on Tuesday.
A spokesman for BlackRock, the world's largest fund manager, said the raid had taken place, adding that the group "cooperated fully with an ongoing investigation into cum ex transactions from 2007 to 2011".
In a statement released on Wednesday, the Cologne prosecutor's office, which runs the investigation, confirmed Tuesday's raid.
The German tabloid Bild first reported on the raid.
For years, investors have resorted to so-called "cum-ex" transactions to take advantage of a legal loophole in Germany's tax code that allowed multiple parties to claim a refund of taxes paid on dividends in shares. The prosecutors of Cologne, Frankfurt and Munich spent several years examining such agreements.
A person familiar with the details of the investigation told the Financial Times that BlackRock has not been accused of tax evasion and that it is not in itself the target of any kind. a criminal investigation.
The individual said the investigators were looking for information about BlackRock's stock lending activities between 2007 and 2011, which may have allowed for cumulative transactions with other parties.
The source said BlackRock did not lend directly to traders, but to big banks, which then passed on to hedge funds and others.
The growth of index trackers and exchange-traded funds over the last decade has provided BlackRock with a broad inventory of loanable assets, enabling it to become the most influential player in the global securities lending market that has generated $ 9.2 billion in revenue last year.
BlackRock generated nearly $ 600 million in securities lending revenue last year.
Investors in the group's NYSE-listed European funds retain 62.5% of securities lending, while a BlackRock subsidiary acting as agent retains 37.5%.
Tuesday's raid comes at a politically delicate moment. Friedrich Merz, president of BlackRock, is a candidate for the succession of German Chancellor Angela Merkel at the head of the Christian Democratic Union in December. Merz joined BlackRock in 2016 and denounced cum-ex transactions.
In October, the German Finance Ministry said it was aware of 418 cases of alleged cumulative tax evasion with a combined value of 5.7 billion euros, adding that any estimate of the total amount of damage caused was "speculation" because the investigations were still ongoing.
In Frankfurt earlier this year, five former employees of HypoVereinsbank, the German subsidiary of UniCredit in Italy, and a lawyer were accused of tax fraud for an amount of 100 million euros. HypoVereinsbank paid a total of € 19.8 million in fines between 2015 and 2017. In its annual report, it was stated that all criminal investigations relating to cum-ex transactions had been settled.
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