Compliance
London's Next Potential "New Libor" Tax Evasion Scandal

Sharp practices likened to Libor-fiddling conduct a few years ago have come to light, and could affect London as well as other financial capitals.
(Updates article with further commentary.)
London could be soon hit by the after-effects of an alleged tax
evasion scheme possibly costing European public coffers as much
as €55 billion ($61 billion). The saga has been likened to the
inter-bank interest rate rigging scandals that broke out about
half a decade ago.
The Times (of London) reported that Martin Shields and
Nicholas Diable, two UK investment bankers, are on trial in
Germany accused of helping to facilitate the so-called cum-ex
trading scheme, which exploited a tax loophole until it was
closed in 2012.
The German authorities are thought to be investigating about 100
domestic and foreign banks on suspicion of tax evasion arising
out of the practice, the newspaper said. Several financial
institutions have made regulatory settlements with the
authorities and a partner in the Frankfurt office of the
Anglo-German law firm Freshfields Bruckhaus Deringer was arrested
last week, it continued.
"This has already been likened to the next LIBOR scandal. If
the SFO wants to sink its teeth into this then it must surely
keep in mind that only five convictions in relation to its Libor
investigation were eventually secured,” Bambos Tsiattalou,
founding partner at specialist white-collar crime firm Stokoe
Partnership Solicitors, told this publication.
The old London Interbank Offered Rate, or LIBOR, has been
replaced as a benchmark reference rate after widespread claims
that it was rigged, triggering a mass of fines on banks in a
number of jurisdictions. Such benchmarks are used to set prices
of mortgages, savings products and a range of financial
instruments.
"This is precisely the sort of overseas tax-related criminal offence that falls within the scope of the Criminal Finance Act 2017, and represents a timely reminder of the potential reach of what is still relatively new legislation,” David Klass, partner, at law firm Hunton Andrews Kurth, said in a note.
“A further noteworthy feature of this story is that it
illustrates the heightened care advisors need to take when it
comes to overseas tax schemes, including in situations where the
consensus may be that a scheme falls on the right side of the
(sometimes narrow) line between avoidance and evasion. And
whereas UK-based advisors may feel a certain level of confidence
in assessing the likelihood of a challenge by HMRC and / or the
likely stance of an English court, the reaction of overseas tax
authorities and courts may be harder for the UK advisor to
predict,” he said.