The involvement of Irish entities in a massive European tax fraud scheme raised a range of "issues of concern" for the Central Bank, the regulator has told an Oireachtas committee.
The scheme, known as cum-ex, involved a network of traders, hedge funds, asset managers and banks claiming multiple refunds on dividend withholding tax that was only paid once, or not at all, through a complex series of trades.
A recent investigation by The Irish Times, in partnership with German newsroom Correctiv and 15 other media organisations, examined a large leak of documents related to the scheme, the Cum-ex Files.
While Irish tax authorities were not defrauded, Irish investment funds were used as vehicles to carry out trades targeting larger EU countries, such as Germany.
Mairéad Farrell TD, Sinn Féin public expenditure spokeswoman, raised the matter with Central Bank officials at an Oireachtas finance committee meeting.
The scheme was not a “victimless crime” and involved siphoning money from tax authorities, “which means ordinary people suffer as a result,” she said.
“This is a really bad mark on this State, the fact we are in any way linked to this, and it was fraud of billions,” she said.
Ms Farrell called for a “clear” commitment from the Central Bank that it was going to examine and pursue the matter.
Gerry Cross, Central Bank director of financial regulation, said the cum-ex scheme "involves a whole potential range of issues of concern" for the regulator.
Concerns included whether firms or individuals were in compliance with regulations, as well as wider questions “about the culture and behaviour within a firm,” he told the committee.
The scheme, since deemed illegal by Germany’s Federal Court of Justice, worked by buying and selling huge volumes of shares in a co-ordinated circuit, at key times around the date companies paid out dividends.
The aim was to create confusion as to who was owed a refund on dividend withholding tax, allowing it to be claimed multiple times, costing European tax authorities billions of euro over two decades.
A number of Irish financial institutions, including Bank of Ireland Securities Services and the Dublin offices of two international banks, Investec and BNP Paribas, were used by those involved in carrying out the trades.
Mr Cross said the Central Bank “absolutely” had a mandate to examine the issue, where it involved regulated financial services firms.
“This is not a victimless issue, this is not something which you say ‘oh well it’s part of business’, not at all,” he said.
“This type of activity raises questions around regulatory compliance, it raises questions around culture, conduct and behaviour, it raises questions around the fitness and probity of the people that are doing it,” Mr Cross said.
“In our supervision we need to engage with all of the facts as we find them, to understand what happened, what didn’t happen,” he said.
The Central Bank official said he could not comment on individual cases.
“This is not something that is somehow not in our mandate or that we would not be worried about, not at all,” he said.
Investec has said the matter had been “discussed with all relevant regulatory authorities,” and it continued to co-operate and assist with any queries.
Similarly, BNP Paribas said it continued to “fully co-operate with the German authorities,” in relation to “information relative to old operations undertaken by certain clients”.
Bank of Ireland has said it sold the subsidiary involved in 2011, and had not been notified the former entity was subject to any investigation.
