top of page

German financial watchdog BaFin keeps crucial report on CumEx fraud by Fortis and WestLB secret for 14 years

Eric Smit & Siem Eikelenboom

4/26/2021

The German financial regulator BaFin has been withholding a report from a whistleblower about large-scale CumEx fraud by Amsterdam-based Fortis GSLA since 2007. This emerges from research by the Dutch investigative journalism platform Follow the Money together with the Westdeutscher Rundfunk (WDR) and the Süddeutsche Zeitung. The total damages to the German state due to CumEX fraud is estimated to be more than 10 billion euros.

In spring 2007, an employee of the German regulator Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) received an e-mail with potentially explosive content. The message comes from a whistleblower and refers to a huge transaction by the state-owned bank WestLB one month earlier.

Several German newspapers and even The Wall Street Journal had reported on that transaction: the bank had suddenly acquired a 14 per cent stake in the DaimlerChrysler automobile group. That is twice as much as the Kuwait Investment Authority - until then the largest shareholder in DaimlerChrysler - holds. The purchase of 144 million shares has a value of nine billion euros.

Although WestLB is one of the largest regional banks in Germany, its position in the shares is very surprising. The bank explains that the position will only be of short duration, but then again: what is a regional bank doing with it?

The whistleblower is convinced that something is going on that cannot bear the light of day. He therefore turns to Germany's financial watchdog with confidential information.

The whistleblower sends along a five-page Incident Analysis Report (the "IA Report") from the Belgian-Dutch bank and insurer Fortis. Two years earlier, in 2005, the Fortis Global Securities Lending & Arbitrage (GSLA) department, located at the Rokin in Amsterdam, reported a form of dividend tax fraud that harmed the treasuries of various countries on a large scale: CumEx. The IA Report describes this fraud in detail.

The fact that the German tax authorities have been cheated out of such sums for years is shocking information. The fact that the state bank WestLB in North Rhine-Westphalia is directly involved via Amsterdam traders makes it even worse.

Portigon, the legal successor to WestLB, had to face the first consequences from the CumEx file in 2020: it has to pay back EUR 302.5 million to the tax authorities for the years 2006 and 2007 in connection with CumEx. In the 2019 annual report, Portigon mentions that another 150 million may possibly be added for the year 2005, but that it considers this chance to be small, as the limitation period would have expired. However, a recent ruling by the Federal Constitutional Court in Karlsruhe makes it possible to recover money acquired from criminal activities even after the criminal period has expired. This ruling could have major consequences, not only for Portigon, but also for ABN Amro, the legal successor to the now infamous Fortis GSLA. Read further on www.ftm.nl.

bottom of page