On 12 May, the European Banking Authority published a news release and report following an investigation which looked into the actions of prudential and AML/CFT supervisors in dealing with such schemes, saying that its inquiry had shown that national authorities do not share the same understanding of dividend arbitrage trading schemes, due to differences in Member States’ domestic tax law.  The inquiry concluded that facilitating, or handling proceeds from tax crimes undermines the integrity of the EU’s financial system and, therefore, sets out a number of expectations of credit institutions and national authorities under the current regulatory framework.  It also sets out a 10-point action plan for 2020/21 to enhance the future framework of prudential and anti-money laundering requirements covering such schemes.

The article explains that dividend arbitrage trading schemes involve the strategic placement of shares in different tax jurisdictions with a view to minimising withholding taxes, i.e. a levy deducted at source from income, for example dividends, which is paid by the company that generates the income or dividends. Where a withholding tax is imposed on dividends generated in one tax jurisdiction, shareholders in another tax jurisdiction can claim back a part of this tax if both jurisdictions have concluded a double taxation agreement.  It says that multiple claims of the same withholding tax could amount to a tax crime. This gives rise to questions about the role of the financial institutions that were involved in facilitating those transactions, and in handling the proceeds from such transactions both from a governance and internal control perspective and from an AML perspective.


The report is at –


The Action Plan is at –





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Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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