Bundesrat Approves Stronger Asset Recovery Measures Targeting Cum-Ex Tax Schemes
Bundesrat approves a bill expanding prosecutors’ powers to seize proceeds from organised tax evasion, focusing on Cum-Ex cases and speeding recovery of illicit assets.
Bundesrat backs tougher asset recovery for Cum-Ex cases
The Bundesrat on Friday approved a legislative proposal that gives public prosecutors broader powers to pursue assets from organised tax evasion, including Cum-Ex share trades. The change would allow swifter seizure of ill-gotten gains and enable retroactive asset recovery in ongoing cases and in tax evasions that have not yet become time-barred. The measure must still be ratified by the Bundestag to become law.
The reform aims to close gaps that have hindered prosecutors from confiscating profits generated through sophisticated dividend-stripping schemes. Officials said the amendment is designed to prevent long delays that previously allowed perpetrators to shield or dissipate assets before a confiscation order could be obtained.
Hessian initiative cites billions lost to Cum-Ex
Hesse’s justice minister, Christian Heinz (CDU), who introduced the reform in the Länder chamber, framed the change as a necessary response to large-scale fiscal damage. He reiterated estimates that Cum-Ex abuses cost Germany between ten and twelve billion euros, arguing that decisive legal tools are required to recover public funds. Heinz thanked members of the Bundestag’s legal committee for earlier approval, underlining political consensus for tougher measures.
Proponents presented the amendment as both a punitive and preventive step: by making seizure more practicable, lawmakers expect to reduce the attractiveness of the Cum-Ex business model and deter future organised tax fraud.
Short sellers and banks fall within new enforcement scope
A central element of the proposal is expanded authority to pursue market participants who facilitated Cum-Ex trades, including short sellers and intermediary banks. Investigators contend that short sellers played an integral role in the transaction chains by passing on shares around dividend record dates without ever owning them. That technique, used frequently between 2006 and 2011 and often routed through foreign entities, was central to generating duplicate tax refund claims.
Lawmakers and prosecutors argue the broader scope will help in identifying and targeting the network of actors who enabled the scheme, not only the parties who directly extracted refunds from the treasury.
Prosecutors report larger potential recoveries than before
Hessian officials released updated estimates indicating that recoverable sums from certain short-seller-linked cases could be substantially higher than earlier assessed. Justice Minister Heinz said investigators now estimate potential recoveries in excess of 100 million euros for those particular proceedings, compared with prior figures in the order of 50 million euros. The increased estimate reflects a re-evaluation of banks and trading chains in light of the proposed legal changes.
The Frankfurt public prosecutor’s office, which leads many Cum-Ex and Cum-Cum investigations, confirmed that the earlier assessments had relied on consultations with a limited set of banks. It said the revised estimate includes a broader set of financial institutions and does not represent the opening of new cases but a recalculation of potential asset recovery in existing matters.
Former lead investigator and advocates welcome the legal fix
Anne Brorhilker, the former chief Cum-Ex investigator at the Cologne public prosecutor’s office and now a board member of the citizen group Finanzwende, described the reform as a corrective to a glaring gap in the criminal code. She argued that enabling effective confiscation of illicit profits will blunt the incentives driving the most lucrative variants of tax fraud. Advocates for financial accountability said the change could make it far less profitable for major players to engineer such schemes.
Commentators stressed that legal clarity on asset recovery is essential for the long-term enforcement strategy, noting that improved tools for seizing proceeds can complement criminal prosecutions and civil recovery actions.
Parliamentary timetable and legal safeguards ahead
With Bundesrat approval completed, the bill moves to the Bundestag for final deliberation and vote before it can be enacted. The reform includes transitional provisions intended to preserve confiscation opportunities where statutory limitation periods might otherwise frustrate recovery. Supporters said the transitional rules are critical to ensuring that earlier investigative delays do not nullify the state’s ability to claim back ill-gotten funds.
Lawmakers and prosecutors will need to balance the stronger recovery powers with procedural safeguards to protect legitimate property rights and ensure proportionality in enforcement. Legal experts expect debate in the Bundestag to focus on those boundaries as well as on technical aspects of retroactivity and case handling.
The Bundesrat’s decision marks a notable step toward tightening enforcement against organised dividend-stripping schemes and related market abuses, with proponents arguing the change is necessary to recover public funds and reduce the commercial viability of Cum-Ex operations.
