Deutsche Bank said its offices in Frankfurt were searched on Tuesday by German prosecutors in connection with a criminal tax-fraud probe.

According to people familiar with the matter, the German prosecutors are focused on a type of dividend-arbitrage strategy known as “cum/ex” which was undertaken using dividend-paying German shares.

Deutsche Bank

Investigators probe serious tax fraud

A Deutsche Bank spokesman, Christian Streckert, said prosecutors in Frankfurt conducted the raid, though no bank employee was accused of wrongdoing. A spokesman for the Frankfurt general prosecutor’s office, Alexander Badle, confirmed that raids were conducted.

However, prosecutors haven’t brought forward any allegations against the bank’s current staff, though a person familiar with the investigation said some current or former Deutsche Bank staff were drawing prosecutors’ interest. Government officials reportedly remained throughout the morning at Deutsche Bank’s Frankfurt offices collecting documents and other information in connection with a broad probe into serious tax fraud that involves a number of firms and individuals.

Interestingly, the raid came two days after the bank said its co-chief executives would resign, though the timing of the raid appeared to have been unrelated to the management change.

According to people close to Tuesday’s investigation, prosecutors were examining what role Deutsche Bank and its clients played in controversial “dividend arbitrage” trades that have been used by a wide range of financial firms and investors to trim taxes on stock dividends by taking advantage of loopholes in European tax law.

Deutsche Bank shares fell as much as 3.8% in Frankfurt and was down 3% at 27.75 euros at 4:45 p.m, paring gains this year to about 11%.

Deutsche Bank juggling a range of investigations

Germany’s biggest bank is juggling a range of ongoing investigations into questionable behavior. Authorities have repeatedly raided its offices in recent years, in connection with investigations linked to the collapse of the Kirch media empire and a tax fraud case related to the trading of carbon dioxide emission rights. Citing a separate source familiar with the developments, Reuters reports that the latest investigation was linked to German private bank Sal. Oppenheim, which the German lender bought in 2010. However, Deutsche Bank said the raid was not related to Sal. Oppenheim.

In past years, investment firms and banks used the carefully coordinated German cum/ex trades to claim rebates on withholding tax-payments despite not having actually paid such taxes in the first place. Following tax authorities plugging loopholes and exchange officials fine-tuning how they handled certain transactions, the market for German cum/ex trades largely died off in 2011.

Germany’s biggest bank was among a number of active cum/ex market participants for several years and employed some traders who went on to start funds specializing in the trades. Other European and global banks were also active in German cum/ex trades, aided by close relationships with wealthy European investors and fund managers geographically located to take advantage of quirks in tax rules.

Though dividend arbitrage itself isn’t illegal, US authorities have been probing some of the strategies to ascertain whether trades were conducted at an arm’s length basis and whether the prices of securities reflected true market levels.