Citi’s financial supermaket had an irresistable product: its Global Markets unit offered “total return swaps,” which allowed foreign clients to get tax free dividends from U.S. securities.
Now, Citi is being fined by the SEC because of it.
FT: Citigroup is to be fined over derivatives transactions that were partly designed to help foreign clients avoid taxes on dividends in a move that could herald a wider crackdown against Wall Street banks that used similar strategies.
The $600,000 fine by the Financial Industry Regulatory Authority, which oversees broker-dealers, comes after the US authorities hardened their stance on offshore tax operations with a series of actions over the past few months.
As this 2007 Citi brochure listing the swaps notes, “Capital Markets at Citi Private Bank offers clients access to risk-management solutions, strategic investment opportunities and tactical trading ideas across various asset classes.” You bet!
This isn’t the first such fine. Citi already paid $24 million to the IRS in 2006 for withholding dividend taxes on a limited set of swap transactions.
The IRS, apprently, is looking into the same issue at other banks.
Read the whole thing here.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.