Citigroup (NYSE:C) will pay $600,000 to the Financial Industry Regulatory Authority [FINRA] over derivatives transactions that helped foreign clients evade U.S. taxes on dividends, Bloomberg reports, citing a source familiar with the matter.
Investigators at FINRA, who oversee almost 4,800 U.S. brokers dealers, found that Citigroup Global Markets assisted their clients to escape paying billions of dollars of US taxes. The scheme is alleged to have involved a system where an overseas client typically sold U.S. shares to Citigroup before dividends were paid, then later received an amount similar to the dividend through a derivative contract. Such swaps helped Citi’s foreign clients receive the full value of dividends from US securities without paying the withholding tax.
The development comes as governments around the world crack down on tax evasion. Earlier this year UBS AG (NYSE:UBS) agreed to pay 780 US million dollars to settle criminal claims that it helped US citizens evade taxes.
Citigroup and Finra spokesman, notes Bloomberg, declined to comment.