Paris: Five significant banks' Paris offices were searched on Tuesday as part of an investigation into possible tax fraud and money laundering involving dividend payments, according to several media sources.

According to Le Monde, which broke the news first, the raids in question occurred at the offices of Societe Generale, BNP Paribas, Exane, and Natixis as well as those of British banking behemoth HSBC.

The searches were confirmed by Societe Generale to Reuters, but the company chose not to elaborate. Regarding the reports, the other four banks made no remarks.

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The raids were later confirmed by France's National Financial Prosecutor's Office (PNF), which also said the investigation was related to the so-called "cum-cum" dividend strategy, which is a scheme whereby a bank temporarily transfers shares of a stock to a foreign investor ahead of a dividend payout to avoid paying the dividend tax.

Either there is no tax on the dividends or the tax is returned to the foreign investor. The shares are then given back to the original owner, and the two parties divide the money that was saved from being taxed had the securities not been returned to the original owner.

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PNF reported that 16 investigating judges and more than 150 agents are working on the ongoing investigation, which was first launched in 2021. The five banks could be subject to combined fines of more than €1 billion ($1.1 billion) as a result of the investigation, according to a Bloomberg report.

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The searches came as yet another blow to the global banking sector, which is still reeling from bank failures in the US and the rival UBS's rescue takeover of Credit Suisse in Switzerland following government-brokered rescue negotiations.