Bank of America (BAC) used its government-backed U.S. banking unit for years to finance controversial trades that helped clients avoid taxes, the Wall Street Journal reported, citing internal documents and people familiar with the matter.
The bank last year started phasing out the practice of using funds from the U.S. unit to finance transactions by its European investment-banking arm that, among other things, helped hedge funds avoid taxes on stock dividends, the Journal said on Wednesday.
“BANA (Bank of America National Association) no longer finances dividend arbitrage activity,” Bank of America said in a statement to Reuters.
The practice dates back to at least 2011 when senior Bank of America investment-bank officials in London started pushing subordinates to adopt the policy to take advantage of the lower funding costs enjoyed by the unit, the Journal said.