Citigroup is being investigated by German tax authorities over an equity trading strategy known as "cum-ex" or "dividend stripping," the U.S. bank said on Tuesday.

Dividend stripping involves buying a stock just before its dividend rights expire, then selling it, taking advantage of a now-closed legal loophole that allowed both buyer and seller to claim tax credits.

"Citi's Germany unit has never been trader, broker or structurer of cum ex trades," a Citi spokesman in Frankfurt said. He said the bank did act as a settlement agent for clients' trades, but only supplied its infrastructure had no knowledge of the actual trades being carried out.

German daily Handelsblatt reported on Tuesday that the Frankfurt tax office had asked for 706 million euros ($791.07 million) in back taxes from Citi.

The Citi spokesman said the financial authorities had not asked the bank for the back taxes.

A number of large banks have already paid hundreds of millions of euros in back taxes and tens of millions to settle disputes with German authorities.

Citigroup and several of its subsidiaries are on a list of about 130 banks which have allegedly been involved in cum-ex trades.

German financial watchdog Bafin is surveying the country's 1,800 lenders to see if they are at risk from potential demands for back taxes from "cum-ex" trades.

Bafin last month closed the German operations of Canada's Maple Financial on impending financial over-indebtedness related to tax evasion investigations.