HSBC To Pay Fine In France Over Tax Fraud Claim

British-based bank HSBC will appear in a Paris court this week to finalise a multimillion-euro fine over alleged dividend tax fraud, a judicial source told AFP on Tuesday.

The case is part of investigations sparked by a massive fraud carried out for years in several European countries, revealed by a consortium of European news outlets in 2018.

Several banks were raided after the allegations emerged, and some have already agreed to fines to avoid further prosecution.

“A hearing to validate the deal concerning HSBC in the fiscal domain will take place Thursday at 10:00 am,” the legal source said, without further details.

In December, Bloomberg News reported the fine would be 300 million euros ($350 million) to close the investigation, which the Paris financial prosecutor’s office has not confirmed.

Contacted by AFP, HSBC declined to comment but referred to a note from its third-quarter earnings statement in October, which cited a 300 million euro provision for an inquiry “relating to dividend withholdings of certain legacy trading activities”.

The financial prosecutor’s office launched in December 2021 inquiries into six large banks, which a source close to the case confirmed as HSBC, a Credit Agricole unit Cacib, BNP Paribas and its Exane unit, Societe Generale and Natixis.

In September, Credit Agricole’s Cacib was the first to accept a deal with French prosecutors, agreeing to pay 88 million euros.

The fraud is known as “CumCum” and involves an investor selling shares to another party just before dividend payment day, to avoid paying taxes, and then immediately repurchasing the shares, with both parties sharing the illicit proceeds.

It was exposed alongside a similar “Cum-ex” dividend tax fraud published by the media consortium in 2018.

The amounts involved in the “Cum-ex” frauds alone are suspected to have reached 140 billion euros ($151 billion) over a period of 20 years, the media group said in 2021.

The aim is “to avoid paying the tax applicable to the payment of this dividend,” the consortium said.

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Banks are suspected of acting as intermediaries in the practice and even charging a commission to the investors taking part.

In December 2022, a German court sentenced lawyer Hanno Berger, believed to be the original mastermind of the scheme, to eight years in prison.

AFP