British banking giant HSBC is set to appear in a Paris court this week to finalise a multimillion-euro fine linked to alleged dividend tax fraud, according to a judicial source.
The case stems from investigations into widespread tax evasion practices across Europe, revealed in 2018 by a consortium of European media outlets. Several banks were raided following the revelations, with some already agreeing to financial settlements 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, providing no further details.
Reports in December suggested the fine could total 300 million euros ($350 million), although the Paris financial prosecutor’s office has not officially confirmed the figure. HSBC declined to comment directly but referred to a note in its third-quarter earnings report from October, which disclosed a 300 million-euro provision related to an inquiry “concerning dividend withholdings of certain legacy trading activities.”
The investigation, launched by the Paris financial prosecutor’s office in December 2021, targets six major banks: HSBC, Credit Agricole’s Cacib unit, BNP Paribas and its Exane subsidiary, Societe Generale, and Natixis. Credit Agricole’s Cacib became the first to settle in September, agreeing to pay 88 million euros.
The fraud at the centre of the inquiry, known as “CumCum,” involved investors temporarily selling shares to another party just before dividend payment dates to avoid paying taxes, then repurchasing the shares immediately, with both parties sharing the illicit gains. The scheme was exposed alongside the similar “Cum-ex” fraud, which media investigations revealed in 2018.
Estimates suggest that “Cum-ex” and related dividend tax schemes may have cost European treasuries up to 140 billion euros ($151 billion) over 20 years. Banks are suspected of facilitating the schemes, sometimes charging commissions to participating investors.
In a related development, German authorities in December 2022 sentenced lawyer Hanno Berger, believed to be a mastermind of the schemes, to eight years in prison.
