British-based bank HSBC is set to appear in a Paris court to finalize a multimillion-euro fine related to alleged dividend tax fraud. According to a judicial source, the hearing is scheduled to take place on Thursday to validate the deal concerning HSBC in the fiscal domain. The case is part of a broader investigation into a massive fraud scheme that was carried out in several European countries, which was first revealed by a consortium of European news outlets in 2018.
The alleged fraud, known as “CumCum,” 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. This scheme is similar to the “Cum-ex” dividend tax fraud, which was also exposed by the media consortium in 2018. The “Cum-ex” fraud is suspected to have reached 140 billion euros over a period of 20 years, with the aim of avoiding paying the tax applicable to dividend payments.
Several banks, including HSBC, Credit Agricole’s Cacib, BNP Paribas, and Societe Generale, were raided after the allegations emerged, and some have already agreed to fines to avoid further prosecution. In September, Credit Agricole’s Cacib accepted a deal with French prosecutors, agreeing to pay 88 million euros. The financial prosecutor’s office launched inquiries into six large banks in December 2021.
The fine for HSBC is reportedly 300 million euros, although this has not been confirmed by the Paris financial prosecutor’s office. HSBC declined to comment on the matter but referred to a note from its third-quarter earnings statement, which cited a 300 million euro provision for an inquiry related to dividend withholdings of certain legacy trading activities.
The investigation into the banks’ involvement in the “CumCum” scheme is ongoing, with the aim of holding financial institutions accountable for their role in facilitating tax evasion. In December 2022, a German court sentenced a lawyer believed to be the mastermind behind the scheme to eight years in prison. The case highlights the need for increased transparency and regulation in the financial sector to prevent such schemes from occurring in the future.
