HSBC faces 300m euro fine for dividend tax fraud

British‑based bank HSBC is set to appear in a Paris court to finalize a multimillion‑euro fine linked to alleged dividend‑tax fraud. A judicial source says the hearing is scheduled for Thursday to validate the deal concerning HSBC in the fiscal domain.

The case forms part of a broader investigation into a massive fraud scheme that spanned several European countries and 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 the dividend payment day to avoid paying taxes, then immediately repurchasing the shares, with both parties sharing the illicit proceeds. This scheme resembles the “Cum‑ex” dividend‑tax fraud, also exposed by the media consortium in 2018, which is suspected of reaching €140 billion over 20 years by evading dividend taxes.

Several banks, including HSBC, Crédit Agricole’s Cacib, BNP Paribas and Société Générale, were raided after the allegations emerged, and some have already agreed to fines to avoid further prosecution. In September, Crédit Agricole’s Cacib accepted a deal with French prosecutors, agreeing to pay €88 million. The financial prosecutor’s office launched inquiries into six large banks in December 2021. The fine for HSBC is reportedly €300 million, although this has not been confirmed by the Paris financial prosecutor’s office. HSBC declined to comment but referred to a note in its third‑quarter earnings statement that cited a €300 million 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, aiming to hold financial institutions accountable for 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 underscores the need for greater transparency and regulation in the financial sector to prevent such schemes in the future.