British-based bank HSBC is set to appear in a Paris court to finalize a multimillion-euro fine for its alleged involvement in dividend tax fraud. A judicial source confirmed to AFP that a hearing to validate the deal concerning HSBC will take place this week. The case is part of a broader investigation into a massive fraud scheme that was revealed by a consortium of European news outlets in 2018.
The scheme, known as “CumCum,” involves investors 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 practice is similar to the “Cum-ex” dividend tax fraud that was exposed alongside it. The amounts involved in the “Cum-ex” frauds alone are suspected to have reached 140 billion euros over a period of 20 years.
Several banks were raided after the allegations emerged, and some have already agreed to fines to avoid further prosecution. In September, Credit Agricole’s Cacib was the first to accept 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, including HSBC, BNP Paribas, and Societe Generale.
In December, Bloomberg News reported that the fine for HSBC would be 300 million euros, although the Paris financial prosecutor’s office has not confirmed this amount. HSBC declined to comment but referred to a note from its third-quarter earnings statement, which cited a 300 million euro provision for an inquiry “relating to dividend withholdings of certain legacy trading activities.”
The investigation into the “CumCum” scheme is ongoing, and 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. The outcome of the HSBC case will be closely watched, as it may have significant implications for the banking industry and efforts to combat tax evasion.
