By Ayomide Otitoju
British banking giant HSBC is set to appear before a Paris court this week to finalise a multimillion-euro settlement over alleged dividend tax fraud, a judicial source told AFP on Tuesday.
The case forms part of a broader investigation into large-scale dividend tax avoidance schemes that operated across several European countries for years and were exposed by a consortium of European media outlets in 2018. Following the revelations, authorities carried out raids on several banks, with some institutions opting to pay fines to avoid prolonged prosecution.
According to the judicial source, a hearing to validate the proposed settlement in the tax-related case involving HSBC is scheduled for Thursday at 10:00 a.m. Details of the agreement were not disclosed.
In December, Bloomberg News reported that the fine could amount to €300 million ($350 million), a figure not officially confirmed by the Paris financial prosecutor’s office. HSBC declined to comment when contacted by AFP but pointed to its third-quarter earnings statement released in October, which disclosed a €300 million provision related to an inquiry into dividend withholding linked to certain legacy trading activities.
The Paris financial prosecutor opened investigations in December 2021 into six major banks, identified by sources close to the case as HSBC, Crédit Agricole’s investment banking arm Cacib, BNP Paribas and its Exane unit, Société Générale, and Natixis.
In September, Cacib became the first bank to reach a settlement with French prosecutors, agreeing to pay €88 million.
The investigation centres on the so-called “CumCum” scheme, in which investors temporarily transfer shares ahead of dividend payment dates to avoid withholding taxes, before repurchasing them and sharing the illicit gains. The practice was uncovered alongside the related “Cum-ex” tax fraud scheme in 2018.
Media investigations have estimated that losses from Cum-ex frauds alone may have reached up to €140 billion over two decades. Banks are suspected of acting as intermediaries in these schemes, sometimes charging commissions to participating investors.
In December 2022, a German court sentenced lawyer Hanno Berger, widely regarded as the architect of the scheme, to eight years in prison.
