UK-based bank HSBC agreed on Thursday to pay a fine of 267.5 million euros to settle French legal proceedings related to suspected tax fraud on dividend payments, as part of a large-scale investigation targeting a number of major banks.
A judge at a Paris court approved a settlement worth 312 million dollars with French financial prosecutors, sparing the bank from further legal pursuit.
The case is part of investigations opened after a consortium of European media outlets revealed in 2018 a large-scale fraud that lasted for years and involved several European countries.
The national financial prosecutor’s office began investigations in December 2021 into six major banks, which, according to a source familiar with the case, are: HSBC, the Cacib unit of Crédit Agricole, BNP Paribas and its Exane unit, Société Générale, and Natixis.
Details of the “Cum-Cum” Fraud
The fraud, known as “Cum-Cum,” involves an investor selling shares to another party just before a dividend payment date to evade paying taxes, then immediately buying the shares back, with the two parties sharing the illicit proceeds.
This scheme was exposed along with a similar tax evasion fraud on dividend payments, which was published by the media consortium in 2018. The banks are suspected of having acted as intermediaries in this scheme, even receiving commissions from the participating investors.
A representative of the bank said during the hearing that HSBC acknowledges the facts as presented. The bank later welcomed the agreement, stating that it reflects “the bank’s cooperation in the investigation and the corrective measures taken to address past issues.”
The Cacib unit of Crédit Agricole was the first to agree to a deal with French prosecutors, committing to pay 88 million euros in September.
In December 2022, a German court sentenced lawyer Hanno Berger to eight years in prison, considering him the mastermind of the “Cum-Ex” scheme, which is estimated to have drained 140 billion euros over nearly two decades.
HSBC
HSBC, or The Hongkong and Shanghai Banking Corporation, was founded in 1865 in Hong Kong to finance trade between Europe and Asia. It has since grown into one of the world’s largest banking and financial services organizations, with its iconic headquarters building in Hong Kong becoming a notable symbol of the city’s financial district.
France
France is a Western European nation with a rich history that dates back to ancient Gaul, later evolving through monarchy, revolution, and empire to become a modern republic. It is globally renowned for its influential art, philosophy, cuisine, and landmarks like the Eiffel Tower and the Palace of Versailles.
Paris
Paris is the capital city of France, historically founded as a Gallo-Roman settlement in the 3rd century BC. It later evolved into a major European center of art, philosophy, and politics, famously symbolized by landmarks like the Eiffel Tower and the Louvre Museum.
UK
The United Kingdom is a sovereign nation in northwestern Europe with a long and complex history, formed through the political union of England, Scotland, Wales, and Northern Ireland. Its historical narrative spans from ancient Celtic tribes and Roman occupation to the rise and decline of the vast British Empire, profoundly shaping global politics, trade, and culture. Today, it is a constitutional monarchy and parliamentary democracy, known for its influential cultural exports and historical landmarks.
Crédit Agricole
Crédit Agricole is a major French banking group, originally founded in the late 19th century as a network of local mutual credit unions to support the agricultural sector. It has since grown into one of the world’s largest financial services providers, while maintaining its cooperative structure and deep roots in regional French communities.
BNP Paribas
BNP Paribas is a major French international banking group, formed in 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. Its history traces back to the mid-19th century with the founding of its two predecessor banks, which played significant roles in financing European industry and international trade.
Société Générale
Société Générale is a major French multinational financial services company, founded in 1864 to support commerce and industry in France. It played a significant role in financing the country’s economic development and has grown into one of Europe’s leading banks, with a global presence in retail banking, corporate and investment banking, and financial services.
Natixis
Natixis is a French corporate and investment bank formed in 2006 from the merger of the asset management and investment banking activities of two French financial institutions. It operates as a subsidiary of Groupe BPCE, one of France’s largest banking groups, and provides services in financing, investment, and asset management on a global scale.
Germany
Germany is a country in Central Europe with a complex history, having been a collection of states for centuries before unifying in 1871. It was divided after World War II into East and West Germany, reunifying peacefully in 1990 following the fall of the Berlin Wall. Today, it is known for its influential cultural contributions in philosophy, music, and science, and is a leading economic and political power in the European Union.
