HSBC Settles French Tax Case, Wins Hang Seng Privatization Vote

HSBC, the British-based banking giant, has agreed to pay nearly 300 million euros to French authorities to settle allegations of facilitating dividend tax evasion through a scheme known as CumCum trading, while also securing shareholder approval to privatize its struggling Hong Kong subsidiary, Hang Seng Bank.

The settlement, announced Thursday and approved by a Paris court, resolves a criminal and civil probe by France's Parquet National Financier into HSBC's French unit's activities from 2014 to 2019. It includes a fine of 268 million euros and a tax payment of about 30 million euros, sparing the bank further prosecution. Prosecutors alleged that HSBC traders in Paris intervened in transactions orchestrated from London, allowing foreign investors to temporarily transfer shares to the bank before dividend payments. This maneuver exploited rules permitting banks to receive dividends tax-free, enabling investors to avoid French withholding taxes on stock profits. The transactions, described by one prosecutor as artificial, differed from broader CumCum practices but followed a similar logic of lending securities to exempt entities during dividend seasons.