European banking juggernaut HSBC is set to cough up nearly £230m to settle an investigation relating to tax-fraud claims.
The FTSE 100 titan was accused of helping foreign investors evade taxes on dividends through a sophisticated financial manoeuvre known as ‘cum-cum’ trading.
This relates to a series of transactions between 2014 and 2019, which were engaged in by the bank’s French unit, according to an investigation by France’s national prosecution – the Parquet National Financier (PNF).
The €268m settlement reached with the PNF brings to an end a long-running probe into the firm’s activity.
The PNF had alleged that HSBC facilitated a scheme where shareholders temporarily transferred their stocks to the bank just before dividend payments were due.
The move allowed investors to skirt taxes they would usually pay on stock profits, due to special rules for banks allowing investors to lend their shares to the bank ahead of the payout.
HSBC took ‘corrective measures’
HSBC said it was “pleased to have resolved this matter.”
“The settlement with the [French court] recognises the bank’s co-operation with the investigation, as well as the corrective measures it took to address the historic issues,” the bank said.
“We continue to remain focused on serving our customers.”
The settlement marks another hefty hit to HSBC coming after the firm made a £830m provision in its third quarter results last year related to the historic Bernie Madoff fraud scandal.
It comes as HSBC also announced on Thursday it had locked down shareholder approval to take troubled lender Hang Seng private.
The bank’s shares took a sharp downturn in October after announcing it would suspend its buyback program in order to buy out minority shareholders in the Hong Kong bank.
HSBC offered to pay HK$155 per share for the 36 per cent not already owned by the bank. The proposal valued the stake at HK$106.1bn (£10.7bn).
The banking giant said its proposals had received strong shareholder support for the proposals, with near 86 per cent voting in favour of the move.
The high court in Hong Kong will give their verdict on whether the privatisation can plough ahead at a hearing scheduled for 26 January.