Implicated for nearly four years in an investigation conducted by the French National Financial Prosecutor’s Office (“PNF”) for acts of aggravated tax fraud, the British bank HSBC Bank plc (hereinafter “HSBC Bank”), a member of the HSBC Group providing banking services to corporate and institutional clients as well as other financial services, entered into a Judicial Public Interest Agreement (“CJIP”) on January 6, 2026[1]. This agreement was validated on January 8, 2026, by the President of the Paris Judicial Court[2].
In exchange for the termination of public prosecution, the company agreed to pay a public interest fine amounting to a total of €267,531,000. In addition, the French Public Finances (“DGFiP”) did not seek to claim any compensable damage in relation to the acts of aggravated tax fraud[3].
Beyond the procedural aspects that led to the conclusion of this CJIP, the agreement forms part of a broader strategy by the PNF aimed at addressing a tax fraud practice that has become structural within the banking sector, through the criminal characterization of arrangements that had long been tolerated from a tax perspective (I).
It is also appropriate to examine the CJIP as a mechanism of financial sanction and an alternative to prosecution, by analyzing its implementation, the calculation of the fine, and its effects on the legal entity (II).
I. The Judicial Public Interest Agreement as a mechanism for resolving CumCum
According to the complaint filed on October 29, 2018, for aggravated money laundering of aggravated tax fraud[4], the fraudulent mechanism consisted in enabling shareholders who were not tax residents in France to evade the withholding tax due to the French tax authorities on dividends received, in exchange for remuneration paid to an intermediary[5].
On November 25, 2021, following a judicial request issued on September 17, 2020, by the PNF, the National and International Audit Directorate (“DVNI” – a French Tax administration section) transmitted to the prosecutor the information in its possession relating to the alleged practices, in which HSBC Bank was expressly mentioned alongside several other French banks. On this basis, the PNF opened a preliminary investigation on December 17, 2021, entrusted to the National Anti-Fraud Office (“ONAF”), concerning acts of aggravated money laundering of aggravated tax fraud[6]. In December 2023 and October 2025, the investigation was expanded following additional complaints filed by the DVNI, notably regarding acts of aggravated tax fraud and the failure to record accounting entries that could be attributed to HBCE, the entity responsible for European activities, including those of the Paris branch[7].
In parallel with the criminal proceedings, during which interviews and searches were carried out in 2023[8], the tax authorities initiated a reassessment procedure based on abuse of law, considering that, in the context of transactions carried out by the Paris branch on the SX5FRE index, the interposition of the latter was artificial[9]. In this context, on October 23, 2025, the Paris branch paid the sum of €29,456,773 in respect of the 2019 fiscal year[10].
The investigation established that, from January 2014 onwards, the Paris branch carried out a market-making activity on indices in close coordination with teams based in London. This activity consisted in providing liquidity and market-making services on derivative products referencing French underlying assets[11]. This organization formed part of a strategy identified as early as 2015 aimed at improving the group’s competitiveness vis-à-vis French banks by taking advantage of the withholding tax exemption granted to French-resident entities[12].
HSBC Bank plc transferred to the Paris branch, through intragroup derivative transactions, the risks associated with French underlying assets and related financing. The branch would then acquire French shares in order to hedge these risks and, when it held the securities at the time of dividend distribution, it benefited from the withholding tax exemption.[13] However, the case shows that the transactions were in fact initiated, structured, and controlled by London-based traders, while the Paris trader had only limited autonomy. The interposition of the branch therefore appears to have been primarily motivated by the tax advantage linked to its French residence, revealing the largely artificial nature of this arrangement.[14]
These facts fall within the so-called “CumCum” practices, consisting of temporarily transferring securities to a resident institution to circumvent dividend taxation.[15] Although such practices had been prohibited abroad for several years, it was only from 2017 onwards that these practices, which seriously undermine public finances, began to be repressed by the tax administration and judicial authorities.[16] Available estimates assess the annual loss for the French State at between €1 billion and €3 billion.[17].
The CJIP concluded with HSBC forms part of a broader strategy by the PNF aimed at sanctioning this form of tax fraud, which has become systemic within the banking sector. In this regard, during the validation hearing of the CJIP, the PNF emphasized the structural nature of these practices.[18] In addition to the ongoing tax reassessments involving thirteen other financial institutions, sometimes relating to damages amounting to hundreds of millions of euros[19], CumCum practices have also been under scrutiny by the PNF since December 2021, with the opening of six criminal investigations for aggravated money laundering of aggravated tax fraud. While some institutions continue to defend the legality of these practices—referred to in professional jargon as “dividend arbitrage” or “div-arb”[20], the conclusion of CJIPs in this area by Crédit Agricole CIB in September 2025[21] and subsequently by HSBC weakens this line of defense.
Several major banks therefore remain under investigation in criminal proceedings for CumCum practices.[22] In this context, during the hearing, the President of the Paris Judicial Court stated that the settlement of the HSBC case was intended “to set an example for the other actors involved,” thereby seemingly encouraging other banks to resort to CJIPs.[23]
II. The Judicial Public Interest Agreement as a mechanism of financial sanction and an alternative to prosecution
Pursuant to Article 41-1-2 of the French Code of Criminal Procedure, the PNF may, within the framework of a CJIP concluded with a legal entity, provide for the payment of a public interest fine.[24] The amount of this fine must be proportionate to the benefits derived from the identified breaches, and may not exceed 30% of the average annual turnover calculated on the basis of the three most recent annual turnovers known at the time the facts were established.[25]
In this case, the consolidated average annual turnover of HSBC Holdings plc over the last three financial years amounted to €56.722 billion, resulting in a theoretical maximum fine of €17.016 billion.[26]
As regards the practical calculation of the fine, based on the amount of tax avoided between 2014 and 2019 and the estimated cash-flow advantage resulting therefrom, the PNF assessed the benefits derived from the misconduct at €144,893,000.[27] The PNF nevertheless took into account the fact that HSBC had already paid €29,456,773 to the DVNI as part of the tax reassessment. Consequently, it was determined that the restitutive portion of the fine should be set at €115,393,000.[28]
Beyond this restitutive dimension, the PNF assessed the punitive portion of the fine at €152,138,000 on the basis of several aggravating factors, including the significant size of the company, the systemic nature of the conduct, the group’s judicial and regulatory history, the use of the legal entity’s resources for concealment purposes, and the serious disturbance caused to public order. Conversely, several mitigating factors were also taken into account, including the implementation of corrective measures, the cessation of the conduct from 2020 onwards, the active cooperation of the group’s management – including the conduct of an internal investigation and the transmission to the PNF of transactional analyses covering the 2016–2019 period – the relevance of the internal investigations carried out, as well as HSBC Bank plc’s acknowledgment of the facts.[29] Accordingly, HSBC Bank agreed to pay a public interest fine in the amount of €267,531,000.[30]
By way of comparison, had the case been tried before a criminal court, the fine incurred could have been set at up to twice the proceeds derived from the offence.[31] Based on the amount retained by the PNF – including the cash-flow advantage – i.e., €144,893,000, the theoretical maximum fine could therefore have reached €289,786,000.
It should also be noted that, within the framework of this CJIP, the DGFiP did not seek compensation for any damage,[32] even though Article 41-1-2 of the Code of Criminal Procedure provides that, where a victim is identified, the agreement may include provisions for compensation for the harm caused by the offence.[33] This choice may be explained by the repayment of the avoided tax amounts, the State being both the victim and the beneficiary of the restitution made.
This absence of a claim for damages is more broadly consistent with the legal regime applicable to the harm suffered by tax administration. Under Article L.232 of the French Tax Procedures Code, when criminal proceedings are initiated following a complaint by the tax administration, the latter may join the proceedings as a civil party.[34] This absence of a claim for damages is more broadly consistent with the legal regime applicable to the harm suffered by the tax administration. Under Article L.232 of the French Tax Procedures Code, when criminal proceedings are initiated following a complaint by the tax administration, the latter may join the proceedings as a civil party.[35]
Conversely, when prosecutions are brought for both tax fraud and money laundering, the French Court of Cassation has accepted that the State may seek compensation for moral damage arising from the laundering offence, on the grounds that such conduct undermines the national preventive framework against money laundering.[36] However, the possibility of such moral damage has recently been restricted by the Criminal Chamber of the Court of Cassation, which considers that the laundering of tax fraud is not capable of causing the State moral harm distinct from the injury caused to the general interests of society.[37] Thus, in cases of tax fraud, any loss suffered by the Treasury should be remedied through the specific mechanisms of tax law.
Consequently, the public interest fine constitutes the sole criminal sanction imposed on HSBC Bank and allows it to avoid prosecution for aggravated tax fraud before a criminal court, for which the bank faced a maximum fine equal to twice the proceeds derived from the offence.[38] In accordance with the legal regime governing CJIPs, the agreement does not entail a declaration of guilt nor any entry in the criminal record, as it does not have the nature or effects of a conviction.[39]
While the findings of the French Court of Auditors in its December 2025 report[40] reveal that the criminal repression of tax fraud remains limited, due to the lack of effective prioritization[41], this CJIP nevertheless confirms the unlawful nature of CumCum practices.[42]
