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HSBC to Pay $353 Million to Settle French Tax-Fraud Probe

Zacks Equity Research

HSBC Holdings plc HSBC will be paying 300 million Euros ($353 million) to settle a criminal investigation initiated by the French government for allegedly helping its affluent clients to evade taxes.

It was found that HSBC helped customers in concealing their assets from the French tax authorities via the use of offshore tax havens. Per a Paris court judge, the fine levied upon the bank, includes a penalty of approximately 158 million Euros and damages and interest of about 142 million Euros.

The Swiss bank finally admitted of being guilty in early 2015. In response to media reports, which accused the bank of aiding wealthy clients to evade taxes and obscure assets worth millions of dollars, HSBC said, "We acknowledge and are accountable for past compliance and control failures." The bank was under scrutiny in 2006-2007.

France initiated an investigation against the private bank after Herve Falciani, an ex-employee in the information technology department at the firm, stole client account information from the Geneva office in 2008 and passed them to the French government.

These files described incidents where HSBC‘s Swiss private banking unit regularly allowed its clients to withdraw a large amount of cash (mostly in foreign currencies), marketed schemes that enabled wealthy clients to avoid European taxes and colluded with clients to hide clandestine accounts from domestic tax authorities. The HSBC files, covering the period 2006–2007, shed light on some 30,000 accounts holding assets worth roughly $120 billion (£78 billion).

The bank expressed their joy and said, "HSBC is pleased to resolve this legacy investigation which relates to conduct that took place many years ago.”

Shares of HSBC have gained 23.7% over the last 12 months outperforming 20.8% growth recorded by the industry.

Currently, HSBC carries a Zacks Rank #3 (Hold).

Swiss bank, UBS Group AG UBS faced a similar allegation and has not agreed to a settlement yet. The company will be facing a trial in France for apparently clients in the country to evade taxes. Notably, a five-year probe into such allegations was closed last year.

Some better-ranked stocks in the same space are KB Financial Group KB and Erste Group Bank EBKDY, each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KB Financial has witnessed an upward earnings estimate revision of 10.1% for 2017, over the last 30 days. Its share price has risen 44.6% over the past 12 months.

For Erste Group, over the last 60 days, the Zacks Consensus Estimate has been revised 16.6% upward for 2017. Its share price has increased 48.4% over the past 12 months.

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