HSBC, one of the largest banks in the world, has come close to admitting that its Swiss branch was used to facilitate tax evasion and money laundering and said that a project aimed at ending such practices has seen deposits in Geneva almost half since 2007, to $68 billion from $118.4 billion.

In an extraordinary statement issued to The Irish Times and other media outlets with access to data on thousands of Swiss HSBC accounts from the mid-2000s, the bank said its project aimed at improving standards in its Swiss branch has seen the number of accounts in Geneva reduced by two-thirds, and that it is going to cease doing business with clients linked with 100 countries. It has also put in place special measures for dealing with "politically exposed persons".

France, Belgium and Argentina have charged the Swiss bank with aiding their citizens in evading tax.

The cases were initiated last year after the data, originally seized from a house in France linked to a former HSBC IT employee, was shared by the French authorities with tax agencies in a number of jurisdictions, including Ireland.

The same data has since been leaked to Le Monde and the International Consortium of Investigative Journalists, with whom The Irish Times and other media outlets internationally are co-operating in a project dubbed "Swiss Leaks".

Radical transformation

The Revenue Commissioners, after taking legal advice, decided the data, which it received in June 2010, did not contain sufficient evidence to justify it taking an aiding and abetting action against the Swiss bank.

In the lengthy statement, HSBC said the bank, and in particular its Swiss private banking branch, had undergone a radical transformation in recent years, with initiatives designed “to prevent its banking services being used to evade taxes or launder money”.

It said that in the past the Swiss private banking industry operated “very differently to the way it does today” and that private banks, including HSBC’s Swiss branch, assumed that responsibility for the payment of taxes rested with the individual client.

Swiss banks were used by wealthy people to manage their money in a discreet manner and “in some cases individuals took advantage of bank secrecy to hold undeclared accounts.

“This resulted in private banks, including HSBC’s Swiss private bank, having a number of clients that may not have been fully compliant with their applicable tax obligations. We acknowledge and are accountable for past compliance and control failures.”

The bank said it had taken significant steps over recent years to implement reforms and “exit clients” who do not meet “strict new HSBC standards, including those where we had concerns in relation to tax compliance.”

The bank has refocused the Swiss bank to concentrate on strategic markets such as the owners and principals of group commercial clients, it said. “As a result of this repositioning, HSBC’s Swiss private bank has reduced its client base by almost 70 per cent since 2007.”

In 2007 the Swiss bank had 30,412 accounts but by the end of last year this was reduced to 10,343, the bank said. In 2007, it had clients resident in 150 countries.

“We are in the process of exiting clients residing in over 100 of those countries.”

The bank said its Swiss business was largely acquired when it purchased two US banks, Republic National Bank of New York and Safra Republic Holdings SA, in 1999.

The business purchased had a “very different client base and had a significantly different culture to HSBC,” it said. The new business was not sufficiently integrated into the group, “allowing different cultures and standards to persist.” The bank was run in a “more federated way” at that time and decisions were frequently taken at country level.

In January 2011, a new group management fundamentally changed the way HSBC was structured globally and, at the same time, there was a complete overhaul of the private banking business, the bank said. A “de-risking and re-shaping” of the Swiss operation occurred.

"Today, the management team in Switzerland which is carrying out these reforms is substantially different to the period before 2011."

A tax transparency policy was introduced in 2012 that involved the closing of accounts, or refusal of new business, in cases where a client or potential client was “not in full compliance with relevant tax obligations”. The policy involved better “know your customer” procedures and anti-money laundering procedures to ensure “a more complete consideration of a new client’s source of wealth.”

Terms and conditions

New terms and conditions allow the bank to refuse a cash withdrawal request and have placed strict controls on withdrawals of more than $10,000, it said. Hold mail services have been discontinued.

“In addition, we have withdrawn from markets where we are unable to conduct due diligence to a satisfactory standard on our clients. We review all politically exposed persons annually at the highest level” and use a financial intelligence unit to support the process.

The statement said the removal of data from the Swiss bank by former employee Hervé Falciani in 2006 and 2007 was “a blatant criminal violation of Swiss law” and said that Mr Falciani is accused by the Swiss authorities of attempting to sell the data to Lebanese banks while using a false name.

The bank has no record of Mr Falciani trying to escalate concerns about the bank’s policies to his line management, it said.