British bank HSBC Holdings admitted that its Swiss subsidiary had failed to comply with regulations after media reports revealed the subsidiary helped wealthy clients across the globe dodge income taxes.
An international collaboration of news outlets, including the Guardian, the French daily Le Monde, BBC Panorama and the Washington-based International Consortium of Investigative Journalists, citing leaked secret bank account files, revealed that the bank's Swiss arm helped wealthy customers dodge taxes and hide millions of dollars worth of assets.
The arm also advised clients on how to circumvent domestic tax rules.
"We acknowledge and are accountable for past compliance and control failures," the bank said in a statement, responding to the allegations.
It added that standards of compliance at the Swiss arm, which it acquired in 1999, were significantly lower in comparison to the banking group. HSBC's Swiss private bank was largely acquired as part of its buyout of Republic National Bank of New York and Safra Republic Holdings.
"Although there are numerous legitimate reasons to have a Swiss bank account, 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," the bank said.
"We have taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards."
The bank noted that it has been undertaking an "intensive de-risking exercise," putting compliance and tax transparency ahead of profitability. As a result, it could reduce the number of accounts at the Swiss private bank to 10,343 at the end of 2014 from 30,412 in 2007. During the same period, the banking arm's total client assets declined to £45bn ($68bn, €61bn) from £78bn.
The news outlets obtained the data from Herve Falciani, a former IT employee of HSBC's Swiss private bank, who was charged in Switzerland with industrial espionage and breaching the country's secrecy laws.