Singapore banks agonise over rich clients in tax evasion
SINGAPORE: Banks in Singapore are urgently scrutinising their account holders as an imminent deadline on stricter tax evasion measures forces them to decide whether to send some of their wealthiest clients packing.
The Southeast Asian citystate has grown into the world’s fourth-biggest offshore financial centre but, with US and European regulators on the hunt for tax cheats, the government is clamping down to forestall the kind of onslaught from foreign authorities that is now hitting Switzerland’s banks.
Before July 1, all financial institutions in Singapore must identify accounts they strongly suspect hold proceeds of fraudulent or wilful tax evasion and, where necessary, close them. After that, handling the proceeds of tax crimes will be a criminal offence under changes to the city- state’s anti-money laundering law.
“Because of banking secrecy, Singapore used to be an attractive place to put money if you didn’t want the authorities back home to know about it,” said Erik Wilgenhof Plante, head of compliance at Germany’s DZ Privatbank in Singapore.
“That has left legacy problems for some banks.”
Singapore officials had said the city- state’s secrecy rules were aimed at safeguarding investors’ legitimate interest in privacy and did not mean it was a haven for illicit funds. The tighter rules were intended to fall in line with new global standards announced last year that treat tax crimes as a money-laundering offence.
Bankers may now feel compelled to give up some of the lucrative accounts that have fuelled a boom in Singapore’s assets under management to more than US$ 1 trillion, with 50 per cent growth in the five years to 2011, according to the latest government data.
But as the centre for managing wealth in fast- growing Asia, and with more millionaires per capita than any other country, Singapore’s pain from the purge is likely to be short-lived and the gains long-lasting.
“Having a more robust framework against illicit money flows is a fillip for Singapore,” said Deepak Sharma, chairman of Citi Private Bank Singapore and co- chair of the Private Banking Industry Group.
“I think Singapore’s size and reputation as a clean and efficient global financial hub will grow.”
While banks do not have to check that their clients are fully compliant with all their tax obligations, they must check if there are reasons to suspect the accounts contain the proceeds of serious tax offences such as fraudulent or wilful tax evasion.
Identifying high-risk accounts will be a challenge, although most banks have a red-flag system to help guide them.
Examples of red flags include clients who use complex corporate structures to hold their wealth and those who bank almost all of their assets in Singapore when they have no other business or personal interests in the city-state.
Singapore has already faced accusations from politicians in Europe that, as the veil of secrecy over Switzerland is lifted, wealthy tax evaders are shifting their money to Southeast Asia. — Reuters