Banks in Singapore urgently scrutinising rich clients

ALL content used in this not-for-profit blog remain the property of their respective owners.
http://in.reuters.com/article/2013/05/06/singapore-banks-crime-idINDEE94504J20130506

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 city-state has grown into the world's fourth-biggest offshore financial centre but, with U.S. 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.

Singapore officials have 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 are 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 $1 trillion, with 50 percent growth in the five years to 2011, according to the latest government data.

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.

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.

But Singapore's image as an alternative to Switzerland for hiding money was not helped by the case this year of France's former budget minister Jerome Cahuzac, who admitted to having an undeclared foreign bank account last month.

French media reports said Cahuzac transferred a million euros from a UBS account to another Swiss bank, Reyl & Cie. That account was then closed in 2010 and its contents sent to a Reyl & Cie account in Singapore where half a million euros still sat.

Clients like Cahuzac will soon become less welcome.

The Monetary Authority of Singapore (MAS) has issued guidelines saying banks must identify and review all existing "high-risk" accounts before the deadline and "discontinue the relationship" where appropriate. Banks will have until June 30, 2014, to review their remaining accounts.

Even if banks cannot determine for sure that a client is wilfully trying to flout tax rules, they may opt to close accounts they feel "may potentially bring about reputational risk," said Kwok Wui San, a partner at PriceWaterhouseCoopers.

Many of the major private banks, including UBS AG (UBSN.VX), have already set up special task forces to train their staff and prepare for a change in mindset to accompany the new rules.

The authorities are keen to ensure the city-state is not seen as a tax haven for the wealthy from Europe, China, Indonesia, Malaysia and elsewhere without dulling its allure as an oasis for the rich, replete with casinos, luxury properties and high-end boutiques and restaurants.

More than 70 percent of Singapore's S$1.34 trillion in assets under management at the end of 2011 came from overseas, an MAS survey showed.

New foreign clients may find that banks become far more picky and inquisitive as the change in mindset takes hold.

"The good old times in Singapore are over," said one European banker. "We don't need that dirty money anymore."