Mon, May 15, 2017 - Page 15 News List

Singapore under pressure over flow of illegal money

‘DUBIOUS DEALS’:Tight bank secrecy laws have helped draw US$1.1 trillion in foreign funds to the city-state, but they have also cast a shadow over Singapore’s reputation

NY Times News Service, SINGAPORE

People fish near Marina South Pier in Singapore on Tuesday last week.

Photo: AFP

Last year, US law enforcement officials pressed Swiss bank UBS Group AG about Henry Hsiaw (蕭清義), a Taiwanese-born American whom they accused of failing to file tax returns.

The world has changed since the days when Swiss banks stood as the peak of privacy for the rich. Already, UBS had paid US$780 million in fines and disclosed details of thousands of Swiss bank accounts held by Americans — including the records of one account controlled by Hsiaw.

Still, UBS balked at handing over information about Hsiaw’s account with the bank in Singapore.

That information, it said, was protected under the city-state’s bank secrecy laws.

The courthouse dispute illustrates the growing pressures on Singapore, an increasingly popular destination for money that wants to stay under the radar.

Tight bank secrecy laws have helped draw US$1.1 trillion in foreign funds to the city-state, according to an estimate from Boston Consulting Group.

Singapore is growing faster than Switzerland and is set to become the largest cross-border financial center in the world by 2028, the firm forecasts.

However, in the face of growing international efforts to crack down on tax cheats, and complaints from abroad about its measures to stop illicit money, Singapore has made moves to show it takes the criticism seriously.

It has jailed local and foreign bankers and closed down branches of two Swiss banks related to more than US$3 billion that was said to have been siphoned from 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund, some of which moved through the city-state’s banks.

Ravi Menon, chief of the city-state’s top financial regulator, has said that 1MDB showed Singapore can do better.

“There is no doubt that the recent findings have made a dent in our reputation as a clean and trusted financial center,” Menon said in a speech in July last year.

The authority was “disappointed with the lapses” in financial controls, he added.

The Straits Times, a Singaporean newspaper, warned the city-state’s banks over 1MDB in an editorial last year.

“Business is part of Singapore’s DNA ... but not the business of facilitating dubious deals,” it said.

Singapore’s position illustrates the new scrutiny global authorities are giving to quiet money.

The Financial Action Task Force, a multicountry advisory group set up to combat money laundering, last year said that Singapore’s financial firms had “a less developed understanding of the risk of illicit flows into and out of Singapore.”

“Singapore is the new Switzerland,” Shanghai-based independent economist Andy Xie (謝國忠) said.

Xie was fired as chief Asia economist at Morgan Stanley in 2006 after a private e-mail he wrote calling Singapore a money-laundering center became public.

“Since the US Department of Justice went after Swiss banks for hiding tax dodgers years ago, Singapore has filled the role,” he said.

The Monetary Authority of Singapore, its top financial regulator, disputed the allegation.

“There is no doubt some increased risk of illicit fund flows associated with the rapid growth of private banking flows into Singapore,” a spokeswoman said in a written statement.

Nevertheless, Singapore “will not tolerate its financial system being used as a refuge or conduit for illicit fund flows,” she said.

Singapore has positioned itself as a one-stop shop for Asia’s rich. It encouraged private wealth managers to use the city-state as a regional base in the 1990s just as China’s rise created a new generation of wealthy.

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