Singapore tightens tax evasion measures
02 July 2013
Posted by: Author: Jeremy Grant
Author: Jeremy Grant
Singapore will from Monday make it a money-laundering offence for banks to assist tax-evaders stash their funds in the Asian city-state, in the latest move by the region’s fastest-growing wealth management hub to join the global crackdown on tax evasion and illicit funds.
The fight against tax evasion is playing out against a backdrop of rising wealth among the world’s richest people, creating a scramble by banks to offer services in tax-efficient jurisdictions such as Singapore.
Fuelled by global recovery in equity and property markets, the "investable wealth” of the world’s richest people rebounded last year, according to a report in June by the Royal Bank of Canada and Capgemini, a consultancy. That grew 10 per cent to a record high of $46.2tn.
Such growth is intensifying competition between Switzerland and Singapore as wealth management hubs. Singapore has, since 2011, been tightening up on anti-tax evasion and anti money-laundering rules while at the same time attracting wealth management business.
Private banks from Switzerland see Singapore as an increasingly important market for wealth management and are competing with Asian banks for business coming from southeast Asia.
The value of investable wealth among Singapore’s richest people rose 12 per cent last year to $489bn, RBC and Capgemini said.
From Monday the financial regulator, the Monetary Authority of Singapore, will "heavily penalise” banks that are found to have facilitated tax evasion, after designating tax crimes as money-laundering "predicate offences”.
This means it is a money-laundering offence for a bank to assist tax evaders in hiding their funds.
The MAS said when announcing the move in October 2012 that this was designed to "discourage the entry of tax evasion monies into our financial system and protect Singapore’s reputation as a trusted financial centre”.
Banks must now "conduct . . . rigorous customer due diligence and transactions monitoring”, as well as reporting of "suspicious transactions”.
Singapore has already pledged to take four steps to "significantly strengthen” its rules for combating tax offences, which were likely to be in place by 2014.
Those would conclude a so-called "inter-governmental agreement” with the US making it easier for financial institutions in Singapore to comply with the Foreign Account Tax Compliance Act (Fatca).
This is a US law requiring all financial institutions outside the US to pass information about financial accounts held by US citizens to US tax authorities.
Singapore would also increase the number of countries with which it can exchange information without being restricted by domestic banking secrecy laws.
These moves have come ahead of a pledge by G8 countries at a landmark summit in Northern Ireland in June that tax authorities should share information to fight evasion automatically.
Jason Collins, a partner at Pinsent Masons, a UK law firm, said Singapore requiring suspected tax evasion to be reported was "only one side of the equation”.
"Many governments are not going to rest until all offshore centres sign up to ‘automatic’ exchange of information so that information about their citizens is as freely available as if they banked onshore.”