While Singapore banks are consistently ranked among the strongest in the world, allegations of secrecy remain
By Gaurav Sharma
Steps to combat cross-border tax crimes.
- Laundering proceeds of tax evasion and tax fraud is now a crime in Singapore, effective 1 July. Financial Institutions are required to conduct customer due diligence to deter and detect proceeds from serious foreign tax offences, even if they are not offences in Singapore.
- In May, Singapore signed the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, in order to enhance the international cooperation on the exchange of tax related information.
- Proposal to amend the Income Tax Act so as to allow the Inland Revenue Authority of Singapore (IRAS) to obtain bank and trust information from financial institutions without having to seek a court order.
- Conclude with US an inter-governmental agreement that will facilitate financial institutions in Singapore to comply with the Foreign Account Tax Compliance Act, a US law which requires all financial institutions outside of the US to pass information about financial accounts held by US persons to the US Inland Revenue Service on a regular basis.
Ravi Menon, managing director of Monetary Authority of Singapore (MAS), while presenting the authority’s annual report 2012/13 in July discussed the above measures and said, “Over last three years, MAS has conducted a total of 108 Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) inspections covering banks, insurance companies, money changers, remittance agents, and licensed intermediaries.”
Of these, Menon cited two examples where financial institutions with control deficiencies were firmly dealt with by MAS. “A bank which facilitated ship-closing transactions, did not conduct adequate due diligence on the final identity of buyers behind these transactions. MAS ordered the bank to commission an independent audit of its AML/CFT controls, which uncovered serious control weaknesses and compliance failures. We imposed a composition sum of S$350,000 on the bank,” he said.
“Another case was of a licensed financial adviser which was rated poor following MAS’ inspection, for serious lapses in policies and procedures on customer due diligence. We did not discover any actual money laundering or terrorism financing cases but MAS imposed composition of S$187,500 on the licensed financial adviser for breaching AML requirements. We then directed the licensed financial adviser to cease all new business until the independent person has verified that the licensed financial adviser has taken corrective actions to address inspection findings. The adviser is in process of winding down its financial advisory operations.”
“MAS will not tolerate abuse of our financial system for criminal activity. Our message to tax criminals is loud and clear: their money is not welcome in Singapore. And our message to our financial institutions is also loud and clear: if you suspect the money is not clean, don’t take it,” Menon reiterated.
Recent allegations of Singapore being a tax haven
The Indian ministry of finance in its, White Paper on Black Money, May 2012, had described Singapore as a “tax haven” and listed cumulative FDI inflows to India country-wise between April 2000 to March 2011. The ministry stated that Singapore with 9.17% or US$ 11,895 million is next only to Mauritius (41.8%), in terms of FDI inflows, and added, “Mauritius and Singapore with their small economies cannot be the sources of such huge investments and it is apparent that the investments are routed through these jurisdictions for avoidance of taxes and/or for concealing the identities from the revenue authorities of the ultimate investors, many of whom could actually be Indian residents, who have invested in their own companies, though a process known as round tripping.”
Prime Minister of Singapore, Lee Hsien Loong, took strong exception to this during his three-day visit to India and clarified the matter with his Indian counterpart Manmohan Singh. Lee also asserted to the local media that neither Singapore has any interest in being a money-laundering centre nor would any shady money wants to come to the city-state. “I think shady money would rather go somewhere else rather than risk being scrutinized by our regulators,” he said.
Last year in October, Germany and Singapore had agreed to enhance their cooperation in tax matters to tackle cross-border tax evasion and bolster their double-taxation agreement with internationally agreed standards on information sharing. This came after US and various European regulators have starting clamping on tax cheats by pressuring Switzerland, considered a traditional tax haven, to disclose information about their citizens’ deposits in Swiss banks, resulting in people looking for other tax-friendly places such as Singapore.
Allegations that Myanmar’s former military junta has stashed billions of dollars in Singapore keep surfacing every now and then, which always attract strong rebuttals from both Myanmar and Singapore governments. Also, the banks in question – Overseas Chinese Banking Corporation and DBS Group— have always denied such allegations.
So, it came as a surprise to many when on September 20, Kyaw Kyaw Maung, Myanmar’s Central Bank chairman, Soe Thein, a minister in the President’s Office, and Myint Zaw, the deputy energy minister, confirmed that their government holds US$ 7.6 billion of foreign reserves in overseas bank accounts, while declining to give further details regarding the locations and banks in which these funds are held.