This happens to all private banking centres at some stage: if you guarantee privacy to your customers, it’s fair to assume that some unsavoury characters are going to try to take advantage of that privacy. Switzerland has faced questions about the fine line between client confidentiality and ethical probity since World War II at least. And now the clashes between Burma’s ruling junta and protesters have put Singapore in the spotlight for the same reason.
Singapore is believed to be home to bank accounts for many key figures in Burma’s ruling regime. In fact, Singapore in general has many ties to the country. Temasek, the investment arm of the Singapore state, and government-linked companies are believed to have between $2 billion and $3 billion invested in the country; junta leader Than Shew comes to use Singapore’s hospitals; and Singapore is understood to house many shell companies for Burmese individuals. Lacking democracy in any functional sense, Singapore’s leaders don’t have to worry too much about the weight of public opinion (and there has been little protest locally anyway), but one thing that it does worry about is keeping a reputation for being a scrupulously clean financial centre.
Singapore argues that its standards are at least as good as anywhere else’s. "In Singapore, the Banking Act provides for banking customers’ right to financial privacy," says a spokesperson for the Monetary Authority of Singapore in written answers to questions from Euromoney. "These provisions do not provide a shield for criminal activities. Banks and other financial institutions are obligated to file suspicious transaction reports if they know, or have reasonable grounds to suspect, that any property is connected with money laundering or terrorist financing." He says the systems and controls "are in line with international best practice".
No hot money, no dirty money
Asked specifically about Burma, the MAS referred Euromoney to a television interview given by Singapore’s prime minister, Lee Hsien Loong. In that interview, in which he argued against sanctions against Burma, Lee said: "We don’t take hot money, we don’t take dirty money, we don’t condone money laundering. Our moves against that are as strict as any other financial centre: London, Hong Kong, New York." He also addressed recent claims that an important trade agreement between Singapore and the EU was close to collapse because the Europeans want greater transparency in Singaporean banking. "The European parliamentarians, they were in Singapore, they want us to open up to them so they can collect tax on Europeans who are investing in Singapore," he said. "That’s a different matter altogether."
This scrutiny is nothing new. One of Singapore’s closest neighbours is Indonesia, which spent years trying to get Singapore to agree to an extradition treaty, in large part because it believes that many senior figures from the Suharto era have taken assets that should belong to the Indonesian nation and invested them in Singapore.
Euromoney recently interviewed Lim Hwee Hua, the minister of state for finance and transport, who was present at the signing of the extradition treaty in Bali. "The world of outlawed money is not something we would welcome," she said, speaking before the problems flared up in Burma. "If you go down the wrong path and attract the wrong kind of business, you get stuck with a bad reputation.
"It’s not an easy balance to strike: there are always some reasons at the fringe why you shouldn’t ask for more information, or why you should disclose more information. We will just have to handle it along the way."
She added: "Wealth management partially revolves around confidentiality of information, and we will protect it provided there is nothing you are convicted of which is relevant to the business you are doing in Singapore." And that’s part of the issue: no Burmese general, for example, has a conviction, for who would convict? And this raises a broader point: that the question of ethics is highly subjective, and the view of legitimacy – or terrorism – is very different in some parts of the world than others. Singapore, practising western standards of financial regulation under an English-style legal code, but situated in southeast Asia and with two Muslim states as immediate neighbours, fits right in the crux of this debate.
Bankers themselves stress their own internal practices. "Pre-account opening, and at the transaction stage once an account is open, we follow closely to understand clients’ sources of wealth," says Rahul Malhotra, managing director and head of Asia Pacific global private client at Merrill Lynch in Singapore. He believes that the increasing scrutiny of capital simply leads to a flight to quality, to the benefit of both Singapore and such banks as Merrill.
So long as international financiers remain comfortable, there’s little for Singapore to worry about, nor any reason to change direction. And there’s certainly no acknowledgement of a problem locally. Euromoney asked Lim if she was comfortable with the origins of the bulk of money residing in Singapore. She said: "As far as our laws can catch them... everything that’s here is legitimate."