Heritage Trust Group is an independent trust company located in Singapore and Hong Kong whose work involves establishing international companies in various popular jurisdictions, providing fiduciary and corporate secretarial services for ease of doing business and structuring trust solutions for succession planning and asset protection.
IFC: How is the wealth planning business in Asia currently? What impact has the on-going EU / US economic crisis had?
Angelo Venardos: With bank scandals surfacing in the financial capitals of Europe and the US, tougher rules on cross-border tax cheats are being implemented all over the world. Asian regulators have moved to safeguard and reinforce the reputation of Asia’s fast-growing financial service sectors in Singapore and Hong Kong.
Alongside legislative implementations, relevant regulatory checks are conducted to ensure that the funds are legitimate before accepting any transaction. As Singapore has one of the lowest personal income and corporate tax rates in the world, businesses and foreign investments see Asia as the opportunity to invest their money here and have it managed by private bankers and professional financial managers.
It is not easy for global wealth management centres like Singapore, with hundreds of billions of dollars in assets, to ensure that every foreigner pays their taxes back home.
IFC: How has Singapore developed as a wealth planning hub and how significant has it and other Asian IFCs been in the growth of the Asian economy?
AV: With the latest enactment of the criminalisation of money laundering taken effect from 1 July 2013, it is clear that Singapore’s reputation for integrity and uprightness far outweighs any short-term benefits of a laissez-faire approach. This emphasises the connection between financial integrity and its role as a premier wealth management centre.
Putting these in place to safeguard its reputation as a reliable wealth management centre, not only assists the growth of the Asian economy but also the global movement of wealth. Making concerted efforts to combat tax crimes shows how seriously IFCs are dealing with tax dodging.
In Singapore alone, the accumulation of wealth – and the speed with which it has happened – has been staggering. According to the Royal Bank of Canada and consultancy, Capgemini, there were roughly 100,000 people with investable assets of more than US$1m last year.. Their aggregate wealth amounts to US$489bn.
Singapore’s position in the centre of Southeast Asia attracts wealth from families in Indonesia, Malaysia, Thailand and the Philippines.
As a result, the city state has attracted almost every name in wealth management. According to the Monetary Authority of Singapore (MAS), there are more than 500 asset management businesses operating in Singapore, including Swiss-based banks such as Credit Suisse and UBS, for which Singapore is the largest centre outside their home market.
Places that are well regulated, efficient, provide good returns and global access would be attractive in this case. Singapore and Hong Kong provides all these.
IFC: Singapore is being touted as the ‘Switzerland of the East’ – is this a correct and is it a helpful analogy?
AV: No doubt with Singapore’s rise as a global centre for managing money and with assets under management which rose nearly a quarter last year, puts Singapore in line with Switzerland as a leading wealth management hub.
The MAS revealed that the value of assets under management in the city state had jumped by 22 per cent last year to a record S$1.63tn from S$1.34tn a year previously. The reasons for such a projection are clear. For some years and especially since the 2008 crisis, more wealth has been created in Asia and faster than any other region at any other time.
It’s openness to the global economy and efficient business model have helped to turn it into Asia’s leading wealth management centre. This marks another landmark shift in the economic balance of power between the east and west.
IFC: IFCs have taken a significant bashing from the media with regard to their perceived lack of regulation and secrecy – how does an IFC such as Singapore respond to such accusations?
AV: The MAS has always declared its intention to have Singapore positioned ahead of the regulatory curve and has designated a broad range of predicate offences and recently included serious tax crimes as money laundering predicate offences. A predicate offence is a crime that, as a matter of logic or statutory provision, is or must be part of another offence.
Singapore’s Deputy Prime Minister and Minister for Finance, Mr Tharman Shanmugaratnam said:
“These changes we are now making are a major enhancement, in step with the strengthening of international standards for exchange of information. But new standards can only work if all jurisdictions subscribe to them. Singapore will work with our international partners to achieve just that, and ensure there is no room for regulatory arbitrage."
The four key steps Singapore will take to further strengthen framework for International Tax Cooperation are:
Extend EOI assistance in accordance with the Standard to all our existing tax agreement partners, without having to update individually our bilateral tax agreements with them.
Sign the Convention on Mutual Administrative Assistance in Tax Matters, which will bring total from 41 to 83 signed.
Allow IRAS to obtain bank and trust information from financial institutions without having to seek a Court Order.
Conclude with the United States an Inter-Governmental Agreement (IGA) that will facilitate financial institutions in Singapore to comply with the Foreign Account Tax Compliance Act (FATCA).
Not falling behind the other key jurisdictions such as Australia, Hong Kong, Netherlands and the UK, the inclusion of tax crimes will be the latest addition to the list of over 400 other money laundering predicate offences designated by Singapore.
Maintaining strict policies for the protection of the confidentiality of customer information will continue; it is a basic right and underpins confidence in Singapore as a wealth management centre. But confidentiality cannot and will not be used to conceal financial crime or the flow of illicit funds. Neither will confidentiality stand in the way of cross-border exchange of information for investigating crimes. There is no conflict between high standards of financial integrity and Singapore’s attractiveness as a centre for managing wealth. The MAS intends Singapore to continue to be a vibrant wealth management centre by having a clean regime that safeguards legitimate funds and eliminates tainted money.
Measures taken to counter money laundering to maintain Singapore’s reputation as a secure, clean and well-managed financial centre will put Singapore ahead of the global regulatory curve.
IFC: What impact will this new legislation to prevent the laundering of money from tax crimes have for the reputation of Singapore as an IFC?
AV: As part of the ongoing efforts to deal with cross-border tax offences, Singapore has made the handling of foreign funds that originate from tax evasion a criminal offence based on the principle of dual criminality. Financial Institutions suspected of instigating tax evasion or failure to comply in applying the full suite of anti-money laundering and countering-financing-of-terrorism measures could face criminal charges and even lose their licence. Furthermore, at the request of a foreign government, it is not required to seek a court order for the tax authority here to order banks to disclose information on customers suspected of dodging taxes.
Though adding new imperative regulatory requirements has pushed up compliance costs for banks and risks driving investors away, there is a need to strike a balance. Businesses will go elsewhere if compliance becomes too rigid.
This will earn a reputation for Singapore as a place to invest and do business.
IFC: The response to the economic crisis in the West has been an increased focus on tax information exchange – with FATCA and its progeny being at the top of most political agendas – what do you think will be the impact of increased tax information exchange on IFCs in Asia?
AV: With Singapore taking steps to further strengthen framework for International Tax Cooperation, having increased the number of countries it can exchange information with for tax purpose from 41 to 83. Meanwhile, efforts have been initiated to assist banks in Singapore comply with FATCA, which requires financial institutions outside the US to disclose information on the overseas accounts of suspected American tax dodgers.
Even without these changes, Singapore already has adequate safeguards in place. The 53 licensed trust companies, have the duty to make sure that assets to be placed in a trust are properly accounted for and that no money laundering is involved, among other things. Conducting rigorous customer due diligence and transaction monitoring, as well as proper reporting customer due diligence and transaction monitoring would be an important task for these Financial Institutions to comply to.
Companies failing to comply with the central bank will be dealt with. Ultimately, Singapore prides itself on its reputation. We do not want to have a bank or trust company here that has an issue somewhere else. So it would be best to remove them.
IFC: Singapore has had a much more proactive approach than other IFCs to the move away from ‘secrecy’ and towards transparency in tax transactions – do you think this proactive approach will safeguard it as an IFC going forward?
AV: To discourage the entry of tax evasion monies in the Singapore financial system, Financial Institutions (FI) have to remain vigilant against suspicious inflows in anticipation of agreements between foreign jurisdictions to resolve outstanding tax issues.
According to the managing director of the MAS, Mr Ravi Menon, these measures are taken to increase the resources used to deal with suspicious banking activity and stepping up MAS supervision. Singapore will align its regime with the approach taken by the Financial Action Task Force (FATF).
MAS intends for Singapore to continue to be a vibrant wealth management centre by having a clean regime that safeguards legitimate funds and eliminates tainted money.
IFC: Do you think IFCs and the ‘offshore’ industry have been legitimately targeted with regard to their regulation and secrecy principles?
AV: No, as Singapore has improved its regulatory regime and has agreed to strengthen International Tax Cooperation as detailed above.
Other IFCs such as the BVI have also enacted the Mutual Legal Assistance (Tax Matters) (Amendment) Act 2012, adopting the standards given by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
IFC: What growth areas do you see for the business in Asia?
AV: Asia is accumulating wealth fast because it is being created by a new generation of entrepreneurs in the rapidly growing economies of South East Asia. Places that are well regulated, efficient, provide good returns and global access are attractive in such cases. It is evident that the main financial hubs in Asia such as Hong Kong and Singapore provide all these.
However, there is a need to train professionals to attract and maintain client relationships. As wealthy entrepreneurs in Southeast Asia hand their business to more than one bank at a time, it will not be easy.
IFC: Will the flow of global wealth continue its eastward trajectory?
AV: Yes, as more wealth is being created in Asia and faster than in any other region. I believe that the offshore wealth management market here will continue to thrive for some time. I don’t think the recent economic crisis has been such that people will walk away from Singapore or Hong Kong.