Recently, the offshore banking world headlined Chinese authorities, who have successfully uncovered the $64 billion underground banking. The banking activities involve money laundering and illegal fund transfers, involving dozens of offshore shell companies registered in Hong Kong.
The above is just one of many encouraging results in the global crackdown on offshore banking, with the latest being on illegal offshore banking activities in the Asian region.
Good news? Most definitely. But it may be a mixed feeling for individuals who protect their wealth offshore. What if they are also suffering the consequences, regardless of the fact that they do it legally? How one can now legally protect his/her wealth, in the midst of the crackdowns?
The recent focus of the crackdown in the Asian region is one of the major financial centers in Asia, Singapore.
Singapore: Offshore banking destination
Singapore has been a long-time favorite as an offshore banking destination. Clients worldwide are flocking to Singapore for securing their assets for several prominent reasons: Stable economy and politics, investor-friendly tax policies and world class financial services.
The local authorities are collaborating to support the growth of the financial sector. Monetary Authority of Singapore (MAS) – along with the other government agencies – aggressively reform the regulations to encourage growth and innovations in the finance sector, such as the following:
- Create a deep pool of talented individuals in financial sector
- Enhance training and development
- Fine-tune legislative framework, which include anti-money laundering laws
- Focus on making Singapore the best place in Asia to live and work in
- Develop supporting services, such as housing, office spaces and schools, for accommodating financial corporations' employees and family members
- Remove estate duties, encouraging the rich and famous to live in Singapore
Why not Hong Kong?
Asset-wise, Hong Kong remains the largest offshore center in Asia. However, Singapore comes close in second, with one great upside.
Due to the business growth driven from Mainland China's clients, Hong Kong naturally focuses on Chinese-speaking clients. Singapore, on the other hand, is attracting a more diverse group of International clients, which means that its offshore banking services are generally more appealing, especially to clients from English-speaking countries.
The demise of banking secrecy as we know it
Unfortunately, just like Switzerland, the constant pressure from other Asian countries, as well as countries outside Asia, such as the United States, has strangled the growth of Singapore's offshore banking sector. Singapore committed to start sharing banking clients' information with foreign tax authorities, starting from 2018. This is practically a focused attempt to end tax evasion – and offshore banking secrecy in general.
Not only that, authorities in Asian countries, such as Indonesia and India are focused in their effort in chasing 'hidden' wealth of their citizens. Indonesia, Singapore's most prominent source of assets, is planning to offer a tax break for citizens who are willing to take their assets back from Singapore to Indonesia. The size of the assets? $225 billion (source).
The pressure is understandable, though.
With the bearish market outlook that has brought down the economy of countries in the Asian region, most notably China's multiple devaluations and South East Asian's Indonesia and Malaysia declining economy, Asian countries are forced to look for leaks and attempt to seal the leaks. One of the ways is by securing 'lost' tax returns from their citizens' offshore accounts in Singapore.
All of those present tough pressure to Singaporean offshore banking sector.
What's the implication?
The changes will require Singaporean banks that offer offshore private banking services to overhaul its business model, departing from client privacy to shared client data. Things are becoming complicated for offshore banks and wealth managers in keeping clients' assets secure.
The gradual changes are also felt by potential clients: Now, opening a bank account has become more difficult from non-residents. Furthermore, with the crackdown on tax evasion and money laundering, legitimate clients are becoming in doubt as they are no longer sure, whether putting their assets offshore is a wise decision or not.
The offshore banking crackdown in Singapore – and in other Asian countries, as well - greatly impact the way banks offer offshore banking services. However, this is – by far – not the end of offshore banking in Singapore. Singapore will continue to be one of the finest financial centers in Asia.
Stellar financial services, supportive economic and policital environment, trust and strong legal system remain well-sought-after.
So, what are your options? There are still a few available:
- Become a resident of Singapore and unlock the benefits of (onshore) banking in Singapore
- Open an offshore bank account in Singapore and share your assets data with your local Government
- Choose another offshore jurisdiction that share similar traits, such as stable economic/political situation, low to no tax, and investor-friendly business laws.
Regardless of your choice, we can help you in shedding some light – consult with us for free.