Singapore has a new anti-money laundering law, making it a criminal offense for banks to manage the proceeds from tax crimes like fraudulent or willful tax evasion.
BANK SECRECY—SINGAPORE’S SUCCESS AND ITS DEMISE
Because bank secrecy is prevalent in Singapore, just as it is in Switzerland, Lebanon, and Luxembourg, it has become a popular destination for those hoping to benefit from tax fraud, parking their assets in its offshore accounts. Indeed, over 70% of Singapore’s total assets under management come from overseas; and in the last five years, the total assets under Singapore management has doubled. However, with the new pressures to combat tax evasion, Singapore Bankers have a great incentive to hand over certain large accounts that have helped propel the growth of Singapore’s total assets under management.
THE NEW LAW
The new anti-money laundering scheme requires that Singapore banks identify those accounts that they strongly suspect hold the proceeds from tax evasion. Once identified, they must close them. The difficult part of the law, one might imagine, is specifying those accounts that rise to the level of “strongly being suspect of tax fraud.” The clear cases would be willful tax evasion or fraud.
But what about carefully structuring of one’s business, estate, or income taxes? Thankfully, in the United States, those do not constitute fraud. As the famous Judge Learned Hand wrote, “[a]ny one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”
Singapore is apparently attempting to distance itself from the reputation of countries like Switzerland known for its illicit tax havens. In the last three years, Singapore has signed nearly 40 agreements with other countries for the facilitation of tax information. Only time will tell whether it lives up to a new reputation.
