"In the past 10 years, a lot of money from outside of Asia has moved to Singapore from Europe, Latin America, the Middle East, Russia and Central Asia," said Edmund Leow, a principal at joint venture law firm Baker & McKenzie.Wong & Leow in Singapore.
Many of the worlds rich are beginning to leave the traditional tax havens of the Caribbean, Switzerland and the Channel Islands for Singapore. One of the prime reasons for this is pressure in those places from Organisation for Economic Co-operation and Development (OECD) member countries, most notably the United States and if Mr Obama becomes president which at the time of writing looks increasingly likely, this pressure will probably turn into a witch hunt.
The US Senate Permanent Subcommittee on Investigations, which began its investigation into tax haven banks in February by looking at how they may be helping US taxpayers to evade tax and manipulate reporting obligations, has issued more than 35 subpoenas and conducted numerous interviews with bankers, trust officers, taxpayers, tax and estate planning professionals.
In Europe money is being moved out of Switzerland to avoid paying withholding tax on their interest as required by the European Union.
Meanwhile in Asia, huge wealth is being amassed with funds from the region, particularly China, Indonesia and India, dominating the bulk of Singapore's private banking business.
India and China are reporting respective rapid high-net-worth individual population growth rates of 22.7 and 20.3 per cent respectively, according to the latest wealth report by Merrill Lynch and Capgemini.
Singapore has a high level of transparency and regulatory bodies. Its legal framework is British based and the government has a continuing zeal to improve and strengthen Singapore’s standing in the world through business and wealth. It began in the time of Raffles, it gained a new and fervent momentum under Mr Lee’s watch and now there is a drive to propel the city state into a private banking hub through the offering of a favourable tax regime and launch of Asia's first educational institute specialising in wealth management.
Singapore's private banking assets under management have grown over the past few years by an average of 20 per cent per annum to reach an estimated US$200 billion, according to the Monetary Authority of Singapore (MAS).
Private banks have fuelled the growth by expanding their wealth management services, most notably in the setting up of trust companies.
"A decade ago, the industry was small and existed only to help local Singaporeans set up offshore trusts but today it is virtually the opposite. The trust industry is helping foreigners set up trusts in Singapore," Mr Leow said.
To cater to the explosive industry growth, the MAS has introduced a licensing regime for trust companies to ensure minimum standards are maintained and adequate anti-laundering requirements are in place, so that trust companies can be better monitored and are subjected to the same requirements as banks.
Singapore's industry is still in its infancy with ample room for development.
"Unlike the Europeans, Asian clients previously did not have full knowledge of what trusts can do such as the complicated tax structures,"
With business from wealthy clients showing no sign of abating, Mr Leow said Singapore's greatest task would be to manage its image both at home and abroad.
"Singapore's challenge will be to maintain its own reputation to ensure it isn't seen in the same light as other offshore centres. We will have to be careful about regulating ourselves or else we could lose our reputation, which is also our advantage."
James Lee – intray@zetland.biz
