Clients cannot hide behind anonymous structures: banks

Singapore

AS the storm unleashed by the Panama Papers leak continues, banks here say they do not let clients hide behind anonymous structures to ensure compliance with anti-money laundering laws.

They also reiterate that offshore or trust structures are legitimate services used by the rich for wealth management and succession planning. Some banks also no longer use services of firms from Panama, seen as a notorious tax haven where the rich buy offshore companies to hide their wealth and dodge taxes.

A possible impact from the Panama Papers leak - the largest in history involving over 11.5 million documents - could see more smart money moving here given Singapore's financial centre and rigorous legal framework reputation, said one lawyer.

While tax authorities mull over the identities of the rich and powerful disclosed by leaked documents belonging to Panama law firm Mossack Fonseca, banks say clients have to identify sources of wealth.

According to Evrard Bordier, chief executive, Bordier & Cie, the bank is required to know all beneficial owners of every account including all ultimate beneficial owners, regardless of the type of legal structure used.

"The identity of each and every beneficiary is available at all times to all relevant regulatory authorities upon request," said Mr Bordier.

He also said Bordier does not use the services of Mossack Fonseca.

The use of professional services providers is common, said a DBS Bank spokeswoman.

"With regard to offshore or trust structures, the law obliges us to take steps to identify ultimate beneficial owners and we do not support the use of concealment techniques," she said.

Koh Ching Ching, OCBC Bank head of group corporate communications, said high net worth individuals use the services of various professional service providers, like accounting firms, corporate secretarial firms and law firms for legitimate purposes like setting up offshore or trust structures for wealth planning purposes, such as estate planning.

"Offshore structures are also used for other legitimate purposes such as business finance or mergers and acquisitions," said Ms Koh.

A UBS spokeswoman said "UBS conducts its business in compliance with applicable law and regulations."

Coutts Trustees has extensive anti-money laundering systems and controls, including the requirement to understand the source of clients' wealth, said a Coutts Bank spokeswoman.

Coutts International was sold last year to Swiss private bank Union Bancaire Privee (UBP).

A UBP spokeswoman also told The Business Times that the bank does not use the services of Mossack Fonseca.

"According to the Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence and the applicable anti-money laundering laws and regulations, all the beneficial owners of any account holders - individuals or structures such as trusts, foundations or corporations - are well known by UBP," she said.

French bank BNP Paribas ceased all activities in Panama in 2010.

A Deutsche Bank spokeswoman said it has robust systems and procedures for on-boarding clients and verifying with whom we are doing business.

On Tuesday night, the Monetary Authority of Singapore and the Ministry of Finance jointly said in a statement that the relevant agencies in Singapore are reviewing the information being reported in connection with the so-called Panama Papers and are doing the necessary checks. "If there is evidence of wrong-doing by any individual or entity in Singapore, we will not hesitate to take firm action."

They reiterated that Singapore takes a serious view of tax evasion and will not tolerate its business and financial centre being used to facilitate tax-related crimes.

"Singapore is also firmly committed to upholding internationally accepted standards for exchange of information (EOI).

"The Global Forum on Transparency and Exchange of Information for Tax Purposes has assessed that Singapore's EOI regime is 'largely compliant' with the international standard, similar to GF's assessment for jurisdictions such as the US and UK."

Based on the leaked Mossack files, the International Consortium of Investigative Journalists (ICIJ) said Singapore with 4,050 active intermediaries, ranks number 9 out of 10 countries with the most active intermediaries.

It added that Mossack Fonseca worked with intermediaries in more than 100 countries. Its most active clients by number of offshore company incorporations were from Hong Kong (37,675), Switzerland (34,301) and the United Kingdom (32,682).

Lawyer Stefanie Thio said offshore companies and trust structures are chosen principally for tax or privacy reasons, and most are used for legitimate reasons.

But Ms Thio, who is managing director of TSMP Law Corp, added that "some business people may be choosing offshore structures for more shady reasons".

"Men going through a divorce have been known to hide assets from their wives in tax haven countries with opaque shareholding disclosure laws, but not every businessman using an offshore vehicle is an alimony-avoiding scoundrel."

She reckons that one impact from the Panama Papers leak could see more wealthy people parking their money in Singapore given its financial centre and strict regulatory reputation.

Singapore, as a financial and legal hub, must adhere to the highest standards, she said. "Law firms are often at the frontline of this battle, because of the confidentiality afforded by solicitor client privilege, and Singapore firms must comply with stringent Know Your Client rules."

After the initial wariness of foreign structures, I expect there will be a flight to quality, said Ms Thio.

"Singapore has the twin benefits of being both a trusted financial centre as well as one which is highly sophisticated and commercial. Smart money will move here, away from dodgy jurisdictions."

"In Singapore, we are seeing more private consultancy, family office and fund management businesses being set up to service high net worth families," said Ms Thio.