Singapore bank secrecy laws threaten EU pact

John Burton
Financial Times
03 Oct 07

Singapore’s refusal to ease its bank secrecy laws could endanger a proposed pact with the European Union, EU parliamentarians said on Tuesday.

The warning came as Singapore faces increased scrutiny over its possible role as a financial haven for Burma’s military rulers who are involved in a crackdown on monks and other pro-democracy demonstrators.

“Bank secrecy is the sticking point in concluding the partnership and co-operation agreement with Singapore,” said Glyn Ford, a British member of the European parliament.

European parliamentarians who are visiting Singapore said their views were shared by the European Commission, which has been negotiating an agreement with the city-state since 2005.

Singapore’s bank secrecy laws are among the world’s toughest and are part of the city-state’s efforts to become a leading private banking and wealth management centre.

The Commission fears that Singapore will become a shelter for money fleeing the EU following the adoption of its savings directive, which requires countries to subject offshore savings held by EU citizens to withholding taxes.

The EU has asked Singapore to introduce financial transparency measures that would help identify suspected tax evaders but Singapore has resisted, fearing that could undermine its private banking business. The proposed EU-Singapore agreement covering trade and political issues is one of three that the Union is negotiating in south-east Asia; the others are with Thailand and Indonesia. The pacts are seen as building blocks towards a broader EU deal with the region.

The financial transparency issue is becoming linked with the Union’s tough stance on Burma’s crackdown against the pro-democracy movement. The country’s military rulers are suspected of hiding large sums in Singapore. Corien Wortmann-Kool, leader of the delegation from the EU parliament’s international trade committee, said Singapore could put more pressure on Burma’s leaders. Singapore chairs the Association of South East Asian Nations, which includes Burma. It is also one of Burma’s largest trading partners.

Ms Wortmann-Kool said: “[Singapore] is an economic centre, this is a financial centre. I think the government can think of measures.”

The US last week announced sanctions designed to increase pressure on the Burmese junta. Members of the EU delegation said Singapore should seize any Burmese generals’ assets as part of “smart sanctions”.

But George Yeo, Singapore’s foreign minister, dismissed the idea of regional sanctions. “What we have is moral influence as members of the Asean family. We can’t do what the big powers can do in terms of trade embargo or freezing of bank accounts,” he told the pro-government Singapore Straits Times this week.

Singapore bank secrecy threatens EU trade talks – MEP

03 Oct 07

Singapore’s refusal to soften its strict bank secrecy laws could scupper talks with Europe about a trade agreement, a European politician said on Tuesday.

The European Union and the 10-member Association of South East Asian Nations are negotiating partnership and cooperation agreements, which are a prerequisite for a fully fledged free trade deal.

However, for such agreements to come into force, the EU wants ASEAN countries to help it make European tax evaders pay tax to their home countries on interest earned offshore.

“Is this a dealbreaker? Potentially yes,” Glyn Ford, a Member of the European Parliament, told journalists during a visit by the parliament’s International Trade Committee.

The EU adopted the savings directive in 2005 but efforts to force Hong Kong and Singapore to join have been unsuccessful.

European banking havens Switzerland and Liechtenstein have agreed to apply a so-called withholding tax.

“We say that we don’t think there’s money laundering going on here, but clearly people engaged in money laundering are looking for places like Singapore with low levels of transparency to actually engage in
money laundering,” Ford said.

“If I was looking for somewhere to do my money laundering, Singapore would be getting towards the top of my list these days,” he added.

Singapore has been promoting itself as a financial hub in Asia in recent years, attracting a number of large European and U.S. Banks that have set up private banking offices to manage money for local and
foreign clients.

Ignasi Guardans-Cambo, another member of the parliament’s trade committee, said Singapore needed to step up transparency of its financial sector to avoid the possibility of attracting organised crime given that it was due to open the first of two multi-billion dollar casinos in late 2009.

“The big money laundering hubs in the world are disappearing and nobody wants Singapore to replace them. And, of course, nobody is accusing Singapore now, but that’s a reality not only in terms of financing of terrorism, but also in terms of organised crime.”

Editor’s note: The SDP is informed that the matter of Singapore government’s decision to ban European Parliamentarians from speaking in Singapore in April this year was raised in the same EU meeting.

Read also: Singapore ban on foreign speakers may affect EU ties

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