Singapore stance on bank secrecy puts EU trade deal in doubt

October 14, 2007
Singapore Democrats

This post is at least a year old. Some of the links in this post may no longer work correctly.

Vladimir Guevarra
Dow Jones Newawires
14 Oct 07
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=1870f28d-84b6-458a-97dc-e4d9de5ba425

Singapore won’t be changing its tough banking secrecy laws despite calls from the European Union for more transparency, a decision which could scuttle talks for a trade agreement between the island-state and the E.U.

“We have no plans to change these (banking secrecy) laws, contrary to the (Dow Jones Newswires) report. They allow for the necessary transparency in combating criminal activity, while safeguarding investors’ interest for safety and security,” a spokesman for the Monetary Authority of Singapore told Dow Jones Newswires Saturday via email.

Dow Jones Newswires reported Thursday that some members of Singapore’s Parliament told their E.U. counterparts last week that they are planning legislative changes on their banking secrecy laws.

Among the changes sought by the E.U. is greater exchange of information between Singapore and E.U. countries on suspicious movements of money between the two markets.

The affluent city’s tough secrecy laws have helped make it a growing private banking hub, but it also aims to prevent any possibility of becoming a shelter for money-laundering, especially with the opening of two multi-billion dollar casinos in 2009 and its proximity to countries that are battling terrorist groups.

The Monetary Authority’s response, which appears to contradict what the Singapore MPs said to their E.U. counterparts, could spell a delay – if not the end – of negotiations for a trade agreement between Singapore and the E.U.

Without any change in Singapore’s banking secrecy laws, it’s unlikely that Singapore and the E.U. will sign a partnership and cooperation agreement (PCA). Such a deal is seen as a building block toward a broader free trade agreement (FTA) between the E.U. and the Association of Southeast Asian Nations.

“At the moment, the European Commission and Parliament would feel that we’re not in a situation, mostly specifically in regards to transparency and banking secrecy laws, where we can reach an agreement. Without a PCA, there is probably no FTA,” Glyn Ford, a senior member of the European Parliament, told Dow Jones Newswires Wednesday.

Ford and his co-members from the European Parliament’s committee on international trade last week held talks in Singapore with their Singaporean counterparts, headed by Zainudin Nordin, chairman of the Singapore-Europe regional parliamentary group.

“They (Singapore MPs) said that they’re planning legislative changes to deal with these issues. They are looking at the matter, they realize it’s a problem and they want to join the fight against terrorism,” Ford said.

“They didn’t give us a timetable but the clear implication is we’re talking about some kind of action within months not years. The implication was that something will be done prior to the opening of the casinos,” Ford said.

Phone calls to Nordin’s office weren’t immediately returned Saturday and an email query wasn’t immediately answered.

Stumbling Block

The European Commission has been negotiating a trade agreement with Singapore since 2005. “In our talks, we got to a point where we were very close to an agreement. The one stumbling block is over banking secrecy,” Ford said.

But in its statement, the Monetary Authority of Singapore said: “The so-called “stumbling block” referred to in the article relates to the question of withholding tax on customer savings which the E.U. has sought to discuss with Singapore.”

“The Singapore Constitution does not allow us to collect taxes on behalf of a foreign country,” the MAS said.

However, the MAS didn’t say whether Singapore will look into changing its Constitution to allow the levying of withholding taxes on E.U. citizens.

The MAS also said that any allegation that Singapore is a potential haven of suspicious money from launderers and terrorists is “baseless”.

“Singapore’s laws on banking confidentiality provide customers of banks the right to confidentiality of information, but do not shield criminal activity. We operate a rigorous regime against money laundering and financing of terrorism which is benchmarked against international standards,” the MAS said.

In the media briefing last week, Ignasi Guardans-Cambo, another E.U. member of parliament who took part in the talks with Singapore MPs, said Singapore needs to boost transparency in its financial sector to avoid the possibility of attracting organized crime given that it will soon open two casinos.

“It was not us but the members of the Singapore assembly who spoke about money laundering, saying that casinos will be set up in less than two years. It was their comment and they need to have a legal framework to prevent Singapore from becoming a money-laundering place,” Guardans-Cambo said.

“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 organized crime,” Guardans-Cambo said.

“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 also said in the briefing.