Singapore is not seeing a large influx of money fleeing offshore jurisdictions such as Switzerland, the head of the city-state’s regulatory and monetary authority has said.

Singapore is not seeing a large influx of money fleeing offshore jurisdictions such as Switzerland, the head of the city-state’s regulatory and monetary authority has said, contesting a notion that the Asian centre is replacing the Alpine state as a home to undeclared cash.

In an interview with the Central Banking publication, Ravi Menon, managing director of the Monetary Authority of Singapore, was asked about fund flows into the jurisdiction and whether there was a link to anti-money laundering and tax avoidance.

“There is a perception that as standards in these areas are tightened in the EU, centres like Switzerland, Luxembourg, Singapore and Hong Kong are likely to gain. That is not true,” he said.

“Established centres like Singapore and Hong Kong meet all the Financial Action Task Force (FATF) requirements. In the last FATF mutual evaluation that Singapore underwent, we were among the top five global centres in compliance with FATF requirements. But this is an area where the standards are continually being raised, so even as the standards for exchange of information are being raised in Europe, we are in a sense playing catch-up to meet those standards,” Menon continued.

“We are conscious that we do not want a case where there is a flow of illicit funds from Europe to this part of the world. We are making sure that onboarding practices here are sound, and stepping up our own regime to keep pace with global developments,” he said.

In a report last year by Boston Consulting Group, Switzerland was the destination of $2.2 trillion of offshore wealth, ahead of Hong Kong and Singapore, with a combined $1.2 trillion, followed by the Channel Islands and Ireland, at $1.1 trillion. (Since then, those figures have almost certainly increased.)

As pressure has grown on Switzerland’s renowned bank secrecy laws – the country has signed a number of treaties with other countries to deal with undeclared money – it has sometimes been argued that these monies will head eastward. But Menon’s comments suggest Singapore seeks to make a handsome living without such inflows. They may also suggest that after the battering that Switzerland has sustained over its system, rival jurisdictions have no desire to undergo the same ordeal.

Asia-driven

“When you look at the data for wealth management and private banking in Singapore, most of the growth has come from sources within Asia. The European share of private banking assets in Singapore has been relatively stable, despite stories you sometimes hear about funds being diverted to Asia,” he was quoted as saying. “We are mindful that if an account is closed in Europe and opened in Singapore with the same bank, the entire onboarding procedure of robust customer due diligence is undertaken. You cannot just transfer an account. This sends the signal clearly that if the money is tax ‘non-compliant’, Singapore is not the place to come to,” he said.

An issue faced by such jurisdictions is how the US authorities have applied their “worldwide” system of tax to hunt alleged US expat tax dodgers via legislation such as the FATCA Act. Asked if he was concerned that such extra-territorial powers will hit Singapore, Menon said: “Our banks have hardly got a presence in America. They are largely regional banks, and they have at best small rep offices in major jurisdictions in America and Europe. Apart from the Japanese banks, most Asian banks do not have a significant presence in the US, or even Europe. “

“If offences were committed in the US by foreign banks operating in the US, it is within the rights of the US to take them to task,” he said.

His comments came shortly after BNP Paribas, France’s biggest lender, was hit with a record $8.97 billion fine for multiple breaches of US sanctions against blacklisted nations such as Iran, Sudan and Cuba. It is rumoured that a number of other non-US banks are in the potential crosshairs of the US.

On other issues, Menon was asked about the global interest rate cycle and the linkage between Singapore and the US’s monetary policy.

“The next big test will be the timeline for the raising of interest rates. The sooner we see a normalisation of monetary conditions globally, the better for us here in Asia and in emerging economies. The spill-over effects of unconventional monetary policies are not insignificant – volatility in capital flows, pressures in asset markets, a general increase in financial stability risks and a flattening of the yield curve that distorts investment decisions – these are not trivial consequences,” he said.