Singaporean Banks Block Tax Amnesty Indonesia . Private banks in Singapore are sharing with local police the names of clients embracing Indonesia’s tax amnesty, banking sources revealed, a move that could undermine the amnesty and damage the banks’ business with their biggest client pool.
Singapore’s Commercial Affairs Department (CAD), a police unit that deals with financial crime, told banks last year they must file a suspicious transaction report (STR) whenever a client takes part in a tax amnesty scheme, three banking sources told Reuters.
After initial resistance from the banks, worried they might lose clients, that message was reinforced this year by the Monetary Authority of Singapore (MAS), the country’s central bank, when Indonesia launched a tax amnesty aimed at wooing back some of the cash its wealthy citizens have stashed in Singapore, the sources said.
“We are filing the STR and hope others are doing it, too,” said one senior private banker when asked about clients responding to the Indonesian amnesty.
“Banks have filed STRs,” said another banking source, adding that clients should not be informed about the filing.
Singapore, where Indonesians hold an estimated US$200 billion in private banking assets – 40 percent of the island’s total private banking assets – made tax evasion a money-laundering offence in 2013.
It is toughening up the implementation of the law after an investigation into state-backed fund 1MDB in neighboring Malaysia exposed how some of its banks failed to impose robust controls on suspicious money flows.
The STR requirement on suspected tax crimes is part of that process.
“The moment the client tells you he’s participating in the amnesty, you have a suspicion that the assets with you are not compliant and so you have to report to the authorities,” said a senior executive at a Singapore-based wealth manager.
“In light of the toughening regulatory environment, banks need to conduct more proactive checks on the effectiveness of their internal controls and procedures,” said Wilson Ang, a partner in the Singapore office of law firm Norton Rose Fulbright.
Reuters spoke to several other senior private bank officials who confirmed the STR filing requirement, but declined to comment further.
Responding to the report, MAS said it advised banks in Singapore to encourage their clients to use the opportunities afforded by tax amnesty programs to regularize their tax affairs.
In a statement quoted by Bloomberg, MAS said participation in the tax amnesty program would not attract criminal investigations in Singapore.
Contacted separately, tax office chief Ken Dwijugiasteadi said: “I haven’t heard of such information, but if true, it is a matter for the Singaporean government. It becomes my matter when someone joins the tax amnesty.”
Responding to the report, Finance Minister Sri Mulyani Indrawati said she had spoken with the Singaporean authority, including Singapore Deputy Prime Minister Tharman Shanmugaratnam to get an official explanation.
“From the Singaporean government’s side, the Monetary Authority of Singapore said it advised all banks in Singapore to support or encourage their clients to use the opportunities offered by Indonesia’s tax amnesty program in to improve tax management in Indonesia,” she said.
She added that Singaporean banks are required to comply with the Financial Action Task Force regulation that demands them to file a report whenever they suspect that a suspicious activity takes place.
However, she said the MAS had insisted that Indonesians’ participation in tax amnesty could not be considered an action that would trigger a criminal investigation.
“I reaffirm once again that we will continue to cooperate with the Singaporean government to lessen the possibilities that will prevent Indonesians from joining the tax amnesty.”
Businessman Sofjan Wanandi, an adviser to Vice President Jusuf Kalla, said the Indonesian government needed to take action to respond to any efforts that threatened the country’s tax amnesty program.
“This is one of ways to prevent the tax amnesty from achieving success. Don’t trust [Singaporean] banks that are reluctant to have their revenues reduced,” Sofjan told The Jakarta Post on Thursday.
Sofjan also suspected that both the Singaporean government and its banking sector harbored the intention to see Indonesia’s tax amnesty program fail.
“Having said that, I encourage fellow Indonesians not to use Singapore’s banking industry. They should move to Indonesian banks,” Sofjan said.