Singapore tilts at financial crime, but problem areas remain

In response to the devastating socioeconomic crisis which the coronavirus pandemic is unleashing on Southeast Asia, a recent UN special report urged countries in the region to address the “fiscal termites”, such as tax evasion, which are taking further slices out of their already-stretched budgets.

Singapore— whose economy contracted by an alarming 42.9% in the second quarter of 2020—seems to have taken the advice to heart. In late July, the city-state rolled out two legislative proposals to tackle the twin scourges of tax evasion and money laundering which have frequently earned it a place on international financial secrecy watchlists. Recent developments, however—from allegations that Swiss businessman Yves Bouvier is using a sham Singaporean residency to evade taxes in his native country, to the news that the US Department of Justice is investigating one of Singapore’s two casinos for possibly facilitating money laundering—have made it clear that even more comprehensive measures are required.

Legislative broadside against tax evasion and money laundering

The Ministry of Finance’s suggested amendments to the Income Tax Bill include a proposal to significantly hike the penalties for tax avoidance. Specifically, the recommended changes would introduce a whopping surcharge on tax evaders, equivalent to half the tax sum imposed on the avoider. What’s more, the tax avoider would have to pay the full penalty within a month—even if they intended to appeal the charge of tax evasion.

In parallel, only a few days after the suggested amendments to income tax regulations, the Monetary Authority of Singapore (MAS) proposed a new legislative framework for the city-state’s financial sector, which would consolidate some of the MAS’s key supervisory powers. It would also expand the scope of the MAS’s regulatory oversight of the financial sector to bring Singapore’s anti-money laundering efforts in line with international norms, such as the guidelines established by the Financial Action Task Force (FATF). A particular focus of the proposed reforms is the trading of digital tokens, including cryptocurrencies—a category of assets which regulators have increasingly fretted could serve as a magnet for money launderers.

Is Singapore still sheltering overseas tax evaders? The Yves Bouvier case

These long-overdue initiatives hopefully herald a broader crackdown on illicit financial activity in the Lion City, as a number of recent cases have made it clear that unscrupulous individuals and firms may still be exploiting loopholes in the island nation’s fiscal oversight to dodge the taxman and to launder dirty cash.

Reports emerged earlier this month that Swiss tax authorities believe controversial arts dealer and entrepreneur Yves Bouvier may have established a fictitious domicile in Singapore in order to conceal some CHF 330 million that he earned between 2007 and 2015, profits corresponding to the CHF 2 billion in art which Bouvier sold to his former client, Russian billionaire Dmitry Rybolovlev.

These art sales have already plunged Yves Bouvier in legal hot water, both in Singapore and elsewhere, as Rybolovlev has accused him of artificially inflating the artworks’ prices through elaborate subterfuge and pocketing the additional margins. Bouvier, meanwhile, maintains that he was an independent seller—rather than Rybolovlev’s agent as the billionaire claims—and that he was therefore free to charge whatever he liked for the paintings. The Swiss entrepreneur has also pointed to his apparent permanent residency in Singapore to deny the allegations that he concealed millions in profits from his home country’s tax officials, insisting that he was not liable for Swiss taxes after moving to Singapore in 2009.

According to recently released court documents, however, Swiss authorities believe that Yves Bouvier’s Singaporean residence is spurious and that he continued to conduct his business from Geneva, even after 2009. The fresh allegations are likely to put Bouvier’s history in Singapore under the microscope and raise questions about whether the city-state is adequately screening its purported residents to ensure they are genuinely domiciled in the island country, rather than using it as a base to avoid taxes abroad.

Singapore’s gambling resorts under scrutiny

The latest development in the long-running case will also undoubtedly raise questions about Yves Bouvier’s business operations in the city-state, particularly the Singapore Freeport he opened near Changi Airport. Nicknamed Singapore’s “Fort Knox”, the facility is a perpetually-loss-making endeavour. Bouvier has been unsuccessfully trying to jettison it since 2017, recently suing a group of businessmen in Singapore’s High Court after they backed out of purchasing the freeport over concerns about its physical condition and Bouvier’s chequered reputation.

The facility was identified in a 2016 FATF report as a money-laundering risk for the city-state, while another recent legal entanglement has highlighted another significant lacuna in Singapore’s efforts to stamp out money-laundering on its territory. One of the city-state’s two casinos, the Marina Bay Sands—owned by American gaming magnate Sheldon Adelson—is being investigated by the US Department of Justice amidst allegations that it facilitated money laundering. More specifically, the investigation is reportedly centring around how Marina Bay Sands treated its high rolling gamblers, as well as questions over whether the casino retaliated against potential whistleblowers.

The news of the DOJ probe into Marina Bay Sands comes after it recently forked over $6.5 million to settle a lawsuit from Wang Xi, a Chinese gambler who alleged that the casino had pasted his signature onto authorisation documents in order to move money from his casino deposit accounts to other gamblers without his permission. Though the casino settled the suit with Xi, Singapore’s Casino Regulatory Authority is reportedly still looking into the resort’s money transfer policies.

In response to the news of the DOJ probe into Marina Bay Sands, Singapore is finally considering reforms to its casino regulations that couldn’t come fast enough. Despite the FATF warning Singapore last November that its due diligence requirements were too lax for customers at gambling resorts, the city-state still allows cash transactions up to $10,000 to take place in casinos without due diligence—far higher than the $3,000 threshold recommended by the FATF.

The Marina Bay Sands money-laundering probe and the reports that Yves Bouvier may be exploiting his connections to the city-state to evade Swiss taxes are just the latest indications that Singapore still has important gaps in its financial regulation. The proposed reforms to the Income Tax Bill and the suggested expansion of the MAS’s purview are steps in the right direction. Rather than sealing the cracks in its regulatory framework one by one, however, Singapore would be better served by a comprehensive redesign of its policies to prevent tax evasion and money laundering.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes