One of the leading figures working to advise the wealth industry about issues such as transparency and offshore tax has called for bolder, more strategic thinking in Asia.

Singapore may be the model that some would-be wealth management hubs emulate but further progress is required and Asia as a whole lacks strategic thinking in how to keep pace with the demand for transparent, open banking.

That, at least, is the view of a leading expert on cross-border taxation and related affairs, Philip Marcovici, a lawyer and consultant who has worked with jurisdictions such as Liechtenstein to craft disclosure facilities and move on from bank secrecy. He spends much of his time in the Asia region and has offices in Hong Kong.

“Singapore is certainly far ahead of Hong Kong given its focus on the industry and clarity of vision that wealth management is a knowledge industry needing investment in education and training, but we need more leaders in the industry to deal with the issues now, and take steps to be innovative and bold,” Marcovici told this publication when asked about the state of financial transparency in the region.

“Instead, in Asia, we see leaders who, like their counterparts in Europe, think short term and leave what are major business issues to their compliance departments and relationship managers to take responsibility for,” Marcovici continued.

The Financial Action Task Force, a global body created by major economies to crack down on money laundering and associated misbehavior, is due to carry out an assessment of Singapore in November and December this year.

Singapore, which has recently mourned the passing of its father-figure and post-independence prime minster, Lee Kuan Yew, is seen as carrying less “baggage” in terms of illicit funds than Switzerland. In recent years, it has been often stated that the Asian city could match or even overtake Switzerland as the world’s most important offshore financial centre. Although estimates vary, Switzerland is thought to be home to around $2 trillion of such assets, with the Lion City holding around $500 billion, according to figures issued recently by Deloitte (these figures are by their nature hard to quantify exactly).

Recently, the chairman of Abu Dhabi Global Markets, Ahmed Ali al-Sayegh, told the Financial Times that the Swiss bank secrecy model is “dead” and he prefers to copy Singapore.

Singapore, like many other international financial centres, has sometimes come under attack for being a haven for money launderers and tax evaders, although the jurisdiction in July last year unveiled tough new measures to combat such activity.

Asia and transparency

Marcovici said that he is frequently queried as to whether Asian financial hubs could come under the same scrutiny that has been directed at Switzerland and elsewhere, and asked whether jurisdictions are sufficiently strategic in how they address such matters.

“For me, more important than the risk to banks and other intermediaries is the reality that inaction is simply not in the best interests of clients, something that we have seen quite clearly from the mess the Swiss banks have made, and the many families whose interests they failed to put at the forefront,” he said.

“Families who were well advised and who took early advantage of voluntary disclosure and other means to regularise their affairs were the ones to be the big winners, and more often than not, they were guided by their 'onshore’ advisors to do the right thing rather than by their `offshore’ private banks.

“In Asia, sadly, I am not of the view that those in charge of key financial centres are really on top of the issues, and in banks and other quarters, like in Europe, the leaders of private banks all too often distance themselves from the realities,” Marcovici said.

“Are Indonesian clients of Singapore banks really compliant with their tax affairs? Are mainland Chinese clients of Hong Kong banks compliant with their Chinese tax obligations (particularly given the broad definitions in China of who is and who is not a Chinese resident)? Have banks really identified the many dual nationals among the families they serve, many of whom have US citizenship as their second nationality? Or are the CEOs going to blame, as we have seen in Europe, the relationship managers for compliance failings? And are anti-money laundering rules being properly enforced and interpreted in Hong Kong and Singapore, or is it more of a `don’t ask, don’t tell’ philosophy that reigns?” he continued.

“Where is the strategy that governments should be taking to address the real needs of wealth-owning families, and to engage with other countries in finding proactive ways to come to 'win-win-win' solutions where families can be compliant with their tax obligations, onshore countries can collect their fair share of taxes and new 'mid-shore' financial centres, like Hong Kong and Singapore, can become the wealth management centres of the future?” he added.