There are fears that data sharing by Singaporean banks of clients using a tax amnesty could deter people from using it.

Private banks in Singapore are sharing with local police names of clients making use of the Indonesian tax amnesty that came into force in July, Reuters reported, citing unnamed bank sources, a situation that could sabotage the amnesty and damage the banks' business with their biggest client pool, it said.

Singapore's Commercial Affairs Department, a police unit that deals with financial crime, reportedly told banks in 2015 they must file a suspicious transaction report (STR) whenever a client took part in a tax amnesty scheme, the sources said.

After initial resistance from the banks, worried they might lose clients, that message was reinforced this year by the Monetary Authority of Singapore, when Indonesia launched a tax amnesty aimed at wooing back some of the cash its wealthy citizens have stashed in Singapore.

This publication has been told by industry figures that the Indonesia tax amnesty, introduced in the summer, had the capacity to remove significant sums from Singapore, although the exact amount affected is difficult to establish. Indonesia is one of almost 40 jurisdictions worldwide with such programmes; such processes have enjoyed mixed levels of success.

The news service quoted one bank source saying: “We are filing the STR and hope others are doing it, too.”

The report went on to say that the MAS confirmed in a statement it has advised banks in Singapore to encourage their clients to use tax amnesty programmes.

Singaporean authorities such as the MAS have taken a tough line on allegedly illicit money flows, keen to avoid the taint of questionable money. Earlier in the summer, MAS took the step of moving to revoke the merchant banking licence of BSI’s bank in the Asian city-state, the first time it had taken such a step since 1984. MAS found that the bank had committed significant breaches of rules around anti-money laundering. The matter was linked to transactions involving 1MDB, the state-run Malaysian fund accused of allowing politicians to siphon off funds for personal use. MAS has also stated that it has found significant shortcomings at UBS, Standard Chartered, Falcon Private Bank and DBS concerning such transactions.