Singapore bank laws threaten EU pact

By John Burton in Singapore

Financial Times
Published: October 2 2007 19:20 | Last updated: October 2 2007 19:20

Singapore’s refusal to ease its bank secrecy laws could endanger a proposed pact with the European Union, EU parliamentarians said on Tuesday.

The warning came as Singapore faces increased scrutiny over its possible role as a financial haven for Burma’s military rulers who are involved in a crackdown on monks and other pro-democracy demonstrators.

“Bank secrecy is the sticking point in concluding the partnership and co-operation agreement with Singapore,” said Glyn Ford, a British member of the European parliament.

European parliamentarians who are visiting Singapore said their views were shared by the European Commission, which has been negotiating an agreement with the city-state since 2005.

Singapore’s bank secrecy laws are among the world’s toughest and are part of the city-state’s efforts to become a leading private banking and wealth management centre.

The Commission fears that Singapore will become a shelter for money fleeing the EU following the adoption of its savings directive, which requires countries to subject offshore savings held by EU citizens to withholding taxes.

The EU has asked Singapore to introduce financial transparency measures that would help identify suspected tax evaders but Singapore has resisted, fearing that could undermine its private banking business. The proposed EU-Singapore agreement covering trade and political issues is one of three that the Union is negotiating in south-east Asia; the others are with Thailand and Indonesia. The pacts are seen as building blocks towards a broader EU deal with the region.

The financial transparency issue is becoming linked with the Union’s tough stance on Burma’s crackdown against the pro-democracy movement. The country’s military rulers are suspected of hiding large sums in Singapore. Corien Wortmann-Kool, leader of the delegation from the EU parliament’s international trade committee, said Singapore could put more pressure on Burma’s leaders. Singapore chairs the Association of South East Asian Nations, which includes Burma. It is also one of Burma’s largest trading partners.

Ms Wortmann-Kool said: “[Singapore] is an economic centre, this is a financial centre. I think the government can think of measures.”

The US last week announced sanctions designed to increase pressure on the Burmese junta. Members of the EU delegation said Singapore should seize any Burmese generals’ assets as part of “smart sanctions”.

But George Yeo, Singapore’s foreign minister, dismissed the idea of regional sanctions. “What we have is moral influence as members of the Asean family. We can’t do what the big powers can do in terms of trade embargo or freezing of bank accounts,” he told the pro-government Singapore Straits Times this week.