But in the face of growing international efforts to crack down on tax cheats, and complaints from abroad about its measures to stop illicit money, Singapore has made moves to show it takes the criticism seriously. It has jailed local and foreign bankers and closed down branches of two Swiss banks related to more than $3 billion that was said to have been siphoned from 1Malaysia Development Berhad, a Malaysian sovereign wealth fund, some of which moved through the city’s banks.
Ravi Menon, chief of the city state’s top financial regulator, has said that 1MDB showed Singapore can do better. “There is no doubt that the recent findings have made a dent in our reputation as a clean and trusted financial center,” Mr. Menon said in a speech in July. The authority, he added, was “disappointed with the lapses” in financial controls.
The Straits Times, a Singaporean newspaper, cautioned the city’s banks over 1MDB in an editorial last year. “Business is part of Singapore’s DNA,” it said, “but not the business of facilitating dubious deals.”
Singapore’s position illustrates the new scrutiny global authorities are giving to quiet money. The Financial Action Task Force, a multicountry advisory group set up to combat money laundering, said last year that Singapore’s financial firms had “a less developed understanding of the risk of illicit flows into and out of Singapore.”
“Singapore is the new Switzerland,” said Andy Xie, an independent economist based in Shanghai. Mr. Xie was fired as chief Asia economist at Morgan Stanley in 2006 after a private email he wrote calling Singapore a money laundering center became public.
“Since the U.S. Department of Justice went after Swiss banks for hiding tax dodgers years ago, Singapore has filled the role,” he said.
The Monetary Authority of Singapore, its top financial regulator, disputed that allegation. “There is no doubt some increased risk of illicit fund flows associated with the rapid growth of private banking flows into Singapore,” a spokeswoman said in a written statement. Nevertheless, she said, Singapore “will not tolerate its financial system being used as a refuge or conduit for illicit fund flows.”
Singapore has positioned itself as a one-stop shop for Asia’s rich….