While the monetary authorities in Singapore insist that participation in a tax amnesty program would not automatically trigger a criminal investigation, they could still use STRs filed in connection with tax amnesty to flag potential issues.
Last week, Reuters ran an exclusive about Singapore Banks reporting Indonesian tax amnesty applicants to the local police authorities. In particular, the report cited sources who said that the Commercial Affairs Department (CAD) in Singapore had advised banks to file Suspicious Transaction Reports (STRs) whenever a banking client took part in a tax amnesty scheme.
The Reuters report led to widespread concern about whether simply participating in the Indonesian tax amnesty scheme (i) constituted an admission that a previous tax violation had occurred; and (ii) could suggest that the parking of funds in Singapore in furtherance of a tax offence constituted a money laundering offence under Singapore law.
This, in turn, led to statements from various Indonesian officials, as well as clarifications from the Singapore regulator—the Monetary Authority of Singapore (MAS)—that participation in the tax amnesty program would not in and of itself automatically attract criminal investigations.
What, then, is the position? As usual, the answer is not so simple.
First, while the tax amnesty scheme of a foreign country may involve immunities from tax and other prosecutions in the foreign country, it does not mean that those immunities are immediately offered in the country in which the proceeds representing the benefits of underpaid tax are located. In the above case, while Indonesia has set out a tax amnesty regime, it does not mean Singapore (as a separate sovereign jurisdiction) is bound or can offer the same immunity if there is contravention of Singaporemoney laundering laws. Seen in this light, irrespective of any directive from the MAS or other authorities in Singapore, it is right for banks and financial institutions to consider filing STRs when clients partake in a tax amnesty scheme. Such a course of action would also be in line with Singapore’s commitment to the Financial Action Task Force (FATF) principles.
Second, even with guidance from regulators like the MAS stating that participation in tax amnesty programs in and of itself would not automatically trigger criminal investigations, the MAS has a genuine and legitimate concern in tracing whether other acts of money laundering in the past may have been disclosed. Say, for example, that a tax offender has hidden monies in two accounts with a bank. He participates in the tax amnesty scheme in respect of the first account but deliberately omits the second account, which he holds through a corporate entity. Assuming the monies in account 2 also represent benefits of tax offences, then the tax offender is continuing to use the Singapore financial system to hide and launder his ill-gotten gains. An STR would help to flag that and other attempts to further launder those funds—whether within Singapore or through the removal of such funds out of the jurisdiction.
Finally, in an increasingly interconnected world where funds are easily and frequently transferred across jurisdictions, the ability of regulators to collect historical data on past transactions is useful—particularly when there may be future request(s) to insist in cross-border investigations.
Thus, there are well-grounded reasons for the MAS and the CAD approach. It is important for financial institutions and clients to properly understand the consequences of and participations in tax amnesty schemes and to tailor their own internal compliance and anti-money laundering procedures accordingly.