June 3, 2013 / 12:02 AM / 6 years ago

Insight - A Singapore wealth manager under fire amid crackdown

SINGAPORE (Reuters) - The email landed at a tough time for David Chong, the colourful founder and chairman of Portcullis TrustNet, one of Asia’s biggest wealth advisory companies.

Bumboats cruise past bars and restaurants in Boat Quay (R), situated near skyscrapers in the central business district of Singapore in this March 19, 2013 file photo. REUTERS/Edgar Su/Files

By threatening to publish offshore companies and trusts held by his clients, it hit a raw nerve at a company whose customers rely on its discretion. But it also came as the wealth management industry faces a wave of global scrutiny from regulators trying to weed out tax dodgers.

The email from a group of investigative journalists said it wanted to expose how the rich compound the world’s economic problems by using offshore tax loopholes to minimise tax payments.

The message struck at the heart of a global debate over the moral divide between savvy tax planning and exploitation of loopholes that critics say mean governments miss out on corporate and individual tax revenues.

Singapore, like other wealth management centres, is in the regulatory spotlight and Chong said the reporters unfairly singled out Portcullis as one of the villains.

“Portcullis sells companies like Victorinox sells knives,” said Chong, a lawyer by training who built up Portcullis over 25 years. “It would be ridiculous to blame Victorinox because one of their knives is used to commit a crime,” Chong said in a rare interview in Singapore.

Portcullis TrustNet describes itself as Asia’s biggest independent group of trust companies, and a one-stop shop for wealthy individuals to manage their money.

Chong defends Portcullis’s business and says he believes the firm has complied with the necessary regulations in all the jurisdictions in which it operates.

He says it conducts extensive due diligence on clients, who, according to press reports, include a member of the Philippines politically powerful Marcos family, a former minister in the Thai cabinet and a hedge fund manager now jailed for insider trading.

The International Consortium of Investigative Journalists (ICIJ), which sent the email in March, said the company has 77,000 clients. Chong declined to comment on specific clients or how many customers the firm had.

He dismissed the suggestion by the ICIJ, a cross-border network of reporters who collaborate on large-scale investigations, that releasing the information on Portcullis’s clients was a vital expose of offshore tax evasion.

“There is a triumphalism out there, but this is all about data theft,” he said, calling the act an invasion of privacy akin to stealing from the Queen of England’s bedroom.

“Some of these journalists are waving the Queen’s underwear in public and boasting “I have the Queen’s knickers.’”

The ICIJ says the data was leaked, not stolen.

Singapore has grown in the last decade into Asia’s biggest wealth management centre as assets under management leapt four-fold to more than $1 trillion. It is tipped in a number of surveys to overtake Switzerland in the coming decade as the world’s top wealth management centre.

To try to safeguard its reputation as an internationally compliant wealth management centre, the government is set to adopt measures that make it easier to share information on potential tax evaders with other countries, including the United States.

It is also bringing in rules that compel financial institutions to identify and, if necessary, close accounts they strongly suspect are held by tax cheats. After July 1, handling the proceeds of tax evasion will be a criminal offence.

Singapore, which has more millionaires per capita than anywhere else in the world, has reacted more proactively to the growing push for transparency in private banking. Switzerland, for example, was forced to open up under enormous pressure from the United States, which led to the closure of Switzerland’s oldest private bank and formal investigations into some of the country’s biggest institutions.

Chong believes the offshore finance industry is being unfairly targeted when often, he argues, they are better regulated than some onshore jurisdictions.

“There is a shrill hysteria against the rich and powerful because of the hard economic times,” said the bespectacled and bow-tie wearing Chong. “To quote a leading tax case, ‘Whether poor and humble or wealthy and noble, a person has the legal right to pay the least tax possible’.”

Still, many governments are facing rising public anger over tax evasion at a time of economic austerity in many countries. The Tax Justice Network, a UK-based advocacy group that supports transparency in international finance, estimates on its website that $250 billion is lost in tax revenues each year owing to funds held offshore by individuals.


Chong’s company formed in 2004 when his firm Portcullis merged with TrustNet, an advisory founded in the Cook Islands that specialised in setting up offshore companies and trusts.

A year later, Singapore passed rules that encouraged the growth of trust companies, legislation that was a boon to the wealth management sector.

A Qing Dynasty scroll hangs in Portcullis’s Hong Kong office, with a mantra written in Chinese characters saying “San Dai Tong Tang, Wu Shi Qi Chang,” meaning: “three generations under one roof, five generations of prosperity”.

“I think there is no moral turpitude in wanting to protect your family from the slings and arrows of outrageous fortune,” said Chong, who was born in Malaysia and educated in Britain.

Trust companies in Singapore and elsewhere operate in a “grey area” of compliance, said Jason Sharman, a professor at Griffith University in Australia, who focuses on offshore financial centres, money laundering and tax havens.

“They may not be breaking Singapore laws but they may be making it a lot easier for foreign clients who break laws in those clients’ jurisdictions,” he said. “There’s often a large amount of turning a blind eye.”

Wealth managers say their core client base in Asia has legitimate reasons for wanting to keep money outside their home countries and to keep the details secret, such as personal security and to protect against political upheaval.

“Privacy is important for someone from the Philippines because they don’t want a kidnap and ransom situation,” said Angelo Venardos, an Australian and former banker who runs the Heritage Trust Group in Singapore. “For an Indonesian it means not having your financial affairs handed over to the wrong political party.”

After the data was lost, Portcullis faced a stream of calls from worried clients looking to expunge their records or move their accounts to another firm, several people familiar with the matter said.

People look at the skyline of the central business district in Singapore in this April 25, 2013 file photo. REUTERS/Edgar Su/Files

“Clearly there has been an impact on our business,” Chong said.

He doesn’t believe there is any evidence of illegal activity in the lost data but noted that what was legal a few years ago may not be now.

“There has been this bad press but hopefully in due course we can show that we have done no wrong,” he said. “The goal posts keep moving and we move with the goal posts.”

Editing by Michael Flaherty and Neil Fullick

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