By Rachel Armstrong and John
O'Callaghan | Reuters – Mon, Jun 3, 2013 8:01 AM
SGT
SINGAPORE (Reuters) - The email landed at a tough time for David
Chong, the colorful founder and chairman of Portcullis TrustNet,
one of Asia's biggest wealth advisory companies.
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 minimize 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 centers, 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.
"OUTRAGEOUS FORTUNE"
Chong's company formed in 2004 when his firm Portcullis merged
with TrustNet, an advisory founded in the Cook Islands that
specialized 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 centers,
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.
"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)
