Editor
SWITZERLAND OF THE ORIENT
The ironies of Singapore’s massive investment in troubled Swiss banking giant UBS are piling up. Even Lee Kuan Yew himself has now said that the Government Investment Corporation invested “too early” in UBS, with the result that is now showing a loss of billions of dollars of citizens’ money on the deal.
GIC put 11 billion Swiss Francs (approx US$10 billion) into UBS in late 2007 and followed that up by subscribing to a rights issue in 2008. UBS was the biggest of all Singapore’s ill-starred investments in foreign banks that made just as markets were starting to show major faults.
But Singapore may need to be worrying about rather more than just the losses sustained by UBS through its follies and forays into all manner of spivvy instruments. The fact is that UBS was more than just the recipient of GIC cash. The relationship with this high-powered Swiss instrument of tax-avoidance and money-laundering goes deeper. UBS is the most important foreign player in Singapore’s mostly successful promotion of itself as the wealth management center of Asia.
For that one needs a no-questions-asked view of money’s origin and freedom from taxes – both of which are readily supplied by the government. But it also needs big investment-house names whom the billionaires of Asia think they can trust with their money. That was where UBS came in. Could there be any name more representative of discretion and skilled and conservative management than the largest of all the Swiss institutions? The biggest gnome in all of Zurich – or to be more precise, in Zug, that even more money-friendly little town in an adjacent canton populated mainly by multinational tax evaders.
So in 2007 UBS became the privileged occupant of one of the top 10 colonial era buildings in all of Singapore — Command House, the former residence of British military commanders and the Singapore president. The UBS website thus describes what is now the UBS Wealth Management Campus, sitting atop a hill and with a commanding view of the city below:
Command House – an architectural gem with a rich history
The Campus in Singapore is set on half a million square feet of landscaped grounds, with its classrooms in an unusual black, white and brown colonial building. Command House has had a rich history as the headquarters for influential British military leaders and statesmen, including Admiral Lord Louis Mountbatten, 1st Earl Mountbatten of Burma, last Viceroy and first Governor General of Independent India and Lieutenant-General A E Percival, who commanded the British forces during the Battle of Malaya and Battle of Singapore. More recently, it was the official residence of former President Ong Teng Cheong, the first directly-elected President of Singapore.
Other big-name “wealth managers” can use the facility for training and promotion, but the name on the door is UBS.
Unfortunately for both UBS and Singapore, the Swiss bankers have not only recently lost billions of dollars through incompetence (and worse). They have also attracted the wrath of the US authorities being caught red-handed encouraging US citizens to break the law by siphoning money into tax-free accounts in Switzerland to avoid the global tax assessments to which US citizens are subject. It has had to pay $780 million and hand over accounts details in respect of cases. Even more dangerous, it is having to fight US attempts to get data on another 52,000 or so Americans who have accounts with it.
If UBS eventually loses in US courts it will either have to break its promised secrecy on a massive scale, or have its whole US operations shut down. Try being a global wealth manager if you cannot operate in the largest market!
There appears to be more trouble coming in the form of a new American determination to do something about tax scofflaws. US Internal Revenue Service Commissioner Douglas Shulman says that the Obama administration is “committed to taking aggressive action on offshore tax abuse”. US Sen Carl Levin said offshore tax havens cost the US economy $100 billion a year and that Switzerland bears much of he blame. In addition, Treasury Secretary Timothy Geithner told a Congressional hearing that the government is going after companies using offshore tax havens.
But it is not just the US taxman who is looking at offshore tax and other scams. The collapse of global markets has shown up a multitude of examples of secrecy of offshore locations hiding all kinds of nefarious activities conducted in the name of investment. Defrauded investors are on the warpath, regulators are being woken from their slumbers and dispatching sleuths to all corners.