With Burma’s state-controlled banking system crippled by stifling regulations, Burmese business people – and others with access to hard currency – have for years looked to Singaporean banks to hold their assets.
Singapore has a much more developed financial services sector than other south-east Asian countries.
The city-state, as an international finance centre, is relatively open to deposits from overseas, and its banks have an enviable reputation for service and efficiency. “Leading entrepreneurs in Burma regard Singapore as their refuge from the chaos of Burma’s monetary and financial system,” says Sean Turnell, a professor at Australia’s Macquarie University and Burma specialist.
But as the US leads efforts to increase the financial pressure on Burma’s ruling military junta and its supporters, that practice has put Singapore in an uncomfortable spotlight.
Visiting the region last week, a senior US official called on Singapore and its south-east Asian neighbours to crack down on Burmese funds parked in their banks.
“We believe that there are [Burmese] regime officials with accounts in Singapore and other countries and we hope that governments will ensure that their financial institutions are not being used as sanctuary,” said Kristen Silverberg, the assistant secretary of state in charge of co-ordinating US diplomatic policy with the UN and other international organisations.
The statement was one of the most explicit the US has made about the possible role of Singapore, its closest ally in south-east Asia, in sheltering the assets of Burma’s military leadership.
Bank secrecy laws prevent the Monetary Authority of Singapore from commenting on whether Burmese officials have accounts in the city-state, but it has said that any suggestion that junta leaders may be using it as a “financial haven” are “completely baseless”.
It says it acts strictly against money-laundering of illicit funds, such as earnings from “criminal conduct”, and funds linked to terrorist groups or regimes targeted by UN sanctions – which Burma has not been.
But Prof Turnell says the source of the generals’ money – if not actually illegal according to Singaporean law – is still of questionable legitimacy. For years Burma’s generals have been accused by opposition groups of exploiting a monopoly on profits from Burma’s extensive natural resources.
“If anyone looks at any of the entrepreneurs, or any business in Burma that makes any money at all, it makes money in rent-seeking on the state in various forms,” Prof Turnell says. “Thus, one might regard any of the money of the regime as somewhat ill-gotten”.
The US request for Singapore to restrict its banking ties with Burma comes as Singapore promotes itself as a regional offshore banking centre with some of the world’s strictest bank secrecy laws.
Singapore has quietly co-operated with the US previously on similar issues. When the US imposed tougher financial sanctions on North Korea in 2005, funds deposited by the Pyongyang government in Singapore were removed under US pressure, according to an intelligence official with knowledge of the issue.
Rangoon-based diplomats say the example of US financial pressure against North Korea has rattled the junta, already shaken by recent financial sanctions imposed by the US and Australia.
Banks in Singapore are required to identify “politically exposed persons”, defined as senior officials from foreign governments, who might deposit funds in the city-state, according to MAS guidelines.
Singapore, which currently chairs the Association of South-East Asian Nations and is host of next week’s annual gathering of the group, has argued that formal economic sanctions could backfire on efforts to push the military junta into talks with the democratic opposition, though George Yeo, the foreign minister, has promised the city-state would comply with any UN-mandated sanctions.
Irrespective of government policy, Prof Turnell says Singaporean banks may be quietly re-evaluating or cutting their ties with Burmese elites.
“They are extremely jealous of their squeaky clean image – and the idea that they uphold more internationally accepted norms than other places,” he says. “This has the potential to embarrass Singapore and tarnish that competitive edge.”