Standard Chartered PLC (StanChart) has been placed under investigation over the transfer of US$1.4 billion (S$1.9 billion) from Guernsey to Singapore before new tax transparency rules could be implemented, as told by sources familiar with the situation.
For StanChart which is headquartered in the United Kingdom, the Financial Conduct Authority plays the role of local regulator. While the regulatory body was informed of the transfers, it is not conducting a review at the moment. Instead, the Monetary Authority of Singapore (MAS) and Guernsey’s Financial Services Commission have taken the lead.
The assets in question belong mainly to Indonesian clients, some who have links to the Indonesian military (TNI). These links raised flags in the investigation, according to The New York Times.
The assets transfer
The Common Reporting Standard (CRS) is a worldwide scheme for tax data exchange. Countries under the agreement have to share annual reports on accounts of individuals who were taxed by member nations.
Both territories are signatories of the CRS treaty but Singapore implemented the rules at a later date than Guernsey. In late 2015, StanChart shifted some S$1.9 billion out before Guernsey’s adoption of the CRS.
StanChart has ceased operations on the Channel Island since then.
According to Bloomberg, anonymous sources said that StanChart reported the issue to regulators themselves. The bank’s processes are currently being reviewed, and regulators have not suggested collusion between bank and client to evade tax.
Academic director at NUS Business School, Johan Sulaeman, said that the bank’s self-reporting to regulators plays to their advantage.
Dr Sulaeman added that banks should accept whistleblowing as a practice to promote professionalism and ethics within the industry.
He further said that there will be implications for all financial institutions following this matter, and that this investigation and the regulators’ response will “send a message” to “reiterate how strong internal compliance policy has to be” in the banking industry.
Besides authorities in Guernsey and Singapore, the Indonesian Financial Transaction Report and Analysis Centre (PPATK) is also investigating the transfer, which was conducted through multiple accounts.
PPATK chairman, Kiagus Ahmad Badaruddin told The Jakarta Post that they are “communicating with relevant agencies” in their investigation. He added that they already have the details of individuals involved in the reported transactions and the records of said transactions.
Dr Kiagus said that the transactions could be classed as money laundering if the assets were transferred overseas to evade taxes and the investigation could check if corruption played a role in the transfer.
Executive director of the Centre of Indonesia Taxation Analysis (CITA), Yustinus Prastowo, said that it is not out of the question for such large amounts of money to be derived from corruption.
Bloomberg reported that Guernsey’s staff highlighted disparities between the earnings of some clients and the balances in their accounts. In extreme cases, clients stated tens of thousands in yearly earnings while their accounts held tens of millions of dollars.
Yustinus suspects that this discrepancy could be an indication of hiding dirty money from being traced by law enforcement agencies. He added that “even if the funds came from legal sources, transferring to overseas accounts could indicate their owners tried to dodge tax.”
TNI spokesperson, Major-General Wuryanto, has yet to respond to media enquiries, and both MAS and StanChart have declined to comment on the incident.