Will the Government of Singapore Investment Corporation (GIC) give up its stake in the Swiss banking giant UBS, which has now admitted its staff took part in illegal activities?
The Wall Street Journal reported yesterday GIC lost $33 billion last year but does not intend to give up its stakes in Citigroup and UBS. It sees them as long-term investments though both are losing money, said the report.
But the Swiss bank has now agreed to pay $780 million in penalties in a deal to resolve criminal fraud charges, says Reuters.
The bank helped rich Americans evade taxes by opening secret accounts concealing their identities, said the US Justice Department.
Such illegal activities would not have been tolerated in Singapore – or will it give the bank a second chance?
The bank has admitted some of its private bankers and managers had “participated in a scheme to defraud the United States", reports the New York Times.
“We accept full responsibility for these improper activities," said UBS chairman Peter Kurer, reports AP. "Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections," he said.
The bank has agreed to identify the tax evaders as part of the deal.
About 17,000 American clients concealed their UBS accounts from the IRS, hiding assets worth about $20 billion, reports AP quoting US officials. That's more than twice as much as the 11 billion Swiss francs (about $9.75 billion) GIC invested in UBS in December 2007.
GIC must have been aware of the allegations against UBS when GIC’s chief investment officer Ng Kok Song defended its investments in Citigroup and UBS in September last year.
Former UBS banker Bradley Birkenfeld pleaded guilty in June last year to conspiring to defraud the IRS by helping US tax evaders. The US Justice Department then sought court orders to elicit the names of the tax evaders from UBS.
Singapore may also face US political pressure over its role as a financial centre for rich foreigners, Prime Minister Lee Hsien Loong said last December. Reuters reported:
He said at a lunch hosted by Singapore's Foreign Correspondents Association that US pressure on some European countries to open their banking system to greater scrutiny may lead to more European money flowing into Singapore.
"But I expect Singapore to come under pressure too," he said.
Singapore has strict bank secrecy laws and denies it is a tax haven, said the Reuters report.
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