SINGAPORE/HONG KONG • Thousands of clients are being booted out of bank accounts in Asia's wealth management industry, which is cleaning up after a money laundering scandal in Malaysia, the "Panama Papers" expose, and a global push for tax transparency, bankers said.
"For some global wealth managers, up to 30 per cent of private wealth clients in Asia are in the firing line," said Hong Kong consultancy Quinlan & Associates chief executive Benjamin Quinlan.
The clean-up is mainly focused on problematic clients in the Asian financial hubs of Singapore and Hong Kong, which manage more than US$1 trillion (S$1.4 trillion) of managed assets combined.
The scrutiny in Asia began in 2014 as banks moved to comply with tougher anti-money laundering rules, top bankers and compliance officers at nearly a dozen banks in Asia told Reuters.
But it has really gathered pace this year, they said.
The urgency increased with announcements that Switzerland and Singapore were conducting criminal investigations into billions of dollars allegedly misappropriated by Malaysian state investment fund 1Malaysia Development Berhad.
Then came the leaked documents in April from Panama law firm Mossack Fonseca on 214,000 offshore companies.
Private banks in Asia have also felt the pressure of aggressive tax amnesty programmes in Indonesia and India, aimed at bringing offshore wealth back home. There is also fear that regulators may impose big fines on banks which breach the rules.
Next year, a global tax transparency campaign starts to bite. Singapore, Switzerland and Hong Kong will be among 101 jurisdictions to begin collecting tax information that they will share to combat tax evasion.
All of this has "sparked a major review and filtering process", Mr Quinlan said, "with one global private bank we spoke to looking to offboard roughly 3,000 wealth management clients in Asia in 2017".
Account and transaction surveillance is expensive, so it is often cheaper for banks to kick out tricky clients, bankers said.
For some, there is no warning - they know their accounts have been closed only when they are suddenly unable to access them online or they get an unexpected cheque in the post, six people working at law firms, funds and service providers said. "We had one client whose account was just frozen, and he couldn't get the money out," said one Hong Kong fund administrator.
New standards adopted two years ago in Asia require banks to clearly identify a client, the client's business and, crucially, the origin of the money deposited.
The banks also need to check that the clients have paid all due taxes back home.
According to the head of a major corporate investigation firm, some banks in Hong Kong and Singapore have even used private investigators to perform due diligence on certain customers.