Singapore has become a major wealth management hub over the past 30 years. As at the end of 2012, total assets being managed here were worth more than S$1.4 trillion (US$1.09 trillion)
But encouraging more wealthy clients from around the globe to move their money here is becoming more difficult.
An increasing number of foreign governments are making a greater effort to track their citizens' money.
And in the process, they are demanding that offshore financial institutions holding these funds release data about their rich clients' accounts.
Singapore regulators have responded by putting in place a slew of strict new rules. The aim is to maintain Singapore's reputation as a clean financial hub. But they may also deter more secretive investors from putting their money here.
This balancing act means the industry's operations have become more complex. Compliance costs have also risen, further depressing already thin profit margins.
What the new rules are
Singapore last year signed the Convention on Mutual Administrative Assistance in Tax Matters, developed by the Organisation for Economic Cooperation and Development (OECD).
In doing so, Singapore joined more than 60 other countries, including major economies such as the United States, Australia and Japan, other wealth centres such as Switzerland and China as well as Asian economies such as India, Indonesia and South Korea.
Singapore's action will make it easier for foreign regulators to obtain information about the funds their citizens who are being investigated for tax evasion hold in the Republic.
Then there is the Foreign Account Tax Compliance Act (Fatca). This is a law that the United States has unilaterally imposed on the rest of the world.
The legislation requires all financial institutions outside the US to provide data about financial accounts held by US nationals to the American taxman on a regular basis. It takes effect in July.
Fatca has drawn criticism, most notably from Russia, which has said that it is too invasive. China, too, has not officially said it would abide by the new law.
But Singapore has signed a deal with the US that would make it easier for banks here to report on their American account holders to the US authorities.
Singapore has also taken other measures.
In May last year, the Inland Revenue Authority of Singapore (Iras) was given powers to obtain bank and trust information from financial institutions without first having to seek a court order.
Singapore also implemented a new law last year that designates tax crimes as money laundering predicate offences.
In other words, tax crimes are now regarded as components of the more serious offence of money laundering. As a result, anyone attempting to disguise the source of such funds may now be charged with a money laundering offence.
Taken together, these moves have certainly strengthened Singapore's image as a reputable financial centre that spurns dirty money and does not harbour tax criminals or evaders.
But it has not been easy or cheap for industry players to get in line.
Banks have had to spend massive amounts on IT systems to execute the checks on clients required by the new laws, and to generate the reports that they now have to submit to regulators.
"The cost of compliance has gone up and there's a lot of time spent making sure everything is done right, so that has hurt productivity and overall profitability," said Tan Su Shan, DBS Group's head of consumer banking and wealth management.
Tan, who is also chairman of the Private Banking Industry Group, noted that customers have been affected too.
The new laws call on banks to thoroughly check the background of new clients to ensure their funds are truly clean before allowing them to open an account.
This can be an onerous process if the customer happens to own complex trusts or structures with many layers.
"Industry players are saying it can now take three or four months to onboard a client where previously it could've been as short as a few days," she said. "Onboarding" refers to the process of assessing and accepting a new client into a bank.
KhattarWong partner Ban Su Mei said some of her clients have complained of having to wait as long as six months to open a bank account. Even then, some end up being rejected by the banks.
"Banks are taking a long time or refusing to open bank accounts because they see an offshore corporate structure or if the Singapore company is owned by an offshore structure," she said.
"We need to draw a balance. Not every structure that has an offshore component is there for tax evasion or money laundering".
Some private banking clients with accounts in Singapore are now also concerned about privacy, especially foreign nationals who pay taxes in countries where corruption and political instability are rampant, another tax expert said.
These clients worry that if the taxman in their home country gets hold of certain details from Iras, these may be passed around various government offices or even leaked publicly.
Iras has said, however, that it has a process of filtering foreign requests for information, to ensure it responds only to valid requests based on solid evidence of tax evasion by the account holder.
A brave front
However tough they make life for private banks and their clients, most players believe these measures will be good for Singapore in the long run, as it will further boost the city's sterling reputation and ensure only clean money comes in, which would support sustainable growth for the wealth industry.
The industry has even published its own set of guidelines of private banking best practices that call for much the same levels of transparency and due diligence that regulators seek.
And Singapore can at least be assured it is not the only country affected by the tighter rules surrounding wealth management.
"I've seen this movie once before," quipped Francesco de Ferrari, the head of private banking for Credit Suisse Asia-Pacific.
"I have lived through such a period of regulatory changes in Europe and what I know is in the end, there will be a level playing field because this is a global issue, not just an issue for Singapore.
"Hong Kong is going through the same (thing), and Switzerland is having similar discussions."
During this adjustment period, as compliance officers get a handle on all the new laws, banks are likely to play it safe and take a long time to approve new clients or even reject new business outright, if the clients have "the wrong profile", Ms Tan noted.
And while that may seem anathema to the growth of the wealth management industry, she believes this is just a bitter pill that Singapore has to swallow for its own long-term good.
The regulatory environment is less important to the industry's growth than actual wealth creation, she said.
"Because if your processes are robust and your new clients are approved and onboarded, at least you know that these are good, clean clients who can bring you a sustainable long-term business. As their business grows, so will yours," she said.
A few critics have asked why Singapore needs to swallow this pill at all, given that much of the push for these new rules is coming from the West, whereas most of the wealth managed here belongs to Asian clients.
But private bankers say reputation is everything.
"When clients want to diversify their assets and they choose to book their assets in Singapore, the No. 1 reason is always that they trust Singapore, because it does not make compromises," said Credit Agricole Singapore chief executive Sen Sui.
DBS' Tan added: "There are some jurisdictions where it's so easy to open an account that people would automatically assume that if you're banking there you may have something to hide.
"It's much better to be in the position where people believe that if you've been approved by a bank in Singapore, then you should be OK." Yasmine Yahya, The Straits Times/ANN, Singapore