* Asia bankers push out thousands of suspicious accounts -
* Anti money-laundering rules implementation started 2 years
* 'Panama Papers', 1MDB and tax campaigns giving it impetus
* Compliance costs and staff soaring at banks
* Some accounts are abruptly closed with no warning
By Saeed Azhar, Michelle Price and Anshuman Daga
SINGAPORE/HONG KONG, Dec 2 (Reuters) - 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 say.
"For some global wealth managers, up to 30 percent of
private wealth clients in Asia are in the firing line," said
Benjamin Quinlan, CEO of Hong Kong consultancy Quinlan &
The clean-up is mainly focused on problematic clients in the
Asian financial hubs of Singapore and Hong Kong, which manage
more than $1 trillion of managed assets combined.
Bankers expect a new round of consolidation among small
wealth managers, as the costs of client due diligence and
surveillance become unsustainable.
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
But it has really gathered pace this year, they said.
TAX INFORMATION EXCHANGE
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. They showed Hong
Kong was the world's most active centre for the creation of
shell firms, which can be used to avoid taxes.
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 and fear regulators may
impose big fines on banks who 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," Quinlan said, "with one global private bank we spoke
to looking to offboard roughly 3,000 wealth management clients
in Asia in 2017".
Compliance and regulatory costs affecting the banking
industry have soared since the 2008 global financial crisis.
Consultants LexisNexis Risk Solutions said anti-money
laundering efforts are costing banks $1.5 billion annually in
Asia Pacific and rising. Banks globally are expected to spend
$12 billion on anti-money laundering compliance in 2016, says
Quinlan & Associates.
Account and transaction surveillance is expensive, so it is
often cheaper for banks to kick out tricky clients, bankers say.
For some, there is no warning: they know their accounts have
been closed when they suddenly are unable to access them online
or get an unexpected cheque in the post, six people working at
law firms, funds and service providers said.
They said several funds incorporated in the Cayman and
British Virgin Islands but operating in Hong Kong, were among
those who found their bank accounts abruptly closed.
"We had one client whose account was just frozen, and they
couldn't get the money out," said one Hong Kong fund
One corporate account at a global bank in Hong Kong was shut
due to the client's inability to provide detailed identities of
investors in his company, a direct source told Reuters.
DECADES OF TRANSACTIONS
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 the clients have paid all due taxes back home.
In some cases, compliance staff at large older banks sit
glued to old mainframe style computers tucked away in remote
parts of the bank. For hours on end, they click through and
manually scan decades of transactions, people who conduct these
searches told Reuters.
According to the head of a major corporate investigation
firm, some banks in Hong Kong and Singapore have even used
private eyes to perform due diligence on certain customers.
Nearly 40 percent of wealth firms in the Asia-Pacific region
have cited compliance as their main strategic budget focus next
year, EY said in its Global Wealth Report. That compares with 11
percent and 9 percent for European and North American firms
"You need to make sure you've got the right controls in
place - people, compliance, technology," said Rahul Malhotra,
who heads JPMorgan's private banking business in Southeast Asia.
"Cost-to-income ratios are definitely going to be impacted
in this business, which will result in further consolidation."
Compliance staff also are gearing up for tax investigations.
Western governments led by the United States have already
aggressively targeted European wealth management centres such as
Switzerland to recoup undeclared tax money. This led to whopping
U.S. fines against top wealth managers including UBS, Credit
Suisse, HSBC and a host of Swiss banks.
Asia could be next in the line of fire, with Singapore and
Hong Kong as key targets, lawyers and banking sources say.
(Additional reporting by Anshuman Daga in Singapore, Lisa Jucca
in Hong Kong and JR Wu in Taipei. Editing by Bill Tarrant)