Private banks in the Asian financial hub, Singapore, are the next target of tighter regulations after the crackdown in the U.S. and Europe on tax cheats.
The Southeast Asian city state, which could overtake Switzerland as the world's biggest hub of offshore wealth by 2020, according to research firm Wealth Insight, is also the fastest growing wealth center globally with $550 billion in assets under management, of which about $450 billion is offshore wealth.
Given the huge size of this pie, private banks in Singapore are worried about whether the new regulations will hurt their competitiveness.
From July 1, any banks believed to be abetting tax evasion or having inadequate controls in place may face a heavy fine, criminal charges and possibly the loss of their license to operate in the city state.
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Having reaped the benefits of Asians' growing wealth and tighter banking regulations elsewhere, private banks could soon feel some pain.
"Singapore is going to lose out in the short term -- I've heard banks booking new accounts in Dubai and Hong Kong and even banks are moving bankers and their accounts to Dubai," said one 39-year old Singapore-based private banker, who asked not to be named.
"What can happen is that while some of the new 'dodgy' money may not make it now to Singapore which is a good thing…even 'healthy' money will not come in because clients want to be confident that there won't be any harassment," said the banker, who has worked in Singapore for 11 years.
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Switzerland last month unveiled plans to ease its once untouchable bank secrecy laws to allow banks to reach individual settlements with the U.S. in cases where their clients have evaded paying taxes.
Since Swiss bank UBS said in 2009 that it had helped clients avoid paying taxes, there has been pressure internationally to clamp down on secrecy in the banking sector. About 13 banks are under formal investigation to avoid criminal prosecution including Credit Suisse and Julius Baer, according to Reuters.
While industry watchers say Singapore should continue to benefit from Switzerland's woes, the private banking sector globally is facing closer scrutiny and that means headwinds for the city state too.
"I talk to plenty of bankers and they say look I spend more time learning about compliance and regulations than managing clients," said Mykolas Rambus, the CEO of Wealth-X, a research firm that tracks the ultra-wealthy. "And that's a very unfortunate position to be in. Who would want to be a private banker when the hurdles keep mounting up?"
Still, regulation is a global trend and something those working in the industry are adapting to, says George McFerran, the managing director for Asia Pacific at recruiter eFinancialCareers whose clients include major banks such as HSBC, Morgan Stanley and regional heavyweight DBS.
"Global regulation and control is very much a feature of working within financial services whether you're in private banking, equities or in the debt markets in a way that it's never been before, so that comes as part of the territory now," he said.
In fact new regulations in the banking sector create a level playing field for private banks, say some in the industry.
"The world is getting smaller… We might see some short-term erosion [from tighter regulations], but when global economies decide to focus on one centre it's usually because a number of positive attributes comes together," said Peter Scott, general manager Asia Pacific of Avaloq, which provides banking software solutions to the retail, wealth management and private banking sector. "A confluence of factors makes Singapore attractive and I don't think the new rules will change that."
Others points to the long-term benefits of tighter regulations for private banks in Singapore.
"Regulators in Hong Kong and Singapore have been proactive to make sure they learn from the very high moving regulatory environment across the globe - I think there is a certain level playing field that has been created," Boris Collardi, CEO of Swiss Private Bank Julius Baer told CNBC.
"Even in Asia, that business that we're able to generate is of that new generation - it's not old generation business and I think clients, new generation understand that," he said referring to new regulations.
Deepak Sharma, co-chair of the Private Banking Industry Group in Singapore and chairman of Citi Private Bank, adds: "Recent announcements will actually have a positive effect on Singapore's status as a premier global financial center as they will deter illicit funds and, instead, attract the right kind of clients and monies."
According to Sharma, "Singapore has also been a little fortunate in terms of geography. Asia is where much new wealth is being created and Singapore is viewed as a safe and sound place in this region to preserve and grow one's wealth."
Wealth-X's Rambus says people using private banking services tend to be those with a net worth of $30 million or more and their ranks are on the rise against a backdrop of fast economic growth in the region.
According to data from consulting firm Capgemini, Asia-Pacific became the region with the highest number of high net worth individuals, or those with $1 million or more in investable assets, in 2011, overtaking North America for the first time.
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That helps explain why major banks, while pulling back on investment banking in recent years, continue to ramp up their private banking teams in Singapore.
Avaloq's Scott said in Asia, Singapore and Hong Kong were the focus for his firm, which hoped to develop Singapore as a center for business process outsourcing to service clients in the region.
And According to Julius Baer's Collardi: "We've named Asia our second home. We've been here since 2006 expanding almost exponentially now."
- By CNBC.Com's Dhara Ranasinghe, Follow her on Twitter: @DharaCNBC