The world's tax havens are being forced to clean up their acts.
As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies.
Now, private banks and wealth managers are scrambling to convert so-called black money - assets that have not been disclosed - into accounts that are above board.
The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits.
''There's much less black money now than three years ago,'' said Jean Schaffner, head of the Luxembourg tax practice at the law firm Allen & Overy. ''It's in the banks' interests for clients to come forward with their money.''
For decades, Western governments tolerated offshore tax havens, places where the wealthy could park millions away from the gaze of their domestic authorities. Switzerland, in particular, developed a reputation as a place where the wealthy could rely on secrecy laws.
The tide began to turn in 2008, particularly after the financial crisis prompted many governments to act in concert.
US authorities began pursuing UBS, the largest Swiss bank, saying it had helped thousands to hide money from the Internal Revenue Service.
UBS later settled with the US Justice Department, turning over details of 4450 client accounts and paying a fine of $US780 million in exchange for a deferred prosecution agreement. Other banks, including Credit Suisse and Julius Baer, have been ensnared by the broad investigation.
Global regulators followed with their own crackdown. For years, the Organisation for Economic Co-operation and Development had tried to rein in offshore financial centres that did not meet certain requirements, such as failing to share tax information with other countries.
In 2009, the OECD compiled a blacklist for the Group of 20, which comprises the world's largest economies, exerting pressure on nations to be more forthcoming. To get off the list, several countries and regions, including Andorra, Costa Rica, the British Virgin Islands, Liechtenstein and Monaco, have since agreed to adopt international standards.
''People were defrauding countries because no one was sharing information with each other,'' said Pascal Saint-Amans, director of the centre for tax policy at the OECD in Paris, who has been co-ordinating much of the global overhaul in how tax havens operate. ''I want to crack down on secrecy, and we're doing just that.''
As Switzerland and other locales tightened their controls, many initially flocked to other tax havens like Singapore and Hong Kong, which still offer some of the world's most secret accounts. But these places, too, are facing new pressures.
Several European allies reached an agreement with the US in February to help enforce the Foreign Account Tax Compliance Act, which requires that virtually every financial institution in the world report any accounts held by Americans.
Many wealthy clients, who previously had not worried about revealing all their international assets to home authorities, are taking advantage of tax amnesty programs in countries like the United States and Britain. The global push against tax havens has been a boon for government coffers.
So far, countries have collected about $US18.7 billion ($18.1 billion) in additional taxes from more than 100,000 wealthy individuals, according to the OECD.
The situation has left private banks scrambling to bolster their risk management practices and educate wealthy clients on the new regulatory environment.
It's a costly process. Banks must stay on top of fast-changing global regulations, ensure that clients are paying tax on all their investments and improve their compliance efforts, for example, by reporting potential tax evasion to authorities.
Still, the changing dynamic could create some opportunities. Analysts say a leaner, more consolidated private banking sector will have greater resources to attract an increasing number of wealthy people from emerging economies. Swiss banks, which have a history of attracting foreign clients, have already expanded into Latin America and Asia, while Austrian banks have focused on Eastern Europe and Russia.
Keeping these new clients will not be easy. Following the financial crisis, the wealthy are demanding lower fees and transparency over where their money is invested.
They also have shied away from complicated financial products, like asset-backed securities, in favour of investments that can be easily sold if the markets take a turn for the worse.
The New York Times