MAS said Cosmic will initially focus on three key financial crime risks in commercial banking – abuse of shell companies, misuse of trade finance for illicit purposes and financing that supports the proliferation of weapons of mass destruction. — Bloomberg
SINGAPORE: To thwart financial criminals who attempt to avoid detection by making illicit transactions across an ever-shifting web of accounts, the Monetary Authority of Singapore (MAS) has mooted a secure digital platform for financial institutions (FIs) to share information on suspicious customers.
A bill proposing amendments to the Financial Services and Markets Act to set up the platform and set out rules governing its initial phase was put up for its first reading in Parliament by Minister of State for Trade and Industry Alvin Tan on Monday.
Dubbed “Cosmic,” which is short for Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases, the information-sharing framework will be jointly developed by MAS and six major commercial banks in Singapore – DBS, OCBC, UOB, Standard Chartered Bank, Citibank and HSBC.
In a brief sent to The Straits Times, MAS said Cosmic will initially focus on three key financial crime risks in commercial banking – abuse of shell companies, misuse of trade finance for illicit purposes and financing that supports the proliferation of weapons of mass destruction.
The six banks will be permitted to voluntarily share with one another information on customers that exhibit multiple red flags indicative of potential illicit activities through Cosmic during this initial phase.
However, the authority said it plans to make some aspects of sharing mandatory and progressively extend Cosmic’s coverage.
Despite closely supervising and working with financial institutions to strengthen Singapore’s defences against the three key risks, MAS said a remaining weakness in the effective detection of illicit financial flows lies in the inability of FIs to alert one another to unusual activity in their customers’ accounts.
“Financial criminals exploit these ‘information silos’ by making illicit transactions through a web of accounts in different FIs and moving from one FI to another to avoid detection.”
Cosmic will enable FIs to “conduct sharper analysis of customer behaviours and activities to detect potential illicit activities more promptly and warn each other of such activities”, said MAS.
“By eliminating the information gaps between FIs, it will be easier to detect criminals. A legislative framework will need to be introduced to enable and govern Cosmic.”
The authority conducted a public consultation on the proposed bill in October 2021. It said respondents were generally supportive of the proposals, and their feedback has been incorporated into the proposed bill where appropriate.
The Straits Times has contacted MAS for details on the incorporated feedback, the reason information-sharing is voluntary in the initial phase, and examples of cases where Cosmic could help.
On the key features of the bill, MAS said information-sharing will be permitted only if a customer’s behaviour or transaction activities exhibit predetermined red flags that cross stipulated thresholds, suggesting that potential financial crime could be taking place.
“The sharing of customer information amongst FIs must be conducted within a robust legal framework that safeguards the interests and privacy of legitimate customers.”
The bill will, therefore, permit the sharing of information solely for the purposes of mitigating money laundering, terrorism financing and proliferation financing risks.
Moreover, the sharing on Cosmic supersedes any restrictions on the disclosure of customer information that any written law or contract may impose, said MAS.
It added: “For the vast majority of individuals and companies that are legitimate and do not exhibit risky behaviours, FIs will neither have a reason to share their customers’ information nor will they be permitted to.” — The Straits Times/ANN
