The Monetary Authority of Singapore (MAS) has proposed a digital platform to make it easier for financial institutions to detect and deter criminal activity.
Dubbed Cosmic (collaborative sharing of money laundering/ terrorist financing information and cases), the secure platform will allow financial institutions to share information on customers who exhibit multiple “red flags” that may indicate potential financial crime concerns, MAS board member Alvin Tan said during a second reading in parliament of the Financial Services and Markets Bill.
The amended bill modifies the Financial Services and Markets Act 2022 to provide the legal framework for the sharing of such information, including robust legal and operational protections to safeguard the confidentiality of the information being shared and the interests of legitimate customers.
The digital platform will initially focus on three key risk areas, which the MAS and the Commercial Affairs Department have identified, based on actual cases involving criminal networks.
The first involves the misuse of legal persons. Tan says that while the ease of setting up a company and opening a corporate bank account supports Singapore as an attractive commercial centre, regulators do not want criminals to take advantage of this efficiency to commit financial crime by using legal persons such as shell companies to launder monies.
The second risk area concerns trade-based money laundering, where criminals use trade as a disguise to transfer their illicit monies across borders, for example, by using fraudulent trade documents to move funds under the guise of genuine businesses operations.
And the third risk area covers proliferation financing – providing funds and financial services that support the proliferation of weapons of mass destruction – and the evasion of international sanctions.
Phased approach
As Cosmic is a new model, the MAS plans to introduce the system in phases. In the first phase, the regulator will make it available to six major banks in Singapore which are already collaborating with the authority to develop the platform, namely DBS, OCBC, UOB, Standard Chartered Bank, Citibank, and HSBC.
Sharing of information between MAS and these six banks will be voluntary in this first phase. This structure will allow the platform to achieve operational stability, and enable the MAS to closely engage with the financial institutions to calibrate Cosmic’s features and address operational concerns.
Subsequently, the MAS plans to broaden the coverage to more focus areas and financial institutions, and make sharing mandatory in higher-risk circumstances.
The regulator says it will require participating financial institutions to ensure the accuracy and completeness of the information shared on Cosmic and to correct any errors or omissions, especially if a customer has provided further clarifications to address their concerns.
The MAS will closely monitor how the financial institutions will use information in cases where they had exited customer relationships, to ensure that customers are given the opportunity to address their concerns.
As well as the six banks, MAS will also have access to all information shared on the platform. This is to monitor if the participants are using Cosmic appropriately, and to support MAS’ broader supervisory and surveillance role to ensure that financial institutions have robust defences against financial crime.
Singapore’s Financial Intelligence Unit, which analyzes and disseminates financial intelligence to law enforcement and regulatory agencies, will also be able to view and use Cosmic information to support the prevention and detection of financial crime.
The amended bill will enable financial institutions and MAS to respond quickly to potential criminal activity within the financial system, which will further strengthen Singapore’s reputation as a safe, trusted and innovative global financial centre, Tan adds.
