Singapore approves groundbreaking "Cosmic" fincrime data

SINGAPORE'S PARLIAMENT has approved the city-state's new AML sharing database, dubbed 'Cosmic.'

The consolidated digital platform is expected to be a game changer for the Asian financial centre, with proponents calling it "ground-breaking."

The amendments to the law agreed on Tuesday allow banks to share information when suspicious transactions exceed a certain level.

The local regulator, MAS, and six banks will be part of Cosmic, which stands for Collaborative Sharing of Money Laundering/Terrorist Financing Information and Cases.

Citibank, DBS, HSBC, OCBC, Standard Chartered, and UOB are among the institutions that will collaborate with the Monetary Authority of Singapore (MAS) to create the platform. The platform will be operating by the end of next year.

Information exchange will be voluntary in the first phase before becoming required.

Over the following few years, it will be expanded to incorporate more financial institutions and major threats.

The Financial Services and Markets Bill in Singapore authorises financial institutions to request and share sensitive information about individuals and corporations in order to help flag, detect, and prevent money laundering, terrorism funding, and proliferation financing.

Cosmic will first concentrate on three major risks:

• Shell firms that conceal true ownership

• Cross-border trade that conceals criminal revenues

• Shell companies that allow for indirect trade and payments to sanctioned countries.

HSBC Singapore chief compliance officer Jamil Ahmed described the platform as "groundbreaking," adding that the initiative "will position Singapore as a market leader in the global fight against financial crime," while Citi Singapore country chief compliance officer Dylan Lee said the move will result in a safer banking environment for clients and strengthen Singapore's position as a financial centre.

To protect legitimate consumers, financial institutions must examine a client's profile before releasing records, consider other information sources other just Cosmic, and allow customers to explain any questionable behaviour identified.

"We will only use the data for the purpose of detecting any illicit activities related to financial crime," said UOB head of group compliance Daniel Ng, adding that the banks are dedicated to maintaining client data security.

The US Patriot Act and the Proceeds of Crime Act 2002 currently allow such data exchange in the United States and the United Kingdom.

On Tuesday, Trade and Industry Minister Alvin Tan informed parliament that the MAS owns Cosmic and will ensure that data is transmitted and maintained securely.

“The platform will have robust controls, including cyber-security measures such as data encryption, and firewalls to block unauthorised external access. It will also have strict user access limitations. These controls will be subject to periodic audits to ensure the efficacy,” he said.

Mr Tan told the House that no red-flag indicators would be triggered for the majority of clients, adding that the revisions include legal and operational measures to preserve the confidentiality of the information being exchanged as well as the interests of genuine customers.

Institutions can also request information from other banks and warn them about potential problematic actors.

According to Lam Chee Kin, DBS's head of legal and compliance, criminals are becoming more clever and engaging with each bank differently, making it difficult for any one institution to ferret out unlawful schemes alone.

Cosmic gives banks more tools to bridge this information asymmetry, he says.

According to Loretta Yuen, OCBC's head of group legal and compliance, information sharing on Cosmic is linked into the bank's data analytics capabilities, enhancing its risk detection strengths and knowledge.

She also stated that it will drive more efficient resource allocation in the sector.

"Cosmic enables participant banks to capitalise on the economies of scale and tactical advantages gained by having a banking sector that can effectively share risk information in a timely manner, with a common goal of combating financial crime."

By fLEXI tEAM