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New digital platform allowing banks to exchange information on suspicious customers launched

New digital platform allowing banks to exchange information on suspicious customers launched

Source: Straits Times
Article Date: 01 Apr 2024
Author: Samuel Devaraj & Andrew Wong

The Monetary Authority of Singapore said legislation which set out the legal basis and safeguards for such sharing also comes into effect on April 1.

A centralised digital platform which enables banks to voluntarily share information with one another about suspicious customers was launched on April 1.

The Monetary Authority of Singapore (MAS) said in a press release on the same day the intent of Cosmic, which stands for Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases, is to aid the global fight against money laundering, terrorism financing and proliferation financing, which includes the financing of weapons of mass destruction.

First announced in 2021, Cosmic was co-developed by MAS and six banks - DBS, OCBC, UOB, Citibank, HSBC and Standard Chartered Bank. They will be the ones to use the platform initially.

MAS said the sharing of information on Cosmic focuses 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.

It said legislation which set out the legal basis and safeguards for such sharing also comes into effect on April 1.

The Financial Services and Markets Act 2022 was amended in Parliament in May 2023 to set out the legislative framework for Cosmic.

MAS said the banks in Cosmic can share customer information with each other only if the customer’s profile or behaviour displays ‘red flags’.

It added the amended Act requires the banks to have safeguards to protect the confidentiality of information shared.

MAS said this will allow banks to share information on potential criminal behaviour while protecting the interests of most customers who are legitimate.

It added customers are encouraged to provide timely responses if requested by the banks to clarify their risk profiles or transactions, so the banks can make informed risk assessments.

In response to queries from The Straits Times, an MAS spokesperson said legitimate commercial, personal, or business transactions should not trigger sharing on Cosmic.

She added it was not advisable for those on the list to be informed as this could alert potential criminals, causing them to cover their tracks, making it harder to disrupt their activities.

Highlighting the benefits of the new platform, Mr Adam Maniam the deputy head of the criminal law practice at Drew & Napier, said money laundering is usually carried out in a decentralised manner. And illicit funds are typically spread out across institutions and jurisdictions to reduce the risk of detection.

Mr Maniam added: “While Cosmic provides a good start to help combat money laundering and terrorism financing in Singapore, such illicit activities frequently involve cross-border transactions, which Cosmic may not be so helpful in detecting.”

Sharing information on Cosmic by the banks is currently voluntary, but MAS had previously said it eventually planned to make some aspects of sharing mandatory.

The MAS spokesperson said the voluntary phase is to enable those involved to focus on understanding and addressing any operational concerns, and make adjustments as necessary.

Banks ST spoke to supported Cosmic.

DBS Bank’s group head of financial crime and security services, Mr Jeffery Lee, said: “If your neighbour’s house was burgled, in addition to telling the police, wouldn’t you want them to warn you as well?

“As responsible participants of Singapore’s financial system, there is a sense of responsibility to warn our industry peers if we become aware of potential financial crime.

“Criminals should not be allowed to hide behind the veil of confidentiality to conduct their nefarious activities.”

OCBC’s head of group legal and compliance Loretta Yuen said while sharing information was important, customer data protection remained a priority.

Ms Yuen said: “Information will only be shared if red flags are detected. Banks will have no reason to share the information of legitimate individuals and companies.”

UOB’s head of group compliance Daniel Ng said financial institutions in Singapore are already sharing information on specific cases, under the existing Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT) Industry Partnership - a private-public partnership established in April 2017.

Mr Ng said Cosmic would allow information-sharing to take place on a larger scale.

Ms Pua Xiao Wei, Citibank Singapore’s compliance risk country officer, said the new tool will help create a stronger network for the whole financial sector.

The role of banks in combating money laundering came into the spotlight following Singapore’s largest money laundering case that saw 10 foreigners arrested on Aug 15, 2023, and more than $3 billion in assets seized.

When ST asked how the development of Cosmic was related to the case, the MAS spokesperson said the Cosmic initiative was first announced in October 2021, before the case came to light in August 2023.

She added: “The development of Cosmic is unrelated to the case.”

In a ministerial statement in October 2023, Second Minister for Home Affairs Josephine Teo said the first sign of trouble in the case came in 2021 when the authorities noticed possibly forged documents being used to substantiate sources of funds in bank accounts here.

Only a small group of police officers was involved in initial investigations, so as not to alert the suspected money launderers.

The MAS spokesperson said as investigations were ongoing, it was premature to say how Cosmic, had it existed earlier, could have helped deter the criminals or detect the scale of this case sooner.

Lawyer S. Suressh, a partner in Harry Elias Partnership’s litigation practice group who advises on compliance issues, said if Cosmic had existed earlier, financial institutions may have reviewed their own dealings with the accused and made suspicious transaction reports or police reports, which may have speeded up the investigations.

The MAS spokesperson added: “Arising from MAS’ reviews and findings, we will consider further measures and enhancements as appropriate.”

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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