The COSMIC platform will be developed and deployed in phases. The initial participants are DBS, OCBC, UOB, StanChart, Citibank and HSBC.
MAS (Monetary Authority of Singapore) has issued a consultation paper on the introduction of a regulatory framework and platform for FIs to share risk information with each other to prevent money laundering, terrorism financing, and proliferation financing.
The paper notes that Singapore’s AML/CFT defences have strengthened in recent years, through sharpened ML/TF/PF risk awareness amongst FIs, greater use of data analytics by FIs and MAS, and closer public-private partnership to identify and disrupt criminal activities and networks.
“However, a remaining weakness is that FIs are not permitted to warn each other about potentially suspicious activity involving their customers,” the paper says. “As such, each FI’s understanding of their customers’ risk profile is limited by the information the FI collects.”
MAS says criminals have been able to exploit this weakness by conducting transactions through a network of entities holding accounts with different FIs, such that each FI by itself does not have sufficient information to detect and disrupt illicit transactions in a timely manner.
Allowing FIs to share information on customers that cross certain risk thresholds will enable them to break down these “information silos” and more effectively detect and disrupt criminal activities.
MAS proposes to introduce a legislative framework and to develop a secure digital platform for FIs to share information with each other – including the particulars of customers and transactions, the high risk behaviour exhibited, and risk observations or analysis that are relevant to the account or customer.
“This enriched set of risk information will enable FIs to conduct sharper analysis of customer behaviours and activities, as well as alert each other to situations which pose higher financial crime risks,” the paper says.
To safeguard the interests and privacy of legitimate persons, FI-FI information sharing will only be permitted for AML/CFT purposes and in a proportionate manner. Information sharing would only occur in the data format specified by MAS, via a secured digital platform owned and operated by MAS.
The platform, to be named the Collaborative Sharing of ML/TF Information & Cases, or COSMIC in short, will be developed and deployed in phases. In the initial phase, MAS intends to focus on combating three key risk areas: Misuse of legal persons (e.g. shell companies), TBML, and proliferation financing.
Information-sharing on COSMIC by participant FIs will be voluntary in the initial phase, which is expected to last for approximately two years. The initial participants will be DBS, OCBC, UOB, Standard Chartered Bank, Citibank and HSBC, which have been actively involved in COSMIC’s development.
Under the proposed framework, a customer must first exhibit multiple high risk behaviours or indicators that suggest serious financial crime (i.e. red flags), before an FI is required to or may share risk information on that customer with other participant FIs.
Such high risk behaviours or indicators may include indications that a company’s profile may be fictitious, financial transactions with unclear economic purpose, evasive or inconsistent replies to an FI’s queries about unusual behaviour, or indications that seemingly unrelated companies transacting with each other may be operated or controlled by the same beneficial owners.
Certain aspects of information sharing will be made mandatory in future phases. MAS will also progressively extend COSMIC to a wider segment of the financial sector and increase the key areas of focus.
MAS notes that stronger collaboration amongst the participant banks may raise the risk of illicit actors shifting their activities to non-participating FIs. To address this risk, MAS will strengthen its surveillance to uncover “risk migration” scenarios, and step up its supervisory engagement of FIs that are not on COSMIC.
The consultation paper, available here, is open for comment until 1 November 2021.