MAS set to build digital platform to tackle financial crimes

Singapore’s central bank will set up an information-sharing platform for banks to detect illegal financial activities more promptly and easily, according to a new bill introduced to parliament.

The Singaporean government tabled the Financial Services and Markets (Amendment) Bill to parliament for a first reading on March 20. The government has an overwhelming majority in the legislature, so the bill is likely to become law.

Currently, financial institutions are not able to alert each other to unusual activity in their customers’ accounts, the Monetary Authority of Singapore said in a briefing document. Financial criminals can thus avoid detection by moving funds from one financial institution to another.

The planned laws, if passed, will authorise the MAS to set up and maintain a digital platform. The platform will allow financial institutions to share information on customers exhibiting “multiple red flags” indicative of potential illicit activities. These activities include money laundering, terrorism financing and the financing of proliferation of weapons of mass destruction.

Financial institutions will be protected from civil liability for disclosing information on the platform, provided that the disclosure was made with reasonable care and in good faith.

The platform, called Cosmic (Collaborative Sharing of Money-laundering/Terrorism-financing Information and Cases), will be jointly developed by the MAS and six major commercial banks in Singapore: DBS, OCBC, UOB, Standard Chartered, Citibank and HSBC.

Under the proposed legislation, the MAS will have access to information on Cosmic for supervisory purposes. The central bank will use information on the platform to intervene in higher risk activities in the financial system.

The Suspicious Transaction Reporting Office, Singapore’s financial intelligence unit, will also be able to use the platform for its own analysis.

The bill only sets out provisions for the initial phase of Cosmic. During this phase, the platform will target three key financial crimes: abuse of shell companies, misuse of trade finance and proliferation financing.

The six banks will be allowed to share information on the platform on a voluntary basis during the initial phase.

In future, the MAS plans to allow more financial institutions to use the platform and make some aspects of the information-sharing mandatory. It also plans to progressively expand the platform’s coverage to more areas.

Data security

The MAS stressed that interests and privacy of legitimate customers must be protected when financial institutions share customer information among themselves.

Under the new laws, banks can only share customer information on the platform for purposes of mitigating money laundering, terrorism financing and proliferation risks.

Such sharing will only be allowed if the customer’s behaviour or transaction activities show “pre-determined red flags that cross stipulated thresholds”, said the MAS.

“For the vast majority of individuals and companies that are legitimate and do not exhibit risky behaviours, financial institutions will neither have a reason to share their customers’ information nor will they be permitted to,” it added.

Banks will also be required to set up systems and implement processes to keep the information they obtain from Cosmic confidential, except in certain specified circumstances. This includes implementing cybersecurity measures and limiting access to the information from the platform to relevant staff.