The Financial Services and Markets (Amendment) Bill 2023 (the Bill) was introduced in Singapore to establish a digital platform called “Collaborative Sharing of ML/TF Information & Cases” (COSMIC), which will allow financial institutions (FIs) to share information on customers who exhibit multiple red flags indicating potential illicit activities.
What will the platform do?
The purpose of COSMIC is to enable FIs to conduct more accurate analysis of customer behaviours and activities, allowing early detection of potential illicit activities and prompt notification between FIs of such activities, thereby eliminating the information gaps and potentially, enforcement delays between FIs.
Initially, COSMIC will focus on three key financial crime risks in commercial banking, and the six major commercial banks in Singapore will work together to develop the information-sharing framework.
The Bill stipulates that sharing of customer information among FIs must be done within a robust legal framework that safeguards the interests and privacy of legitimate customers. Information sharing will only be permitted for the purposes of mitigating money laundering, terrorism financing, and proliferation financing risks, and will only be allowed if the customer’s behaviour or transaction activities exhibit predetermined red flags that cross stipulated thresholds indicating potential financial crime.
FIs will be able to share information via COSMIC, but they will be prohibited from disclosing the information obtained from COSMIC except in certain specified circumstances. They will also be required to establish systems and implement processes to keep the information obtained from COSMIC confidential and guard against unauthorised use and disclosure of information.
The Bill provides statutory protection from civil liability for FIs in respect of their disclosure of risk information onto COSMIC. However, this protection will not apply if the disclosure was not:
(a) made with reasonable care;
(b) in good faith; and
(c) in accordance with the disclosure thresholds.
The Monetary Authority of Singapore (MAS) will have access to information on COSMIC for supervisory purposes, including to monitor whether FIs were using the platform appropriately and to make necessary adjustments, where necessary.
Information from COSMIC will be integrated into MAS’ overall surveillance framework to target higher risk activities in the financial system for supervisory intervention.
The Bill allows the Suspicious Transaction Reporting Office (STRO) to have direct access to COSMIC so that it can use COSMIC information as another data source for its own analysis.
The implementation of the Bill will allow FIs in Singapore to quickly detect potential illicit activities by analysing customer behaviours and activities with greater accuracy.
By sharing information between FIs, the bill aims to close information gaps, detect criminals, and prevent money laundering, terrorism financing, and proliferation financing. The establishment of the COSMIC platform will represent a significant step towards enhancing Singapore’s defences against financial crime.
However, FIs must take measures to maintain the confidentiality of information obtained from COSMIC to avoid unauthorised use and disclosure and comply with disclosure thresholds to avoid civil liability.
The Bill showcases Singapore’s dedication to preserving the integrity and reputation of its financial sector. It will also promote cooperation among FIs in Singapore and improve the overall effectiveness of the country’s anti-money laundering and counter the financing of terrorism regimes.
Saravanan Rathakrishnan is an associate of RHTLaw Asia's Corporate and Capital Markets Practice. Funds, capital markets, mergers and acquisitions are among his areas of expertise. Saravanan is engaged in the startup community, consulting a variety of startups in relation to contract terms, regulatory obligations, legal commitments and corporate structure. He maintains a keen interest in finance, economics, and law and has published a host of legal, economic and finance articles.