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Singapore has launched a new information sharing platform for financial institutions (FIs), in an effort to transform the way that they handle money laundering (ML) and terrorist financing (TF) risks.
The Collaborative Sharing of ML/TF Information and Cases platform, also known as COSMIC, went live in Singapore this week, after more than two years in the making.
For the first time, the COSMIC platform will allow FIs to share customer information with each other in relation to ML,TF and proliferation financing (PF) risks.
Previously, FIs were permitted to share such information only with regulators and law enforcement agencies.
But due to high volumes of risk information and resource constraints at these agencies, Singapore is experimenting with new ways to tackle financial crime using private-to-private information sharing.
On the same day that COSMIC went live, Singapore’s Financial Services and Markets (Amendment) Act 2023 also came into effect.
The act sets out the legal basis for information sharing via COSMIC and introduces new safeguards and obligations for participant FIs.
COSMIC was co-developed by the Monetary Authority of Singapore (MAS) and six commercial banks, namely DBS, OCBC, UOB, Citibank, HSBC and Standard Chartered.
These banks will join COSMIC as the first participant FIs during its initial phase, before the platform is opened up to others.
Information sharing on COSMIC will be voluntary and will initially focus on three “serious” financial crime risks: misuse of legal persons; misuse of trade finance for illicit purposes; and proliferation financing.
“COSMIC will enable FIs to warn each other of suspicious activities and make more informed risk assessments on a timely basis,” said Loo Siew Yee, assistant managing director of policy, payments and financial crime at MAS.
“It complements the industry’s existing close collaboration with MAS and law enforcement, and will strengthen Singapore’s capabilities to uphold our reputation as a well-regulated and trusted financial centre.”
Breaking down information silos
COSMIC has been highly anticipated across the financial industry, where FIs often report being constrained in their AML/CTF activities by rules against sharing customer information.
But the need for greater private-to-private information sharing is now widely accepted among FIs, and was a key theme at last year’s Sibos conference.
Swift, the global interbank network that connects more than 11,500 FIs, hosted a panel session at Sibos 2023 exploring options for FIs to “widen the lens” on financial crime risks.
Speaking with Vixio this week, Swift’s Kevin Wong, chief executive for Asia Pacific, welcomed the launch of COSMIC as a promising step that could be emulated in other jurisdictions.
“Swift is encouraged to see the introduction of industry initiatives of this nature, which highlight the importance of industry collaboration and digitisation in defending against financial crime,” he said.
“As the financial landscape continues to rapidly evolve, it is more important than ever to have strong measures in place to protect the security of payments.”
How will COSMIC work?
As covered previously by Vixio, there are strict rules that govern how participant FIs should interact with COSMIC and handle information received through it.
A COSMIC participant FI may share customer information with another participant FI only if the customer’s profile or behaviour displays objectively-defined indicators of suspicion, known as “red flags”.
The criteria that make up the red flags will be kept private between the MAS and participant FIs, so as to “avoid circumvention” by criminals.
As noted in a previous consultation response, participant FIs are legally bound not to reveal the criteria to any unauthorised person.
When using COSMIC, FIs are authorised to share information on “relevant parties” that exhibit “multiple red flags”.
A relevant party is defined as any person who is, has been or who seeks to be a customer of a participant FI.
All three types can also be added to the COSMIC watchlist, which will be accessible to all participating FIs on the platform.
“Participant FIs will be able to extract from COSMIC key identifiers of customers that have been placed on the COSMIC watchlist to incorporate in their screening systems,” said the MAS.
“Where there is a positive hit against the key identifiers, participant FIs should access the COSMIC watchlist to query for more risk information on the positive hit and use the risk information as part of their AML/CTF assessments on that customer.”
However, FIs should not rely solely on information obtained from COSMIC when making AML/CTF decisions, the regulator said.
Instead, information gleaned through COSMIC should be combined with other sources of information, both public and non-public, as well as customer behaviour and transaction monitoring tools.
How novel is COSMIC?
COSMIC is a genuinely novel initiative in that it combines a secure digital platform with new legislation to enable new types of customer information sharing between FIs.
However, sources who spoke with Vixio noted that COSMIC has similarities to Australia’s new Fraud Reporting Exchange (FRX), a collaboration between 17 Australian banks.
Owned and operated by the bank-funded Australian Financial Crimes Exchange (AFCX), FRX enables member banks to “jointly identify funds which have been fraudulently transferred”.
FRX also offers a centralised digital platform for FIs to communicate fraud information between one another, but the FRX is an industry initiative without additional legislative backing.
It is also narrowly focused on identifying fraudulent transactions so that funds can be frozen more quickly, whereas COSMIC, at least in its early stages, will seek to tackle the most serious financial crime.
