Money laundering (ML) is the method by which criminals introduce the proceeds of their criminal activities into the global financial system to conceal the true source of the funds. These funds could be the proceeds of drug trafficking or other major crimes. This method of laundering tainted funds allows criminals to use their illegal money without fear of detection or prosecution.
Closely linked to money laundering is terrorism financing (TF). In terrorism financing, funds for terrorism financing can come from either legitimate or criminal sources. The techniques used to conceal the sources and uses of the terrorists’ funds, on the other hand, are like ML. Singapore is acutely aware of the significant harm that ML and TF can cause the country. Therefore, Singapore, as a major financial centre in the region, has put in place safeguards to ensure that money launderers and terrorism financiers would not affect the country’s economy or the safety of citizens.
COSMIC will significantly enhance our financial institutions’ ability to detect and curb suspicious activity while minimising the impact on legitimate actors.
– MAS Assistant Managing Director, Policy, Payments & Financial Crime
The Monetary Authority of Singapore (MAS) recently launched a digital platform and facilitating regulatory framework for financial institutions to share relevant information on customers and transactions to prevent money laundering, terrorism financing, and proliferation financing. The platform is known as, Collaborative Sharing of Money Laundering or Terrorism Financing Information and Cases (COSMIC), was developed in collaboration with Singapore’s DBS, OCBC, UOB, Standard Chartered Bank, Citibank, and HSBC.
It will allow financial institutions to securely share customer or transaction information. According to the MAS, such information sharing will benefit financial institutions while also disrupting illegal networks. At the same time, the platform will be operated by MAS and will have strong security features to prevent unauthorised access to information.
The MAS will stipulate in legislation that financial institutions may share information only to combat money laundering and terrorism financing. All COSMIC users are also required to put in place strong safeguards to prevent unauthorised use and disclosure of COSMIC information.
According to the MAS, a common issue that financial institutions in most jurisdictions face is the inability to warn one another about unusual activity in customers’ accounts. This gap is frequently exploited by financial criminals to conduct illicit transactions through a web of entities with accounts in various financial institutions, such that no single financial institution has enough information to detect these transactions promptly.
While other countries have implemented information-sharing arrangements among FIs, the COSMIC platform will be the first centralised platform where information is shared in a structured format that allows for seamless integration with data analytics tools. This will allow FIs to collaborate more productively and on a larger scale. COSMIC’s regulatory framework will also be unique in that it will specify the types of information that will be shared, as well as the circumstances under which sharing will be permitted or mandated. The information from COSMIC will be used by MAS in its risk surveillance to identify illicit networks operating in the financial system and to target these activities for timely supervisory action.
MAS ultimately intends to launch the COSMIC platform in the first half of 2023. COSMIC will initially focus on three key financial crime risks in commercial banking: the use of shell companies for illicit purposes, the misuse of trade finance for illicit purposes, and PF. During this initial phase, the six banks involved in COSMIC’s development, all of which are major players in commercial banking, will participate and be permitted to share information in COSMIC. MAS intends to gradually expand COSMIC’s coverage to include more FIs and focus areas, as well as make some aspects of sharing mandatory.
