Singapore launches new digital platform to fight money laundering

Singapore launched a new digital platform on April 1 that allows banks to voluntarily exchange information on suspicious customers.

In a press release issued on April 1, the Monetary Authority of Singapore (MAS) said the purpose of the Cooperative Information Sharing and Countering Money Laundering/Terrorist Financing (Cosmic) is to support the global fight against money laundering, terrorist financing and nuclear proliferation, including the financing of weapons of mass destruction.

Cosmic is co-developed by MAS and six banks including DBS Bank, OCBC Bank, UOB, Citibank, HSBC and Standard Bank and launched in 2021, Chartered.

MAS said the information sharing on Cosmic focuses on three key financial crime risks in commercial banking: misuse of shell companies; misuse of trade finance for illicit purposes; and financing to support the proliferation of weapons of mass destruction.

Regulations setting out the legal basis and safeguards for such sharing also come into effect from April 1.

The Financial Services and Markets Act 2022 was amended by the Singapore Parliament in May 2023 to set out the legal framework for Cosmic.

MAS said banks in Cosmic can only share customer information with each other if a customer's profile or behaviour raises red flags. The amended Act requires banks to take measures to protect the confidentiality of shared information.

This would allow banks to share information about potential criminal activity while protecting the legitimate interests of most customers.

According to MAS, customers are encouraged to provide timely feedback if asked by the bank to clarify their risk profile or individual transactions, so that the bank can make an informed risk assessment.

Responding to queries from The Straits Times, a MAS spokesman said legitimate commercial, personal or business transactions would not trigger sharing on Cosmic.

She added that people on the list should not be notified as this could “alert” potential criminals, causing them to cover their tracks and continue their activities.

Underscoring the benefits of the new platform, Adam Maniam, associate director of law at Drew & Napier, said money laundering is often conducted in a decentralized manner, with illicit funds often spread across institutions and jurisdictions to reduce the risk of detection.

“While Cosmic is a good start to help combat money laundering and terrorist financing in Singapore, such illicit activities often involve cross-border transactions, which Cosmic may not be useful in detecting,” Mr Maniam stressed.

Banks' sharing of information on Cosmic is voluntary, but MAS has previously said it planned to make some aspects of sharing mandatory.

The voluntary period is to allow those involved to focus on understanding and addressing any operational concerns and making adjustments where necessary, a MAS spokesperson said.

The role of banks in combating money laundering has come under the spotlight following Singapore's biggest money laundering case, which saw 10 foreigners arrested on August 15, 2023, resulting in the seizure of more than $3 billion in assets.

“Based on MAS’s assessment and findings, we will consider further measures and improvements as appropriate,” added a MAS spokesperson. Shane Godwin, head of financial crime at HSBC Singapore, said timely access to relevant information was critical to tackling illicit finance.

“This innovative initiative is a testament to the country’s leadership and commitment to safeguarding the integrity of its financial system and will strengthen Singapore’s position as a trusted international financial centre,” he stressed.