On 20 March 2023, the Financial Services and Markets (Amendment) Bill (“FSM(A) Bill“) was tabled for First Reading in Parliament. The changes set out in the FSM(A) Bill intend to address a gap in Singapore’s defences to prevent money laundering (“ML“), terrorism financing (“TF“), and proliferation financing (“PF“). This gap arises as financial institutions in Singapore (“FIs“) are currently not permitted to alert each other to unusual activity occurring in their customers’ accounts. Hence, the FSM(A) Bill sets out the provisions to enable the establishment of a secure digital platform for FIs to share information with each other regarding customers that exhibit multiple red flags indicative of potentially illicit activities.
The secure digital platform, named COSMIC (short for “Collaborative Sharing of ML/TF Information & Cases”), will enable FIs to conduct sharper analysis of customer behaviours and activities thus allowing for the faster detection of potential illicit activities and enabling FIs to warn each other of such activities. COSMIC will be governed by a legislative framework to be introduced under the Financial Services and Markets Act 2022.
Background
In October 2021, the Monetary Authority of Singapore (“MAS“) conducted a public consultation exercise on the key features of COSMIC in the Consultation Paper on the FI-FI Information Sharing Platform for AML/CFT. For a summary of the key proposals in the consultation paper, please click here to read our Legal Update titled “MAS Consults on Features & Legislative Framework of Digital Platform for FIs to Share Information for AML/CFT Purposes”. On 20 March 2023, MAS issued its Response to feedback received pursuant to the earlier consultation; please click here to read the MAS Response.
Phased Implementation
The FSM(A) Bill sets out the provisions only for the initial phase of COSMIC. During this initial phase, all sharing will be on a voluntary basis.
COSMIC will be jointly developed by MAS and six major commercial banks in Singapore – DBS, OCBC, UOB, SCB, Citibank, and HSBC. Initially, COSMIC will focus on three key financial crime risks in commercial banking: the abuse of shell companies, misuse of trade finance for illicit purposes and PF. During this initial phase, the six banks will be permitted to share information on COSMIC. Moving forward, MAS plans to make some aspects of sharing mandatory, and in subsequent phases progressively extend COSMIC’s coverage to more focus areas and FIs.
Key Features of the FSM(A) Bill
The key features of the FSM(A) Bill include:
(a) Sharing only permitted for the mitigation of ML, TF and PF risks
- The sharing of information solely for the purposes of mitigating ML, TF and PF risks will be permitted. Such sharing may occur despite any restrictions that may be imposed by any written law or contract.
- Additionally, information sharing will only be permitted if the customer’s behaviour or transaction activities exhibit pre-determined red flags that cross stipulated thresholds and thereby suggest that potential financial crime could be occurring.
(b) Tight controls to safeguard information security and confidentiality
- FIs will be prohibited from disclosing the information obtained from COSMIC except in certain specified circumstances.
- Additionally, FIs will be required to establish systems and implement processes to maintain the confidentiality of the information obtained from COSMIC and guard against the unauthorised use and disclosure of information.
(c) Statutory protection against civil liabilities for disclosures on COSMIC
- Fls will be provided with statutory protection from civil liability regarding their disclosure of risk information on COSMIC. This is subject to the disclosure having been made with reasonable care and in good faith, and in accordance with the disclosure thresholds.
(d) Access and use of COSMIC information by MAS and the Suspicious Transaction Reporting Office (“STRO”) for AML/CFT purposes
- MAS will have access to information on COSMIC for supervisory purposes.
- STRO will have direct access to COSMIC, and be able to use information obtained from COSMIC as an additional data source for its own analysis.
The FSM(A) Bill is slated for second reading on the next available sitting of Parliament on or after 2 May 2023.
Click on the following links for more information:
- Explanatory Brief for Financial Services and Markets (Amendments) Bill 2023 (available on the MAS website at www.mas.gov.sg)
- Financial Services and Markets (Amendment) Bill (available on the Parliament of Singapore website at www.parliament.gov.sg)
