Singapore to require FIs to share high-risk customer information

The MAS is developing a digital system, Collaborative Sharing of ML/TF Information & Cases (COSMIC), to receive the reports. Initially, only the six major commercial banks will participate and participation is nominally voluntary. However, the plan is to progressively extend the banks' reporting obligations to the wider financial sector and to make it compulsory. The MAS will also be watching out for any 'risk migration' where illicit actors shift their activities away from mainstream banks to non-participating FIs. If this happens, the MAS will order the relevant FIs to tighten their AML controls.

The legislative framework will be set out in additions to the Financial Services and Markets Bill, to be tabled in parliament before the end of this year. COSMIC will come into operation in the first half of 2023 and after two years will be made compulsory for the whole financial sector.

Its purpose is to prevent criminals from using Singapore's processes for incorporating companies and opening bank accounts to launder illicit proceeds and hide them amid cross-border trade flows of large volume and value. It will also make it more difficult to disguise illicit financing of weapons of mass destruction and evade international sanctions through front companies and mediators.

FIs will be encouraged to identify suspicious customer behaviour and unusual transactions. Such behaviour might include creating networks of accounts or business relationships across multiple FIs, transferring illicit funds within said networks to disguise the origins of the funds and presenting fictitious trade or business documents to justify these transactions or obtain financing. Sharing this information with other FIs through a 'request, provide and alert' protocol will help them spot 'red flag' indicators that suggest serious financial crime.

The MAS intends to issue the 'red flag' and threshold criteria privately to participant FIs, who will be legally obliged to keep the criteria confidential. Law firm Baker McKenzie suggests they are likely to include indications that a company's profile may be fictitious or that seemingly unrelated companies may have the same beneficial owners. Other behaviour might be a customer ‘undertaking a series of financial transactions with unclear economic purpose’, being evasive or giving inconsistent replies to queries, the firm says.

Information will be shared only for AML and related purposes and will be permitted only between FIs participating in? COSMIC and within the bounds of specified information sharing modes.

The MAS will also protect the participant FIs by giving them statutory protection from civil liability in respect of their disclosure of information, providing that the FI has exercised reasonable care and acted in good faith. However, the MAS also expects to use information from COSMIC in combination with its other sources of information, such as its own checks with the customer, reviewing the customer's transactions, public information sources or intelligence from other authorities.

Sources

• Baker McKenzie
• MAS
• Baker McKenzie (August 2021)