Singapore to allow banks share client data to fight crime

DBS Group Holdings Ltd, Oversea-Chinese Banking Corp, United Overseas Bank Ltd, Standard Chartered Plc, Citigroup Inc and HSBC Holdings Plc will be the first group to access Cosmic. — Reuters

Singapore banks will be able to share information on potentially risky clients next year, a move aimed at curbing illicit flows amid the city-state’s rise as a key financial and wealth hub.

Parliament passed a bill Tuesday that paves the way for the Monetary Authority of Singapore to set up and maintain a secure digital information-sharing system. The platform called Cosmic is meant to make it easier for financial institutions to detect and deter activities in areas like scams, money laundering and terrorism financing.

“A clean and trusted financial sector is the basis upon which both Singaporeans and foreigners choose to invest and have their funds managed here,” Alvin Tan, Minister of State in the trade ministry, told lawmakers. Tan, who also sits on the MAS board, said there’ll be strict safeguards to protect the confidentiality of information within the system.

Singapore will join the US and the UK in allowing financial institutions to raise red flags to one another if they spot suspicious transactions related to illegal flows. The most recent prominent case has been 1MDB, in which billions of dollars from the state-owned Malaysian investment fund were siphoned off through bank accounts and shell companies in countries including the city-state, Europe and the US.

Money laundering is a headache for jurisdictions all over the world. These illicit flows account for between US$800bil (RM3.55 trillion) and US$2 trillion (RM8.89 trillion), or 2%-5%, of global gross domestic product in a year, according to a United Nations estimate. In countries like Singapore where offshore funds are several times larger than the size of the economy, the authorities have sought to ensure banks scrutinise flows.

Assets managed in Singapore rose to US$4 trillion (RM17.79 trillion), and almost 80% is from outside the country, per the latest MAS data. That compares with its GDP of about S$640bil (RM2.14 trillion or US$486bil).

New rule

Under the new law, banks may request clients’ information or alert one another only for the purpose of combating serious financial crime. The focus will be on preventing the use of shell companies to hide true ownership for money laundering purposes or to facilitate payments to sanctioned countries and using trade-related transactions to disguise crime proceeds.

Currently, financial firms are restricted from sharing client information and can mostly do so under police investigation and court orders.

The new system will provide “safe harbour” for banks to ask, provide, alert or escalate information with one another, said Radish Singh, the Asean Financial Services Risk Management Leader at Ernst & Young.

Cosmic will be rolled out from the second half of 2024 to six banks which helped the MAS develop the system. Sharing will be on a voluntary basis during the initial stage. Other banks will be able to access the system in subsequent phases and new key risks may be added.

DBS Group Holdings Ltd, Oversea-Chinese Banking Corp, United Overseas Bank Ltd, Standard Chartered Plc, Citigroup Inc and HSBC Holdings Plc will be the first group to access Cosmic. – Bloomberg

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