MAS Launches COSMIC Platform for KYC Data Sharing
On April 1st, 2024, the Monetary Authority of Singapore (MAS) launched COSMIC, a platform to facilitate information sharing between financial institutions (FIs) to combat illicit money flows.
COSMIC, which stands for Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases, is the first of its kind as a platform for anti-money laundering (AML). The platform has been in the works since a public consultation in October 2021 and is the product of co-development between MAS and six of Singapore’s preeminent commercial banks: DBS, OCBC, UOB, HSBC, and Standard Chartered Bank.
How Banks and other FIs Will Engage with COSMIC
The six banks involved in the development of COSMIC are also the first to implement the solution during the initial phase of the launch. However, participation in the information sharing platform is voluntary, so it's unclear how wide-spread adoption of COSMIC will be across FIs operating in Singapore.
COSMIC participant FIs can share customer information with other participant FIs, but there must be a genuine suspicion that the customer’s profile or behavior is suspicious, based off objective indicators like “red flags.” On top of this, FIs are required under the Financial Services and Markets Act (FSMA) to have policies and safeguards in place to partake in information sharing through COSMIC to make sure the information stays confidential. This means that the interests of legitimate customers, who are the majority, are protected.
How Customer Information Sharing Addresses Money Laundering and Terrorism Financing
Under- and over-reporting of suspicious activity are very real consequences of FIs having limited access to information about a transaction or client that is potentially suspicious. Ordinarily, banks can only access their own data. As a result, banks are only getting one side of the story when querying a potentially suspicious transaction. An illicit actor using financial services from multiple providers can effectively rest easy because, even if one FI closes their account due to economic crime, this isn’t disclosed to other FIs. This incomplete picture highlights the problem with FIs not being able to truly understand a client’s behavior: a client whose account has been closed is still free to open new accounts and continue criminal operations with little to no disruption.
This same situation is true even within a single FI, as data is often not shared between teams and there is often no single view of client behavior. In a worst-case scenario, this means that suspicious activity could be flagged by one team monitoring customer transactions, but other teams responsible for other stages of the customer lifecycle aren’t made aware and so the customer’s account is not closed.
“COSMIC will enable FIs to warn each other of suspicious activities and make more informed risk assessments on a timely basis. It complements the industry’s existing close collaboration with MAS and law enforcement authorities to combat financial crime. This will strengthen Singapore’s capabilities to uphold our reputation as a well-regulated and trusted financial centre.” - Ms Loo Siew Yee, Assistant Managing Director (Policy, Payments & Financial Crime), MAS
Why FIs Don’t Share AML and KYC Data Already
Generally, FIs are restricted from sharing customer information with other FIs as it breaches data protection and privacy laws in many countries to do so. However, government agencies and regulators in key financial hubs around the world appear to be changing their tune when it comes to sharing data related to money laundering, terrorism financing, and proliferation financing.
For example, in the UK, a bill known as The Economic Crime and Corporate Transparency Bill has been proposed which aims enable sharing of information between certain businesses for the purposes of preventing, detecting, and investigating economic crime.
MAS launching the COSMIC platform is a great example of a regulator recognizing the need to reduce data silos to combat financial crime. At an FI level, Know Your Customer (KYC) data silos between systems and teams create delays in compliance processes like KYC reviews or suspicious activity report (SAR) filing by driving up the time it takes to collate customer data.
Without a single, centralized client view, FIs are doomed to take longer and spend more on even the basic compliance processes needed to run a regulated firm, such as onboarding. Even more risk is introduced by data silos that make it almost inevitable that customer red flags will be missed, which opens them up to financial penalties and reputational damage.
How Digitalizing Compliance Processes Helps FIs Futureproof for Regulatory Updates Like COSMIC
Initiatives like COSMIC and the UK’s Economic Crime Bill are a step in the right direction when it comes to catching up with financial crime and safeguarding the global financial system. Participating FIs stand to gain a greater view of their risk exposure and a deeper understanding of their client base, but taking advantage of this opportunity to share data all hinges on whether banks and other FIs have their data in good order.
Fenergo’s Client Lifecycle Management (CLM) platform enables clients to digitalize the end-to-end management of customer data and ensure compliance with regulatory requirements in over 120 jurisdictions. Automation of key compliance processes like KYC reviews is critical to futureproofing for regulatory developments - not just for regulatory changes like sanctions but also so that FIs can take advantage of opportunities like COSMIC to compliantly share data and close AML gaps globally.
Why not speak to the Fenergo team about your KYC data today? Get in contact to book a demo.