Mr Derrick Goh: Mdm Deputy Speaker, Singapore must uphold its status as a trusted global financial centre, as criminal networks leverage on the dynamic financial and technological landscape to commit more sophisticated commercial crimes, like in the areas of Money Laundering (ML), Terrorism Financing (TF) and Proliferation Financing (PF). While our defences against ML/TF/PF have strengthened over the years, MAS must continue in its commitment to refresh traditional policies, as we cannot combat new criminal typologies with old methods.
A notable way in which ML/TF/PF crimes are perpetrated is by creating a web of individual accounts or through accounts of shell companies opened across different Financial Institutions (FIs) to facilitate illicit fund flows. This capitalises on the limited ability of FIs to share and piece information together, in part due to the FIs’ compliance with well-intentioned client confidentiality obligations as well as banking secrecy regulations.
We need to overcome this and I believe the new digital COSMIC platform paves the way forward for stronger public-private partnerships, for authorities and FIs to assess risks more holistically, and disrupt financial crime more effectively.
That said, I would like to seek some clarifications on this Bill and will start with COSMIC’s coverage and implementation.
While we welcome the inclusion of six major banks as a start, can the Minister clarify the expected effectiveness of COSMIC? For example, assuming COSMIC had been rolled out in the past year, how many more material cases of ML/TF/PF would be detected in this back test? I ask, as this would enable a clearer understanding of COSMIC’s effectiveness with the six banks participating at onset, and to calibrate how fast it should scale to achieve a meaningful impact.
Relevant to this, I understand that the initial phase is planned to be approximately two years starting from second half of 2024, during which information is shared by the six banks only on a voluntary basis as the Minister had mentioned. Considering innovations in financial crime are rapidly evolving, it is crucial for COSMIC’s implementation to be swift, to be effective. To this end, can Minister explain how MAS will review and shorten this period, including mandating information sharing earlier if the platform proves to be stable and effective?
Digital financial services are also developing very, very quickly and as compared with traditional banks, regulations in this space are still maturing, which could encourage their usage as vectors for crime. Against this backdrop, can the Minister elaborate on the plans for COSMIC to include fintech, payments and other virtual asset service providers?
Clause 28G of the Bill states that MAS will be issuing threshold criteria and high-risk indicators to participating FIs, which when met, mandates FIs to request, provide and publish risk information on COSMIC, under clauses 28D to F respectively. The criteria are confidential to avoid circumvention by bad actors.
Understandably, risk processes vary across sub-sectors and the different FIs have different risk appetites, some of which may be more conservative than COSMIC’s. As COSMIC scales, can Minister explain if FIs are able to leverage on COSMIC’s information to meet their tighter risk standards than the required baseline as stipulated in COSMIC’s implementation?
Also, as we discuss this Bill, the exponential increase in scam cases comes to mind as was discussed in the earlier Bill, just a while ago. Typically, scam proceeds are swiftly dissipated across different local and foreign bank accounts as part of a broad and organised money laundering network, which makes it challenging for authorities to trace and recover assets. Close to S$1.3 billion have been lost to scams over the last two years, despite the best efforts of authorities and private sector entities. Given significant impact, can the Minister clarify if and how COSMIC can help to stem this facilitation of scams?
Madam, I will now turn to cybersecurity risks and data confidentiality. With financial intelligence on companies, individuals and their related parties shared on a larger database used by multiple FIs and authorities, I am glad that the Bill has factored safeguards to ensure cybersecurity and data confidentiality.
Regarding cybersecurity, COSMIC is required to comply with the Government’s security standards and have features like user-authentication and data encryption. FIs must also implement controls to complement MAS’ efforts in preventing information security breaches. For clearer accountability, can the Minister clarify the roles and responsibilities of the participating FI who provides the information, vis-a-vis MAS as the owner of the COSMIC platform, in the unfortunate event of a cybersecurity incident or breach?
As participating members, the effectiveness of each FI’s controls will be crucial to uphold the security of the entire network. To this end, can Minister share if there will be periodic reviews or audits conducted by MAS on the robustness of FI controls relevant to COSMIC?
Regarding data confidentiality, MAS has clarified that within the Government, only authorised officers from MAS and the Suspicious Transactions Reporting Office in Commercial Affairs Department (CAD) will be able to directly access and use information from COSMIC. Clause 28K of the Bill sets out conditions for onward disclosure of information and Clause 28I accords statutory protection for FIs against civil liabilities. Further to the provisions, can Minister clarify if MAS or CAD may use information in COSMIC to assess, and/or subsequently, penalize a participating FI for any ML/TF/PF control lapse?
Madam, in concluding, I am reminded of the parable of the blind men and an elephant, where each feels a different part of an animal, resulting in limited and inaccurate perspectives of what the animal is really like. It is only through the sharing of experiences by everyone that a clearer picture is formed.
COSMIC can indeed help us piece together the clearer picture of financial crimes. Greater collaboration between FIs and authorities is fostered, so that as sophisticated as criminal operations may be, they can be quickly unraveled and have fewer places to hide. This will further strengthen the oversight of Singapore’s reputation as a global financial centre. Madam, I support the Bill.
Watch the speech here.