06/08/21

SINGAPORE: MAS Finalising New Data-sharing Platform for Banks.

As published on regulationasia.com, Friday 6 August, 2021.

The new platform will enable banks to securely share information on customers exhibiting significant risk red flags and warn each other of potential criminal activity.

MAS (Monetary Authority of Singapore) has been working with law enforcement and the industry to develop a new platform that will allow banks to securely share information and warn each other of potential criminal activity.

In a speech addressed to the wealth management sector on Thursday (5 August), Assistant Managing Director for Policy, Payments & Financial Crime Ms Loo Siew Yee said the details of the new platform are currently being finalised and will be shared “soon”.

Ms Loo was discussing the use of data analytics to enhance AML effectiveness and “engender a paradigm shift in the disruption of financial crime” at three levels – the customer level, the network level, and the system level.

At the customer level, data analytics helps firms know their customer better, and proactively detect and assess changes in customers’ risk profile in a more dynamic and timely manner, she said.

The conventional approach of cycle-based customer risk assessments, where the frequency is based on static risk indicators, is a “time-worn approach” and not sufficiently responsive to changes in customer transactions, ownership or business profile.

“Using technology solutions, it is now possible to integrate and analyse changes in the customer’s behavioural, transactional and profile data holistically and in a more timely manner,” Ms Loo said, adding that this allows FIs to better focus their resources on higher impact cases.

At the network level, data analytics helps to identify and disrupt illicit fund flows between customers in a network, taking a “more holistic rather than a silo view” of customers’ behaviours and activities.

Focusing on an entity-level assessment may “miss the forest for the trees” and fail to detect transactions that are part of a larger and nefarious web of activity, Ms Loo said, noting that several FIs have applied network link analysis to detect and visualise connections among customers and transaction flows.

This has helped to detect networks of shell and front companies or nominees used to facilitate illicit activities, identify true beneficial owners, and prioritise higher risk networks for review. MAS itself uses network link analysis in its own processes to detect emerging threats or suspicious activities, Ms Loo said.

At the system level, close collaboration between the public and private sectors can help to amplify the effectiveness of data analytics, as it allows FIs to alert each other to risk, such as when criminals layer transactions across multiple FIs to evade detection.

“In overcoming this issue, it is important to ensure that the interests of legitimate customers are not unduly impinged upon,” Ms Loo said, pointing to research by the Wealth Management Institute and Nanyang Technological University to enable secure, privacy-protected sharing of intelligence across FIs.

Along with techniques such as federated machine learning, this could “hold the key” to analytics-driven collaboration on a large scale, she said.

She said MAS has been collaborating with the CAD (Commercial Affairs Department) and major banks to develop a “technology enabled platform for participants to share information on customers exhibiting significant risk red flags and warn each other of potential criminal activity”.

MAS is currently finalising the details of the platform will be able to share these details “soon”.

“Responsible and secure sharing of information amongst FIs, coupled with the effective use of data analytics, promises to be a game changer in our fight to keep Singapore safe from financial criminals.”

Ms Loo concluded by highlighting the need for FIs to actively consider staff training needs to ensure they are able to make full use of new data analytics tools and properly apply the insights they generate.

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