In the recent letter from the Hong Kong Monetary Authority (HKMA), while financial institutions are taking anti-infection measures in their branches to maintain essential banking services to the public in the light of COVID-19, HKMA believes the use of financial technology (FinTech) would provide significant opportunities to manage some of the challenges presented in the current environment, especially community efforts on social distancing.
Similarly, financial institutions around the world are encouraging the use of online banking platforms. These “contact free” digital banking options, which include online banking, mobile banking apps, digital payment solutions and more, minimize human-to-human transmission but they also stress unprepared infrastructures.
Cybercriminals are not far behind. Armed with a large cache of stolen identity credentials from frequent data breaches, they are exploiting vulnerabilities while using online anonymity and the large volumes of transactions as cover. The biggest is fraud. Fraudsters are constantly adjusting their tactics and exploit online vulnerabilities, while hiding behind internet anonymity and transaction volumes. They are also getting more sophisticated with organized crime getting involved and often use stolen credentials to masquerade as legitimate users.
Some do get caught. Late last year, Hong Kong police caught a gang involved in a HK$4m fraud that lasted 18 months. During the same month, HKMA published 18 other scams involved phishing, fake websites and malicious mobile apps. But many scammers and fraudsters that target vulnerable SMEs and low-wage earners do get away. Add internal fraud involving bank employee collusion into the fray, and one can imagine the difficult situation that virtual banks face.
There is no black or white answer either. Virtual banks need to balance their consumer promises of frictionless and convenient banking with their compliance needs. With no on-site onboarding processes and minimal physical checks, they also need to be extra vigilant without putting off genuine users or stopping legitimate transactions.
Technology advances like RegTech and the right partner can help. For example, at LexisNexis Risk Solutions we have helped different virtual banks to mitigate major compliance risks inherent in digital banking, deploy risk governance frameworks for the virtual banking platforms, establish proper security controls for customer security, and recalibrate IT security for better availability and business continuity plans.
In a virtual meet-up, we asked Wendy Ennis, head of financial crime compliance for the Virtual Bank at Standard Chartered Bank how her organization is preparing to battle online fraud. Download the full recording to learn about the elevated role of RegTech, how virtual banks can partner with these startups, and a practitioner’s insights into effective AML processes.
To access the full virtual meet-up recording, click HERE.