Pakistan’s State Bank Enhances Fraud Detection Methods to Protect Customers from Digital Banking Scams
The State Bank of Pakistan (SBP) has taken a significant step to combat digital banking frauds by directing commercial banks and microfinance institutions to strengthen their controls and processes to prevent fraudulent activities. This move aims to enhance customer trust in the digital banking ecosystem.
Rise in Digital Banking Adoption and Fraud Cases
The adoption of digital banking continues to rise in Pakistan, with a growing number of financial services users falling prey to scammers who take advantage of lack of awareness among customers. Fraudsters are using sophisticated techniques such as:
- Spoofing bank helpline numbers
- SIM swap attacks
- Identity theft
- False registrations
New Guidelines for Banks
To tackle this issue, the SBP has rolled out new guidelines for banks to enhance security measures in their digital banking products and services. The guidelines require financial institutions (FIs) to:
- Formulate a digital fraud prevention policy
- Ensure effective communication of such policy to customers
Enhanced Fraud Detection Methods
Under these guidelines, FIs must:
- Design, review, and continuously improve end-to-end processes for digital fraud risk management and customer complaint management
- Realign their processes to ensure that disputes against fraudulent transactions are immediately raised in the Fraudulent Transaction Dispute Handling (FTDH) system
Additional Measures
The SBP has also directed banks offering branchless banking wallets to:
- Restrict cash-out, mobile top-up, and online purchases from incoming fund transfers for two hours
- Implement a new liability shift framework, where banks will be required to compensate customers if they fail to take timely remedial and control measures
Objective: Promote Digital Financial Inclusion
These enhanced fraud detection methods are part of the SBP’s wider objective to promote digital financial inclusion by creating and enhancing customer trust in the safety and security of the digital banking ecosystem.
Access the Circular
The circular issued by the SBP can be accessed at https://www.sbp.org.pk/bprd/2023/C4-Annex.pdf.