Financial Crime World

Philippines Banks Under Pressure to Implement Real-Time Fraud Monitoring Systems Amid Rising Financial Crimes

The Bangko Sentral ng Pilipinas (BSP) has issued Circular Number 1140, requiring financial institutions (FIs) in the Philippines to implement an automated and real-time fraud monitoring and detection system. This move aims to reduce losses from fraud and cybercrimes, and boost digital financial transactions in the country.

Rising Transaction Volumes

The Philippines has experienced a surge in transaction volumes, with PESONet transactions reaching over 26 million and InstaPay volume increasing by 32.7% to 166 million transactions in April this year. While this growth is encouraging, experts warn that banks must simultaneously fortify their anti-fraud defenses to prevent financial crimes.

The Importance of Real-Time Fraud Monitoring

Clari5’s Founder CEO, Rivi Varghese, believes that the surge in digital payments warrants a key question - are banks doing enough to secure transactions? “Credit card fraud in Philippines went up by 21% even as online transactions are growing exponentially,” he said. “The onus lies on each and every bank to implement the regulatory mandate in letter and in spirit.”

Combining Fraud Management and Anti-Money Laundering Efforts

Varghese noted that combining fraud management and anti-money laundering efforts, known as FRAML (Fraud + Money Laundering), is a critical step towards combating financial crime. This approach converges real-time enterprise fraud management and real-time AML management into a force multiplier.

Benefits of Real-Time FRAML

Real-time FRAML can benefit banks by:

  • Reducing the impact of financial crime on customers
  • Protecting their reputation
  • Improving efficiency
  • Driving down costs

It also enables the application of fraud detection analytics to AML, as well as sharing solutions and resources between departments.

Challenges and Opportunities

Despite the challenges, Varghese believes that a unified, real-time approach to combating fraud and money laundering is the ideal way forward for Philippine banks. “A mindset pivot at the bank leadership level, coupled with a unified, real-time approach to combating fraud and money laundering seems to be the ideal way forward,” he said.

Lessons from EFRM Implementations

Experts warn that the failure of EFRM (Enterprise Fraud Management) implementations can be attributed to various reasons, including:

  • Poor interfacing with core banking systems
  • Lack of cost transparency
  • Failure to include total cost of ownership in budgeting

Varghese noted that a TCO sensitivity is vital for banks, as it includes costs such as license fees, maintenance, infrastructure, database, and customization over a five-year period.

Conclusion

As the Philippines races towards becoming a 100% digital transaction ecosystem, it is imperative that banks adopt proven ways to implement a unified framework to manage financial crime. The BSP’s circular provides an opportunity for Philippine banks to view fraud and AML in a holistic fashion and implement real-time fraud monitoring systems to combat rising financial crimes.

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