Financial Crime Risk Management Framework in Philippines: Banks Urged to Adopt Holistic Approach
The Bangko Sentral ng Pilipinas (BSP) has issued Circular No. 1140, mandating financial institutions (FIs) to implement an automated and real-time fraud monitoring and detection system to combat growing incidents of frauds and cybercrimes. This circular aims to reduce losses from fraud and boost the country’s bid to increase digital financial transactions.
Philippine Banks Face Rise in Transaction Volumes
Philippine banks are experiencing a surge in transaction volumes, with PESONet transactions reaching over 26 million and InstaPay volume growing by 32.7% to 166 million transactions. However, this has also led to an increase in credit card fraud, which rose by 21%.
Experts Urge Banks to Adopt Holistic Approach
Experts say that while the shift to digital is encouraging, banks need to further fortify their anti-fraud defenses. Rivi Varghese, Founder and CEO of Clari5, a category-leading real-time banking financial crime management technology solutions provider, stressed that banks must adopt a holistic approach to combating financial crime.
Integrating Automated Fraud Monitoring Systems with AML
The BSP has asked FIs to integrate their automated fraud monitoring systems with their Anti-Money Laundering (AML) system to have a cohesive and comprehensive financial crime prevention system. Varghese believes that combining fraud management and AML efforts is crucial in combating financial crime, as criminals often operate across both areas.
Benefits of Real-Time Financial Crime Risk Management Framework
A real-time Financial Crime Risk Management Framework (FRAML) can converge the separate worlds of the bank’s fraud and financial crime compliance teams, reducing losses, improving efficiency, and driving down costs. FRAML combines real-time enterprise fraud management and real-time AML management into a force multiplier.
Common Mistakes Banks Make in Implementing FRAML
Experts have identified four primary reasons why banks fail to implement a successful Financial Crime Risk Management Framework:
- Lack of real-time data intelligence interface with core banking systems
- Failure to consider the cost of sizing
- Ignoring TCO sensitivity
- Neglecting to include the cost of making changes, upgrades, and customization over a 5-year period
Industry Leaders Urge Unified Approach
Industry leaders urge bank leadership to adopt a mindset pivot and take a unified approach to combating fraud and money laundering. The BSP’s circular is seen as an opportunity for Philippine banks to view financial crime in a holistic fashion and consider proven ways to implement a unified framework to manage financial crime.
Conclusion
In conclusion, the adoption of a Financial Crime Risk Management Framework is crucial for Philippine banks to effectively combat growing incidents of frauds and cybercrimes. A real-time FRAML can converge the separate worlds of the bank’s fraud and financial crime compliance teams, reducing losses, improving efficiency, and driving down costs.