Malaysia steps up fight against financial fraud

The Malaysian government has launched the National Fraud Portal (NFP) to exploit artificial intelligence’s (AI) ability to detect suspicious transactions through predictive analysis.

Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour said one of the NFP’s main characteristics is its modular design that allows for continuous improvements to be made on the existing basic infrastructure.

He said that while overall losses due to financial fraud are considered relatively small given the number of domestic financial transactions, “Malaysia cannot be complacent but must instead be more vigilant in identifying and overcoming the threats to safeguard the confidence in the national financial system”.

Ghaffour said cyber criminals will exploit technology advancements to expand their tactics. “Our journey in fighting fraud is long and winding. In taking steps forward, I want to emphasise three main themes towards our efforts to combat financial fraud,” he said in his speech during the launch of the NFP.

The themes are optimising technology, nurturing collaboration and empowering consumers.

The central banker said Malaysia must optimise technology to enhance its capability and methods to crack down on financial fraud in view of the proliferation of scams.

“We have to nurture collaboration in our effort. Eradicating financial fraud requires the whole-of-nation approach as well as close public-private sector collaboration,” he said.

Ghaffour added that the NFP, which has received positive feedback, is backed by 16 of the country’s financial institutions, with “more set to follow in the near future. BNM and the financial industry welcome new participants and expansion of existing participation from all relevant stakeholders in the greater digital ecosystem to strengthen our concerted action,” he said.

He said persistent efforts are required to educate consumers to be more cautious and so prevent financial fraud.

“The public is the first line of defence in preventing financial fraud. Similarly important are efforts by the financial industry in dealing with mule accounts and educating the public so that they do not become victims involving mule accounts,” he said.

“In addition, improvements to the NFP are being planned to enable consumers to report suspicious transactions directly from their online or mobile banking accounts,” he added.

The NFP launch will enhance the capabilities of the National Scam Response Centre (NSRC), which was established in 2022, by automating the centre’s capability to trace stolen funds across multiple financial institutions and payment systems.

Rapid consumer complaints via the NSRC 997 hotline and financial institutions’ responses can prevent stolen funds from being moved out of the financial system, Ghaffour added.

As of June 2024, more than 12,000 investigation papers have been opened, with RM72 million (£12.5 million) in funds being frozen through enforcement orders issued by the police.

Meanwhile, BNM will also enforce the revised Policy on Fair Treatment of Financial Consumers effective October 2024 for ensuring the fair treatment of victims of unauthorised online electronic banking.

Among the policy’s key principles are fostering greater transparency on obligations of financial institutions and consumers, particularly for cases where the investigation is unfavourable to the victims, and ensuring a robust and timely investigation process.

If the investigation takes longer than expected, the banking institution must take appropriate measures to mitigate the financial burden of the victims.

 

Fiscal Responsibility Act adds to economic stability

The Malaysian economy has maintained its strength thanks to a mix of domestic reform and external boosts, according to the World Bank.

The World Bank’s lead economist for Malaysia, Apurva Sanghi, said two fiscal reforms that have contributed to the country’s economic stability but had not received much attention were the Fiscal Responsibility Act (FRA) and pension reform.

He described the FRA as “a major missing piece in Malaysia’s macro armour [that] would link revenue and spending to keep the fiscal ship steady.

“It requires tax expenditure statements to cut down on wasteful tax breaks. It sets out four rules on debt and deficits, pushing for more responsible fiscal spending, and more,” Apurva said.

However, he said that the current debt ceiling set by the FRA might be too high and could benefit from a review or adjustment to align better with practices in other countries.

Apurva also said the proposed pension reform phases out the defined benefits (DB) scheme for new civil servants, replacing it with a defined contribution (DC) scheme. This should make pension spending more sustainable, he said.