Response to HKMA's 'Enhaned Approaches to Combat Digital Fraud'

In light of the increasing number of fraud-related banking complaints, the Hong Kong Monetary Authority (HKMA) has released a new circular on 12 October 2023, 'Enhanced approaches to combat digital fraud’.

The circular1 serves as an update on the enhancements and communicates expectations of HKMA on authorised institutions (AIs) to ensure that these efforts to combat digital fraud should be adequately resourced and coordinated to ensure the effective implementation of stronger protection for customers.

To further enhance these approaches, the HKMA will continue to work closely with AIs on the following:

1. Promote information sharing

To promote the flow of information between public and private sectors, the participation of HKMA’s Fraud and Money Laundering Intelligence Taskforce (FMLIT) has expanded to include 28 retail banks, and 6 Stored Value Facility (SVF) are expected to join by the end of 2023. The authority will continue to monitor how the AIs utilise data, analytics, and other regtech capabilities to enhance FMLIT intelligence and analysis.

In addition to FMLIT, building on the success of the pilot’s experience and international practices, the Financial Intelligence Evaluation Sharing Tool (FINEST) will be expanded to include more banks and a broader range of financial crimes and accounts. The HKMA plans to seek industry and public input on legal provisions for sharing personal account information to enhance crime prevention and detection.

2. Adoption of innovative solutions

Due to the use of new and innovative methods to conduct fraud, HKMA strongly encourages banks to deploy innovative solutions to combat fraud. This includes exploring the inclusion of more data and applying network analytics in real-time fraud monitoring systems. These systems would strengthen their ability to identify high-risk accounts and networks and alert customers of high-risk transactions.

3. Enhaned pre-transaction fraud screening

Leveraging the anti-fraud engine “Scameter”, HKMA expects banks to further enhance their pre-transaction alert mechanism. The regulator is currently working with AIs, SVF licensees, the Hong Kong Police Force (HKPF), and Hong Kong Interbank Clearing Limited to introduce a pre-transaction alert system for faster payer system (FPS) transactions, which is based on Scameter’s data and will notify the user of potential “High Risk” payees. AIs are expected to make system enhancements, communicate these changes to customers, and establish effective oversight.

Banks are also expected to track their performance by establishing key performance indicators and having adequate management oversight.

Synpulse's recommendations

  • Augment your organisation’s artificial intelligence and machine learning (AI/ML) capabilities, with more advanced technologies such as Network Link Analysis (NLA) and ML capabilities, to proactively detect and prevent fraud.
  • Refresh relevant policies and procedures to reflect the new solutions and ensure that they have been effectively implemented across the bank.

Speak with our experts to find out how we can support you in your journey to combatting fraud and financial crime.

1 Enhanced approaches to combat digital fraud. (HKMA, 12 October 2023)