Evolving digital scams in Asia-Pacific

In 2020, one in three people in Southeast Asia experienced online fraud amid a boom in online shopping and activity due to the COVID-19 pandemic. Asia-Pacific has the highest number of internet users in the world, so the opportunities for scammers were already aplenty before the crisis of 2020.

Cybercriminals were quick to take advantage of the crisis for their own nefarious gains. The Philippines’ Anti-Money Laundering Council saw a 57 percent increase in suspicious transaction reports from January to August 2020, compared to the previous year. Clearly, the increase in online activities served as the perfect backdrop for increasingly nuanced racketeering efforts by financial crime syndicates, who targeted everything from the boom in deliveries to interest in the stock market and even the vaccine program to fleece consumers.

With banks offering record-low interest rates, consumers are turning to alternative places to put their money. Scammers lure consumers with all sorts of money-making opportunities promising high returns. Since April last year, the Securities and Exchange Commission has exposed nearly 30 entities luring people into such investments scams.

Similarly, the adoption of digital transactions due to the growth in e-commerce has presented some weak points for scammers to exploit. Credit card fraud cases have also been on the rise, with the Credit Card Association of the Philippines observing a 29 percent increase in fraudulent credit card activities via digital payment channels since the pandemic-induced lockdown.

The pandemic has also contributed to the emergence of new scams. Delivery scams have risen as a new way to siphon funds. The scam works by sending consumers emails or SMS impersonating delivery services to either inject malware onto a system or to obtain personal information under the guise of redirecting unsuccessfully delivered parcels that had never existed in the first place.

As COVID-19 vaccination programs ramp up globally, there has been a proliferation of fraudulent sites stealing people’s money and data under the guise of providing direct access to vaccines. Fraudsters are reaching out directly to an anxious public, running ads for COVID-19 vaccines and test kits online. Some are using outbound sales teams to call consumers, offering home delivery of the vaccine after payment is made upfront. Predatory criminals are also issuing a fleet of text messages inviting recipients to set up an appointment for a coronavirus vaccination, or urgent offers of “leftover” vaccine supposedly up for grabs.

Throughout the pandemic, one of the biggest demands on fraud and financial crime technology has been the ability to adjust quickly. Fraud detection algorithms based solely on pre-pandemic purchase behavior might face difficulties in accurately predicting consumer behavior due to the rapidly shifting environment and current uncertainties. Apart from the financial costs of missing fraud, these systems could also produce many false positives that inaccurately identify legitimate customer behavior as suspected fraud, frustrating the customer and creating friction around the use of payment cards.

To further complicate matters, the pandemic has also accelerated the adoption of real-time payments due to restricted facetime and greater demand for contactless payments. While the convenience of real-time payments is great news for customers, it has opened a new window of opportunity for fraudsters. This is concerning, as four out of five Asia-Pacific banks (78 percent) say the introduction of real-time payment platforms in their country has resulted in increased fraud losses, due to not having the most advanced fraud analytics in place.

To keep scams and fraud at bay, financial institutions require purpose-built solutions that can adapt and prepare for unprecedented events. A layered fraud defense framework with advanced behavioral analytics, for instance, can be deployed to detect out-of-pattern payments. Using two-way customer communication services can also help financial institutions demonstrate appropriate scam interventions before it’s too late. Plus, by leveraging artificial intelligence, such as tapping into robotic process automation, banks can filter out scams through typically used keywords to help relieve some of the workload on personnel. This will allow them to focus on high-value tasks while automating routine decisions and workflows.

Aside from the necessary technological investments, collaborations and partnerships between financial institutions and regulators can go a long way in protecting consumers. Regulatory bodies can supplement technological efforts with ramped-up efforts to bolster consumer awareness of the evolving scam landscape. These advisories keep consumers up to date with the latest scams, and recommendations on how they can actively protect themselves.

With the increase in digital activities, geographical borders are quickly becoming irrelevant to scammers, as joint operations among scammers can be launched without the need for a physical presence on ground. Hence, countries must work in tandem to improve detection capabilities on a transnational scale to effectively tackle fraud. A recent Asia-Pacific-wide operation led by Interpol is testament to this, where $83 million in illicit funds from cyber-enabled financial crime were successfully intercepted in under six months.

Financial crime syndicates are constantly innovating new ways of infiltrating financial systems to illegally profit. There is simply no room for complacency. Financial institutions, regulators, and consumers must remain vigilant and work collaboratively to adapt to the ever-evolving fraud and financial crime threats.

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Subhashish Bose is senior director of Fraud and Security Line of Business in Asia-Pacific at FICO, a US-based data analytics company.