Enhanced approaches to combat digital fraud (PDF File, 196.5 KB)

The Hong Kong Monetary Authority (HKMA) has issued a circular to provide an update on its ongoing efforts to combat digital fraud. Such efforts are necessary, so the Authority, due to a large increase in fraud cases in 2023 which already nearly doubled the fraud cases of the entire year 2022. The efforts include the following:
(1) Information Sharing:
The Fraud and Money Laundering Intelligence Taskforce (FMLIT) has been successful in sharing information between the public and private sectors since its inception in 2017. It is now being expanded to include more banks and Stored Value Facility (SVF) licensees. Similarly, the Financial Intelligence Evaluation Sharing Tool (FINEST), which is currently tested in a pilot project by five domestic systemically important Authorized Institutions (D-SIBs), will soon be available to other financial institutions and cover a wider range of financial crimes and accounts. FINEST enables banks to share timely information about financial crime risks and take prompt action against corporations suspected of being involved in fraud-related money laundering. The HKMA also plans to consult the industry and the public on legal provisions for personal account information sharing, aiming to facilitate crime prevention and detection. This will likely involve discussions about data privacy and legal frameworks to ensure secure information sharing.
(2) Transaction Monitoring:
Due to the severe increase in fraud cases, all authorized institutions have now implemented real-time fraud monitoring and detection capabilities. This means they have systems in place to identify high-risk transactions as they occur. In this context, the HKMA also encourages institutions to employ network analytics in their real-time fraud monitoring systems. This involves analyzing transaction data in a broader context, looking for patterns and anomalies that might indicate fraud. This approach is seen as a way to strengthen the ability to identify high-risk accounts and transactions.
(3) Customer Alerts:
The HKMA introduced an anti-fraud search engine called „Scameter“ in September 2022, allowing the public to assess whether a transaction might be at a higher risk for fraud. The HKMA is now collaborating with institutions and various other stakeholders to implement a pre-transaction alert system for Faster Payment System (FPS) transactions. This alert mechanism is based on „Scameter“ information and will notify customers when the FPS Proxy ID of the payee is listed as „High Risk“ in the Scameter engine. That way, customers will have an opportunity to verify or halt a suspicious payment BEFORE it is executed. In this context, the HKMA reminds institutions to make appropriate system enhancements to enable the effective implementation of the Suspicious Proxy ID Alert Model. Also, institutions need to ensure to communicate these changes to customers in a timely manner.