Instant fund transfers said fueling fraud

The Power of Instant Fund Transfers Said to Fuel Fraud

The rapid adoption of real-time fund transfers in the Philippines has revolutionized the way people manage their finances. However, this convenience has also created new challenges for banks and financial technology firms to combat fraud. Services like InstaPay, which allows for almost immediate transfers of up to P50,000 at any time, have made transactions faster and more convenient. However, this ease of use has also enabled cybercriminals to move stolen money across multiple accounts within seconds, making it more difficult for financial institutions to trace and recover the funds.

The Rise of Fraud

According to Jasmine Alansalon Gonzales, products head at CIBI Information Inc., the instant nature of digital transfers has allowed cybercriminals to move stolen money across multiple accounts within seconds, making it far more difficult for financial institutions to trace and recover the funds. The moment it's dispersed and withdrawn... it's gone. There's no way for you to get the money back, she added.

The Challenge of Recovery

Once the funds have moved through a chain of accounts and withdrawn, recovery becomes extremely difficult. At that stage, financial institutions can only block the accounts involved and investigate the incident after the fact, often with little chance of retrieving the stolen funds.

The Growth of InstaPay

According to Bangko Sentral ng Pilipinas data, transactions through InstaPay have continued to surge, with the total value increasing by 57.3 percent to P11.553 trillion. The number of transactions also jumped, more than tripling to 4.7 billion from 1.4 billion, reflecting the growing use of real-time fund transfers for everyday payments and business transactions.

The Rise of Mule Accounts

Gonzales noted that the rise of mule accounts, or legitimate accounts used by cybercriminals to move stolen money, has worsened the situation. It's a legit account, so now it's hard to detect who's legit and who's not because it's real, but it's just used for fraudulent activities, she said.

The Three Most Common Types of Fraud

Gonzales identified the three most common types of fraud as mule accounts, followed by card fraud such as counterfeiting or skimming, and account takeover.

Addressing the Challenges

To address these challenges, CIBI and Fintech Alliance.PH have developed a fraud intelligence data-sharing (FIDS) system that will allow participating institutions to exchange information about suspicious transactions and accounts in near real time. Through the network, banks, e-wallet providers, and other financial institutions will be able to share data related to potential fraud patterns, helping industry players identify mule accounts and block suspicious activities more quickly.

The Power of Collaboration

Gonzales emphasized the importance of collaboration and information-sharing in combating fraud. If all banks collaborate, they can easily spot which accounts are constantly used for transfers where they get a lot of complaints... we can create a pattern and detect collectively.

The Success of FIDS in Other Countries

CIBI President and CEO Pia Arellano noted that the same system has already been implemented in countries such as South Korea and Malaysia. She highlighted the success of the system in South Korea, where the consortium running the system has been operating for about 10 years and has helped prevent around $2 billion worth of fraud.

Lessons Learned

Fintech Alliance Founding Chairman Lito Villanueva emphasized the importance of continuous monitoring and improvement in combating fraud. The goal was to lessen incidents of fraud, as completely eliminating them would be unrealistic. Metrics will be developed, and at least that will be our performance scorecard insofar as having to check on the progress or success of this initiative.

Conclusion

The rapid adoption of instant fund transfers has brought about numerous benefits, but it has also created new challenges for banks and financial technology firms to stop fraud. However, through collaboration and information-sharing, the industry can work together to combat fraud and prevent further losses.

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Edward Lance Arellano Lorilla

CEO / Co-Founder

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