Issue 24
February 2025
Welcome to the MBA's News Digest!
Dear readers,
As we bask in the aftermath of Safer Internet Day, celebrated on 11 February this year, fraud remains a universal challenge, with the UK estimating annual fraud-related losses to $1.5 billion.
Artificial intelligence continues to make leeway in finance, with overall firms benefiting from their investment, while navigating its safe adoption.
Digital payments continue to skyrocket in Australia, with a record number of 500 million payments worth over $20 billion made with mobile wallets.
Best wishes,
The MBA team
Why we can’t ignore fraud despite challenges in data and analysis
22 January 2025
‘Stories of fraud and scams like those in the box above make clear the human impact of financial crime. The financial impact is no less horrifying. The UK is estimated to lose over a USD 1.5 billion annually to fraud, which makes up 40 percent of reported crime – despite significant under-reporting. Globally, individuals are estimated to lose over USD 1 trillion to online scams alone. Whatever the real figures, that’s a lot of money that needs to be laundered on international markets. Following our expert annual review meetings we decided to add indicators of fraud to the Basel AML Index methodology this year. This decision reflects the growing significance of fraud as a predicate offence to money laundering and as a risk that regulated entities need to consider.’
Customer vulnerability disclosures – new principles for the mortgage sector set a framework for action
3 February 2025
‘In the context of mortgage sales, where most are originated via brokers, it is vitally important that customers’ vulnerability needs are identified, recorded and shared as appropriate between brokers and lenders. Yet while there are considerable benefits in doing so, not least helping to ensure customers’ needs are met, uncertainty remains about sharing sensitive information on vulnerability. To help address this, UK Finance working with members of the Association of Mortgage Intermediaries (AMI), the Building Societies Association (BSA) and the Intermediary Mortgage Lenders Association (IMLA) has developed a set of principles for information sharing between mortgage intermediary firms and lenders. The principles, which were published on 9 December 2024, came into effect on 6 January 2025. We encourage firms to use them in considering and agreeing the nature and scope of what vulnerability information is shared, when it should be disclosed, how to disclose it and – importantly – why it should be disclosed.’
Financial services sector well positioned to harness generative AI
28 January 2025
‘This report highlights that the financial services sector is investing more in AI and is making use of its strong track record of responsible innovation in technology. It focuses on seven key areas where generative AI is driving the most value: Customer engagement and personalised marketing; Knowledge management and information retrieval; Software development and data management; Intelligent workflow and email processing; Fraud and financial crime; Legal, contractual and compliance text analysis; and Desktop and meeting productivity. Firms are innovating with the technology but equally are being careful to manage the potential risks and ensure compliance with regulations.’
Contact centres: the new frontier in fraud prevention
27 January 2025
‘While the financial industry has traditionally monitored and measured fraud at the transactional level, this approach only addresses the ‘cash-out’ stage of the fraud life cycle. Data from Smartnumbers customers shows that 28 per cent of flagged activity in contact centres is reconnaissance, while 59 per cent is related to attack setup. These stages allow fraudsters to validate stolen information, steal more data, and prepare their exploits. To reduce the amount of fraud, organisations must recognise the importance of securing customer data at the point of initial contact with a fraudster. As Matthew Addison, Chief Revenue Officer at Smartnumbers, explains: “Organisations need to stop focusing solely on the financial loss and start addressing data loss through reconnaissance [in contact centres], which is a precursor to bigger fraud incidents.” ’
BIS drafts guidance for central banks on AI adoption
30 January 2025
‘The report provides guidance on how central banks can identify and manage risk associated with the adoption of AI models and tools in their organizations, according to BIS. Among its many recommendations, the report proposed 10 actions central banks should consider when adopting AI, such as establishing an interdisciplinary AI committee, defining the principles for responsible AI use and performing a detailed assessment of risks and controls. “The safe and proper usage of AI across the central bank functions may demand changes to existing risk management and governance frameworks,” the report states. “In this sense, central banks will eventually have to consider a careful review of their current governance structures and risk management practices, while embracing AI models and tools safely and efficiently.” ’
Cloud services: Outsourcing the service, but not risk
29 January 2025
‘That philosophy is pertinent when it comes to cloud adoption, as federal regulators have repeatedly stated that they expect banks to have third-party risk management frameworks in place when outsourcing technology services. Cloud providers may do the tasks, but it is banks that assume much of the risk. “A lot of these tech companies don’t fully understand that,” Manriquez says. “So it is kind of ironic that, in some cases, we’re trying to hire bankers or regulators so they can teach them about the frameworks that we operate under.” There are different strategies for approaching cloud services risk management. Santa Cruz County Bank uses a hybrid strategy in which it maintains responsibility for security. Other banks may outsource most of their functions to the cloud. There are few wrong or right answers when it comes to deciding which approach works best for an institution, and there are resources available to help banks make that choice. “It pretty much goes back to what the business strategy is,” Manriquez says.’
Banks urge Parliament to modernise payment system regulation
4 February 2025
‘The ABA is urging the Parliament to swiftly pass legislation that will ensure Australia’s payments regulatory framework remains fit-for-purpose as digital payments continue to skyrocket. According to the RBA, each month Australians are now making over 500 million payments with mobile wallets worth over $20 billion. This legislation will give the RBA powers to regulate all players within the payments system including Apple and Google, to ensure it is fair and safe for all customers. ABA CEO Anna Bligh said the payments landscape had evolved significantly with the introduction of mobile wallets and these reforms would ensure Australia continued to maintain a world-class payments system. “The payments system has rapidly evolved, yet regulations have not been updated for over 25 years,” Ms Bligh said.’
RBI penalises Equitas Small Finance Bank, India Post Payments Bank
31 January 2025
The Reserve Bank of India (RBI) on Friday said it has imposed penalties on Equitas Small Finance Bank and India Post Payments Bank for deficiencies in regulatory compliances. In a statement, the RBI said it has imposed a penalty of Rs 65 lakh on Equitas Small Finance Bank for non-compliance with certain directions on ‘Levy of Foreclosure Charges/Pre-payment Penalty on Floating Rate Term Loans’ and ‘Credit Flow to Agriculture — Collateral free agricultural loans’.
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