Virtual Workshop on Strengthening Anti-Fraud Frameworks in Financial Institutions in Indonesia

Fintelekt Advisory Services organised a virtual workshop on Strengthening Anti-Fraud Frameworks in Financial Institutions in Indonesia on November 14, 2024.

The opening address at the workshop was delivered by Ibu Diana Soraya Noor, Director of the Directorate of Strategy and International Cooperation, Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), Indonesian Financial Transaction Report and Analysis Centre (INTRAC).

The resource person for the workshop was Shailesh Verma, Empaneled Trainer, Fintelekt.

Shirish Pathak, Managing Director, Fintelekt Advisory Services facilitated the programme.

In the opening address, Ibu Diana emphasized the importance of building robust anti-fraud frameworks in Indonesia.

Here is a summary of her remarks:

• – In October 2023, Indonesia became the 14th member of the Financial Action Task Force (FATF), a recognition of Indonesia’s commitment to adhering to global standards in anti-money laundering and counter-terrorist financing measures. To maintain these standards, PPATK looks at financial institutions not only as reporting entities, but as essential strategic partners.
• – Reporting entities act as a frontline defence in safeguarding and preserving the integrity of Indonesia’s financial sector against abuses related to money laundering, terrorist financing and proliferation financing. The ability of reporting entities to identify risks, implement mitigation plans, and detect and report the Suspicious Transaction Reports (STRs) to PPATK is crucial to preventing being exploited by malicious actors.
• – The reporting entities should stay vigilant, continually assess risks, and report suspicious transactions promptly, as delays could impact the nation’s anti-financial crime efforts. Failure to adhere to expected standards may result in significant consequences for both reporting entities as well as the national financial system.
• – PPATK supports all reporting entities through guidance, tools, and regular training – provided by national and international experts.

Ibu Diana concluded by expressing hope that the workshop would promote meaningful dialogue and generate impactful ideas to strengthen Indonesia’s defences against financial crime. She expressed her heartfelt gratitude to all participants from Indonesia who attended the workshop, since their presence at the workshop strongly reflected Indonesia’s collective commitment to preserving the integrity of its financial systems and enhancing the nation’s standing within the global financial community.

Shailesh commenced his presentation by addressing recent trends in fraud and their implications for banks. Key points included:

• – A rise in the volume, total value, and average value of fraud cases within the banking sector, with fraud recovery rates remaining below 25% of total losses.
• – External frauds proving more costly and impactful compared to internal frauds.
• – The digital and cyber space posing the most significant emerging challenges.
• – Innovation serving as a key avenue for increased fraud risk in digital banking.

Here is a summary of his presentation:

• – There are various types of fraud, including accounting fraud, forgery, identity theft, money laundering, card and payment fraud, rogue trading, and internal staff fraud.
• – Effective management of fraud includes the following elements:
  • Fraud Risk Governance Framework: includes fraud prevention (establish robust internal controls), detection (regular monitoring and reviews) and response (prompt investigations and corrective actions).
• • Fraud Prevention – Strategy & Measures: Strong internal governance (comprehensive policies, processes, and system controls for all stakeholders), checks and balances (ongoing transactions monitoring, due diligence), and early stage controls (product design and approvals, models evaluations, partners due diligence), data driven predictive capabilities (use of data analytics tools, behavioral analysis and red flags), multi layered security program (strong focus on information and data security), awareness and communication (training for employees and customer education).
• • Effective use of Technology in Fraud Prevention: Technology should be agile (seamless integration with tech infrastructure), customizable (ability to customize risk rules, limits, ranges, red flags) and smart (on-demand reporting for all stakeholders).
• • Building a Risk Culture: Tone at the top (buy in from top management), governance (shared responsibility), decisions (risk appetite should be the guiding principle of decision-making) and competency (data access and tech proficiency).
• – Red flags can broadly be categorized in three areas – procedural (examples include enquiries inconsistent with role, poor engagement, delegation without oversight), financial (indicators such as cash only transactions, frequent returns, related party transactions) and behavioural (refusal to take leaves, lifestyle beyond means, deferment requests).
• – Some new trends in fraud include: SEO manipulation fraud (directing users to compromised websites via legitimate search engines), impersonations, deepfakes using AI (romance scams, deepfakes of trusted persons or celebrities).
• – Indian Cyber Crime Coordination Centre (I4C): Established in 2020, I4C collaborates with governments and financial institutions to simplify cybercrime reporting, detect trends, raise public awareness, and train public officials.

Shailesh concluded with reflective questions and emphasized strategies for moving forward in fraud prevention.