How the HKMA, banking and stored value facility sectors are working to protect the public from fraud

In recent years, we have seen a rapid increase in the number of fraud cases, particularly in online fraud, driven by two factors: technological advances which make financial services faster, easier and more accessible for consumers; and the pandemic which moved activities online.  Types of fraud include phishing emails, offers of non-existent jobs and online “merchants” selling non-existent products.  Whatever the method, fraudsters try to get victims to send them money or important personal information, such as credit card details.

This has become a global phenomenon.  In Hong Kong alone, according to the figures released by the Hong Kong Police Force (HKPF), deception cases increased by 42% in the first half of 2022 over a year ago to more than 12,000 cases, with losses of around HK$2.1 billion.  Shopping fraud, employment fraud, investment fraud and telephone deception accounted for over 60% of the total cases.

The effects on victims should not be underestimated.  Even in some cases, where losses appear to have been absorbed via credit card chargeback, for example, they still have to be paid for and may eventually show up in higher charges or interest costs.  There have also been cases of investment fraud where victims suffered life-changing consequences, losing life savings that were meant to fund their retirements.  Be in no doubt: fraud is not petty crime.

Our response to the increase in fraud is to work with banks, stored value facility (SVF) licensees and our Hong Kong and global partners to make sure the actions are comprehensive.  A robust banking system is of paramount importance to financial stability in Hong Kong, and since banks and their customers tend to be primary targets, the banking sector and the HKMA are heavily involved in the efforts. And in recent years, we have been leveraging technology and data to help strengthen banks’ and SVF licensees’ ability to identify high risk activity promptly and share analysis and intelligence with the eco-system.  It is these partnerships between banks, SVF licensees, the HKMA and HKPF, where we see the greatest value.  I will briefly describe some of them.

First is the Fraud and Money Laundering Intelligence Taskforce (FMLIT), established by the HKPF and supported by the HKMA since 2017, with active participation by 23 retail banks including all virtual banks currently.  Selected fraud cases are shared, helping banks identify over 19,000 previously unknown mule accounts, take prompt action and also support law enforcement investigations.  The HKMA has also shared good practices with the industry, including the use of non-traditional data such as IP addresses.

Another important public-private initiative is the introduction of 24/7 stop payment by retail banks upon receipt of intelligence on scams.  When victims report to the HKPF that they have been defrauded, bank staff can offer immediate assistance in intercepting funds after receiving intelligence from the HKPF, with over $2.2 billion of crime proceeds stopped by banks in 2021. 

The latest initiative, a search engine called “Scameter”¹ allows members of the public to, before a transaction is conducted, input information such as bank account numbers, telephone numbers or Faster Payment System proxies, which are checked against the HKPF’s databases of information previously linked to scams.  This also represents relevant information for banks and SVF licensees in anti-fraud efforts.

Our guidance emphasises the need to be agile, leveraging advances in technology and data while constantly fine-tuning systems to respond as effectively as possible.  To help, we have worked with the HKAB to update the practical guidance in its Frequently Asked Questions.  The HKMA also encourages the use of network analytics through bringing together banks and data experts to experiment in the AML Regtech Lab (AMLab) series. You may read more about this in the latest HKMA Quarterly Bulletin.  We also recognise the HKMA has a unique role in tackling financial crime risks at the systemic level, with a pilot project just commenced on applying network analytics tools to data sets from multiple banks.   

Finally, I would like to share how we as consumers can do to protect ourselves from fraud, whether online or by more traditional methods.  Remember the basic principles:

• never click on hyperlinks purportedly sent by banks or SVF licensees which ask for sensitive personal information: banks or SVF licensees are not allowed to send such hyperlinks;
• Always think twice before sending money or providing personal information;
• Use the available facilities like the Anti-Deception Coordination Centre Anti-Scam Helpline 18222 and Scameter, wherever possible; and
• If it sounds too good to be true, it probably is.

The HKMA will continue to work closely with the banking and SVF sectors to prevent and detect abuse of accounts and protect customers from financial losses from fraud.

Arthur Yuen
Deputy Chief Executive
Hong Kong Monetary Authority

6 October 2022