2024 was a bumper year for scams, with three in four attempts using synthetic, AI-generated tools. 

We live in an age where fraud increasingly looks like it will become as important as financial crime in the banking and regulatory universe.

To wit, regulators in Asia lost no time in 2024 laying down new rules, as finews.asia has extensively reported, and banks have been struggling to catch up. 

Range of Measures

In Singapore, the measures extend from a relatively soft-pedaled bank industry scam-fighting mascot to a parliament bill that may allow police to restrict banking transactions directly. In Hong Kong, Fast Payment (FPS) users are warned when they are potentially falling victim to criminals, with city ATMs slated to do the same from March onwards.

As finews.asia commented on then, Australia has taken an even more direct approach to bank sector responsibility by suing HSBC for scam-related failures in December.

Tough Nut

The truth is that many banks have been caught off guard and don’t get it – at least not yet, as the statement by the Australian regulator related to HSBC reeked of impatience while describing a very sorry state of affairs, something we indicated at the time.

But, in the industry’s defense, protecting clients from scammers is going to be a tough banking nut to crack – as victims voluntarily make fraudulent payments without them necessarily knowing they are doing so, and once the money is gone, it is almost impossible to get back. To get defrauded in our age means that everything happens silently and is above board until it is way too late.

Growing Complexity

Then there is the matter of growing complexity. Global identity and verification management leader AU10TIX says that synthetic, AI-generated fraud accounted for 75 percent of total losses that the company managed to prevent worldwide in 2024.

In financial terms, it managed to stave off around $7.5 billion in scams last year.

Paradigm Shift

We conducted an interview with AU10TIX chief business development officer Ofer Friedman in November that looked at the growing intricacy of the attacks.

According to him, current efforts require a paradigm shift, as today’s AI and Gen-AI technologies are so challenging that they require more than just better and keener reviews, with case-by-case analyses needing to be complemented by behavior-level lookbacks.

Regional Exposure

At the time, he also mentioned that Asia Pacific was high on the fraud list relative to other regions given the presence of fraud rings, as well as the financial activity undertaken by individuals. As an example, in foreign exchange, the region leads the world in active brokers and market activity, with the high volumes generated attracting more criminal interest.

Moreover, Hong Kong is flying a task force to Thailand this weekend after city residents have been increasingly falling prey to high-paying job scams following the recent high-profile rescue of mainland actor Wang Xing, as the «Bangkok Post» reported on Monday. 

Although that is not directly related to the financial sector, it does raise an important point. It is the age of the scam, online and real.

Quizzical Looks

Indeed, what is happening now is somewhat reminiscent of when financial crime prevention first reared its head internationally, with institutions outside the US being belatedly prodded to fight it from the 1990s on. 

Back then, getting banks to check rationales for repetitive ATM withdrawals and circular payment flows would draw quizzical, incomprehensible looks from bank management, a lesson very painfully learned by HSBC in 2012.

Larger Impact

However, the current wave of fraud could end up having a much larger impact on the industry than financial crime ever will have. 

If the banking sector does not get its hands around it all, despite the real difficulties of doing so effectively, it could potentially be an unexpected trigger for the next major financial crisis.

Digital Bank Run

It could prompt a spate of bank runs, particularly if clients lose their confidence that banks aren’t in a position to meaningfully protect them and return funds seized by fraud.

As we know with Credit Suisse in 2023, digital bank runs come thick and fast.