BNM's Mandate: Fraud Accountability in the Financial Sector

Bank Negara Malaysia has made it clear in the past months that it will be more strict on financial sectors when it comes to fraud losses, with new policies aiming to encourage banks to strengthen their security measures and protect customers by making them responsible by reimbursing fraud victims.

They are also getting PDRM involved when it comes to user negligence. All in all, the stakes are higher than before for financial institutions in Malaysia as the government has begun implementing laws similar to that in the UK. In short, the goal here is for banks to put less focus on profits and more focus on the consumer.?

As a bank official, you may feel a sudden surge of anxiety when it comes to this news. However, the best minds often turn challenges into opportunities, and stringent regulations can lead to better outcomes for you and your customers.

People Over Profits

In the traditional capitalist framework, the bottom line has always been the focus of any corporation. However, that paradigm is slowly beginning to shift. Amidst climate impacts, public awareness, and advancing cyber-threats, this old method of ever-increasing profit margins is unsustainable for the health of not only our society, but also our planet.?

Short term profits should never be the long term plan of any financial institution. This creates a culture of executives disregarding their customers for the sake of making their company look good on paper. This callous approach erodes trust from their customers and can end up doing long term damage to their branding.

Trust as a Bottom Line

In an era where digital threats are becoming more sophisticated, a bank's ability to foster trust can significantly impact its long-term sustainability. By taking the lead in implementing robust security measures and absorbing the costs of fraud due to security lapses, banks can position themselves as champions of consumer protection. A small price to pay for more public backing.

This trust will not only retain existing customers but also attract new ones, as people gravitate toward institutions that genuinely put their well-being first. Trust, once built, can serve as a competitive advantage far more enduring than quarterly profit margins.

An Incentive to Innovate

The ultimate intent of BNM’s new policies is to push a wave of innovations in the banking sector. To avoid losses for your company, banks will be motivated to research and invest in better technologies to combat fraud.?

The world is not like it was 10 years ago. E-wallets are rising to be the most commonplace means of purchase, and BNM (and fraudsters) know that.? Investing in advanced fraud detection systems might seem like an added expense initially, but it paves the way for sustainable growth.?

By tackling fraud with transparency, banks can forge deeper trust and loyalty in a crowded market. Embracing a purpose-driven model that balances societal impact with financial success not only keeps banks relevant but also creates a win-win for all stakeholders. In this new landscape, the true measure of success is a bank's ability to connect and uplift communities while thriving financially.

The Downsides

These new policies could backfire and lead to unintended consequences. For one, the cost of compensating fraud victims may significantly increase banks' operational expenses, putting financial pressure on them. Smaller banks and new players might also be discouraged from entering the market due to higher barriers, paving the way for the big players to tighten their grip and monopolize the industry even further.

When the incentive is presented as a threat, this can lead to longer rollouts for innovations in fraud detection technology as banks will become overly cautious.??

A Middle Ground

The government can begin experimenting with how much money is compensated to customers in the event of fraud. For example, compensating half the amount will likely put less financial strain on the banks, while still making customers feel reimbursed.

Ultimately we are still in the early stages of these policies being implemented, but there is hope that these policies will create a safer future for financial institutions.