18th May 2023 - 3 min read
A global study by analytics software provider FICO revealed that 62% of Malaysians is willing to commit fraud in order to obtain a loan or file an insurance claim. This translates to approximately three in five Malaysians who would do so.
Among other things, the study – which surveyed 1,000 respondents each in 14 countries, including Malaysia – indicated that about 35% of its Malaysian respondents feel that it is acceptable to exaggerate their income in their loan or mortgage applications. Meanwhile, around 25% thought it was normal to do so. Similar numbers also apply for consumers who would overstate an insurance claim or include additional items to a claim.
Furthermore, the study noted that banks in Malaysia may be incurring financial losses from inflated insurance claims due to inaccurate risk assessments following the submission of false information on applications. This is despite the fact that financial institutions usually possess the evidence required to tell apart fraudulent and genuine applications, mainly because fraud teams are unable to access such data as they are siloed.
FICO’s lead for fraud, security, and financial crime in Asia Pacific, CK Leo noted that the survey has highlighted the worrying mindset that Malaysians have regarding the topic of fraud. “While many think that people should never take these fraudulent actions, the survey sheds light on the concerning willingness of many Malaysians to commit fraud in pursuit of financial gain. These numbers underscore the importance for Malaysian banks to bolster fraud prevention to safeguard customers’ interests and strengthen their bottom line,” he said.
Leo also acknowledged that in some cases, individuals may have been forced to resort to extreme measures to obtain credit facilities, especially given Malaysia’s current economic climate and the rising cost of living. However, he stressed that customers must recognise that the act of providing incorrect information on applications or claims is not only illegal, but also a form of fraud.
Additionally, Leo called upon financial institutions to improve their systems and procedures to overcome this challenge. “By enhancing their capacity to identify irregularities indicating exaggeration or misrepresentation of information, financial institutions can proactively safeguard themselves against losses arising from customers’ repayment challenges. Moreover, through such efforts, they can also aid customers in steering clear of unfortunate outcomes,” he said.
Leo also urged banks to consider adopting a holistic approach as well as analytics and machine learning models in assessing applicants’ data, instead of merely resorting to tedious and expensive identity checks. This will enable them to differentiate between fraudulent and legitimate applications more effectively, without compromising the customer experience.
“To achieve success, fraud teams must strike a balance between powerful fraud protection and the legitimate needs of customers. This is further necessitated by the region’s competitive banking landscape, where the wrong fraud strategy can be costly,” Leo commented.
Other countries that were also involved in this study – which was conducted in late 2022 – included the United States, the UK, Germany, Sweden, and Canada.
(Source: New Straits Times)
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