The Banking Executive Magazine - October 2023

Kuwait’s Central Bank The reliable sources said the banks have informed the CBK that the last meeting came up with four main is- sues which can be limited to: ACHIEVING THE TARGET The banks are almost ready to estab- lish the required “chamber”, while the current open discussion is related to the appropriate technical and human mobilization to provide a specialized team in each bank capa- ble of achieving the goals of the “chamber” and receiving financial fraud reports, following them up and dealing with them with the required speed and efficiency, as each bank will allocate Specific employees for this purpose. The sources stated that the banks coordinated with the rele- vant authorities to take the necessary precautionary measures to ensure that it does not happen again. The sources explained that a preliminary vision had been developed to limit electronic financial fraud operations, a mechanism for dealing with bank- ing reports with those concerned in the Ministry of Interior, freezing de- cisions with the Public Prosecution, and a mechanism for dealing with phone numbers and Internet website addresses used in cases of fraud with CITRA, while suggesting that imple- mentation of the construction of the “chamber” will begin in the next two weeks. FREEZE FUNDS The CBK reported that they received, during the meetings of their represen- tatives in the coordination team, re- assurances from the prosecution stating that the latter is moving to- wards accelerating the procedures for freezing funds derived or sus- pected of being the result of fraudu- lent operations and that they are more prepared to respond as quickly as possible to requests for banking permission to block suspicious funds until they are disposed of and re- turned to their owners. Although the prosecution’s assurances to the banks did not include any indication that a specific department had been allo- cated to these cases and that the mat- ter was still limited to increasing the working hours allocated to this scope, this move dispelled banking fears of exposure to the risks of freez- ing any clients’ funds without permis- sion from the prosecution, which It usually takes 3 business days to com- plete. LOCAL OPERATIONS The banks pointed out that any im- mediate freezing of fraudulent funds will be limited to the movement of funds from one bank to another in- side Kuwait. However, if the “hacker” succeeds in convincing the victim and withdrawing his money in transfers abroad or in “online” pur- chases, the “Chamber” will not be able to implement the plan. The ur- gent measures that you will take lo- cally are to freeze the amounts of these operations immediately. To simplify, if a person is defrauded and his money is transferred to another local bank, the receiving bank will be asked to freeze the transaction funds, after obtaining permission from the prosecution to freeze imme- diately, in preparation for returning them again to the victim client’s ac- count. However, if the “hacker” succeeds in luring the victim by transferring his amounts directly abroad or directing them for “online” purchases, the bank with which the customer’s ac- count is opened will have no choice but to activate its traditional proce- dures, which include contacting the intermediary bank to stop the flow of funds to the opposite party of the transfer or purchase process. Of course, the success of the procedure depends on the speed of reporting and many other considerations. WITHDRAWAL OF MONEY There is a possibility that the bank re- ceiving the money will not be able to freeze the fraudulent amounts imme- diately, even if the transaction was between two local banks if the “hacker” succeeds in withdrawing the “cash” amounts before the is- suance of permission from the pros- ecution, as he may withdraw the amount by simply depositing it in an account used as a bridge. Timed or transferred “online” at a speed ex- ceeding the response time of the “chamber”. It is noteworthy that the “Central Bank” asked “CITRA” to take the necessary measures regard- ing fraudulent operations that use phone numbers issued by telecom- munications companies operating in the country, and to use means to pre- vent fraudsters from impersonating official institutions, including requir- ing telecommunications companies to display the full name of the con- tacting party on the website, phone screen for communications with legal entities such as banks and gov- ernment agencies, to reduce cases of impersonation of employees of banks or government agencies. Perhaps what will increase the signif- icance of the establishment of the ex- pected “chamber” is the escalation of financial fraud operations at signif- icant rates in the past three years, as many services and businesses have become available digitally, which has contributed to an increase in the spread of cyber-crime, especially fraud operations that aim to steal in- dividuals’ banking and personal data in an effort to To access their money. Many methods of financial fraud have recently spread, including fraudsters claiming to be from an of- ficial or banking institution to request information from individuals. According to data issued by the Cen- tral Bank of Kuwait recently, the number of cases of fraud on bank cards at local banks increased by about 6 times last year compared to what was recorded in 2020. Accord- ing to reports from local banks, fraud on bank cards has been increasing every year. Since March 2023, the Central Bank has held a series of meetings with banks as part of its ef- fort to determine frameworks for co- ordination and cooperation between concerned parties to reduce elec- tronic financial fraud. ISSUE 178 OCTOBER 2023 the BANKING EXECUTIVE 13