Malaysia not in crisis as State of economy goes beyond ringgit's showing

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State of economy goes beyond ringgit's showing

https://www.thestar.com.my/business/business-news/2022/10/05/state-of-economy-goes-beyond-ringgits-showing

Malaysia's weakening ringgit not reflecting state of economy ...

Inflation likely to peak in the third quarter of this year.

PETALING JAYA: One could not help but notice that Bank Negara governor repeatedly emphasised in her latest speech – three times to be exact – that the Malaysian economy is no longer in a crisis.

Tan Sri Nor Shamsiah Mohd Yunus highlighted that the economic recovery is well underway, although she acknowledged that the future ahead will be “challenging, highly uncertain and unpredictable.”

Interestingly, in the same speech at the Khazanah Megatrends Forum 2022 yesterday, Nor Shamsiah warned that Malaysia could be left behind if no reforms are done.

“As a country, we must now focus on strengthening our economic fundamentals, resilience and flexibility.

“Our neighbours within the region are actively pressing on with reform measures. We run the risk of being left behind if we do not act now,” she said.

Amid speculation that a recession is imminent, Nor Shamsiah advised Malaysians not to act in a manner that jeopardises the recovery and the confidence of investors, which in turn can create a “negative self-fulfilling cycle.” StarPicks

Commenting on the economy, Nor Shamsiah noted that Malaysia’s investment activity and prospects continue to be supported by the realisation of multi-year projects.

The country’s exports have also been recording double-digit growth since the start of 2021.

Nor Shamsiah also said that the labour market has shown strength.

“Wages in both the manufacturing and services sectors have been increasing since the start of the year, at around 5% and 7%, respectively.

“Unemployment is now less than 4% and income prospects remain positive,” she said.

On price pressures, the central bank head said Malaysia’s inflation remains well anchored, with headline inflation averaging 3.1% year-to-date.

“It is largely supply-driven but we have also seen stronger demand with the reopening of the economy.

“That said, we project that inflation will peak in the third quarter of this year.

“In addition, the extent of upward pressures to inflation will remain partly contained by the existing price controls and the prevailing spare capacity in the economy,” she said.

Despite her optimistic view on the outlook, Nor Shamsiah acknowledged that rising geopolitical tensions and conflict, global inflationary pressures and extremely volatile financial markets will lead to slower growth in 2023.

However, she also pointed out that the fundamentals of the local economy and financial system are strong.

“The preemptive policy measures taken will help us to weather this storm,” she said.

With regard to the weakening ringgit against the US dollar, Nor Shamsiah said it is not a reflection of the state of the economy.

“The exchange rate is only one indicator among many.

“Like I said at the start, it is important to consider the strength and positive performance of the Malaysian economy.

“Growth is robust, the labour market is healthy and the financial system is resilient and continues to perform its role effectively,” she said.

Nor Shamsiah also noted that Malaysia has a strong external position with more foreign currency assets than foreign currency liabilities.

“Foreign currency borrowings only account for less than 3% of total federal government debt,” she said.

Between January and September 2022, the ringgit has depreciated by 10.2% against the US dollar.

The current depreciation of the ringgit is due to the strength of the US dollar.

Nor Shamsiah called upon corporate Malaysia to help maintain “orderly market conditions” by taking action that do not exacerbate the ringgit’s depreciation against the greenback.

“Bank Negara will ensure that our onshore foreign exchange market remains liquid, so businesses can be assured that all their foreign currency needs can be efficiently fulfilled.

“So there is no need to hoard or front-load US dollar purchases.

“Corporates and domestic financial institutions should also be prudent in managing their balance sheets.

“This includes to avoid creating new vulnerabilities, especially from foreign currency debt and financial imbalances, as well as hedging their risks appropriately,” she said.

As for businesses and investors that benefit from a ringgit depreciation, the central bank governor urged them to take advantage of the weaker ringgit.

“For example, for those in tourism and exports to increase production and capitalise on this opportunity, and for those with a global presence, to reinvest back home,” she added.

Khazanah Nasional managing director Datuk Amirul Feisal Wan Zahir, who also spoke at the Khazanah Megatrends Forum 2022, shared Nor Shamsiah’s views on reform initiatives.

He pointed out that Malaysia is still “too far down” the value chain of productive work and that growth has to be fully inclusive.

“Our past growth was based on foreign direct investments-driven, low-cost competitive manufacturing – this no longer serves at our current stage of development.

“Long term structural reforms are required – but these will require substantial resources.

“And future growth must not allow inequality to persist, it must be fully inclusive of all socio-economic classes, and fully include women – where structural norms have long impeded opportunities for this demographic,” he said.

Amirul also spoke on climate change, highlighting that there is much work to be done, globally and collectively.

“But this does not mean that all countries have the same work to do, the same amount of pain to bear, the same standards of accountability.

“There is nothing fair and equal about climate change,” he said.

He mentioned about the devastating floods in Pakistan, in which an area three times the size of the country of Portugal went under water, and yet Pakistan produces less than 1% of the global greenhouse gas emissions.

In order to meet critical climate goals, Amirul said the world needs to ensure a “just transition”, which is much more complex and nuanced than a common standard for all nations.

“Just six national entities are responsible for producing over 70% of the greenhouse gas already emitted in human history, namely the United States, the European Union, China, Russia, the United Kingdom and Japan.

“Malaysia’s contribution, as of 2020, has been a mere 0.37%.

“New ‘targets’ are not so easily attained by developing countries, who suffer the most from climate change, and yet historically have contributed the least to causing it,” he said.

Amirul also added that all businesses and organisations have an ethical duty to act immediately and must not just wait for regulations to be imposed.

“This is why Khazanah Nasional has already defined and adopted a Sustainability Framework which encompasses environmental, social and governance (ESG) standards.

“We have published these on our website to make them fully public, and they include carbon-neutral operations by 2023, net-zero emissions by 2050, 30% of board and senior leadership positions to be held by women by 2025 and ESG-linked key performance indicators for key leadership positions in our portfolio companies by 2023,” he said. 

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Malaysia's economy is not in crisis: Bank Negara governor

 https://www.nst.com.my/business/2022/10/836783/malaysias-economy-not-crisis-bank-negara-governor

 

Malaysian economy not in crisis: Bank Negara Malaysia 

 

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Xi’s 10-year rule and what lies ahead

 

 

 

Understanding the rise of China | Martin Jacques;

Why Western Democracy is in Serious Trouble

A toast: Xi and Li raising glasses during a reception at the Great Hall of the People in Beijing. — Reuters

 

AS the Communist Party of China prepares for its 20th National Congress in October, where President Xi Jinping is expected to secure a controversial third term as top leader, Asian Insider looks at his record over the last 10 years and what the future holds for him, the party and the country.

Last weekend, Twitter was abuzz with “news” that there had been a military coup in Beijing and President Xi Jinping was under house arrest.

The grist to the rumour mill: Hundreds of flights had been cancelled across the country, Xi had not been seen in public for a week, and a video showing a military convoy making its way into the capital city was being widely circulated.

Unsubstantiated claims and conspiracy theories about Chinese leaders’ fall and demise come and go with enough regularity to make the most seasoned China watchers roll their eyes every time one of them pops up on social media.

The 101-year-old Communist Party of China swept to power 73 years ago on Saturday, but it is still one of the world’s most opaque political parties.

As it gears up for its twice-a-decade congress in two weeks, where nearly 2,300 delegates will elect a new Central Committee made up of 370 or so leaders, it is keeping political pundits guessing over who might rise in the ranks to lead the country of 1.4 billion people.

The Politburo Standing Committee – the pinnacle of power with seven men – and the wider Politburo of 18 other leaders will be of particular interest to most.

But compounding the difficulty in making any predictions is President Xi Jinping’s track record of breaking norms – whether written or unwritten – and the cloak of secrecy that has only thickened under his rule.

Only two things appear to be certain for now: President Xi will secure a rare third five-year term as party and military chief during the week-long gathering. And there will be no apparent successor.

But who else might stand alongside Xi when the new team takes the stage a day after the conclave? Here are three possible scenarios:

Most conservativeTwo of the seven standing committee members will step down, in keeping with an unwritten retirement rule that requires Li Zhanshu, 72, and Han Zheng, 68, to relinquish their third-ranked and seventh-ranked seats.

The “seven up, eight down” rule sets at 67 the age limit for old and new members of the standing committee and the Politburo at the start of a new term. Politicians aged 68 or older are disqualified.

But the rule does not apply to Xi, 69, who is looking to seek a third term in office.

Conventional wisdom has it that Premier Li Keqiang, 67, will retain his second-ranked seat in the standing committee because he has not reached the retirement age. But he is constitutionally required to step down as premier in 2023 after two five-year terms and could take over Li Zhanshu’s role as head of Parliament.

Wang Yang, 67, who is chairman of Parliament’s top advisory body, is the frontrunner to succeed Li Keqiang as premier in 2023. As far as seniority goes, Wang should be next in line for the prime minister’s job.

Tradition also dictates that only those who have been vice-premiers and are capable of managing the economy can be appointed premier. Wang was vice-premier between 2013 and 2018, overseeing commerce, among other things.

Current standing committee members who have yet to reach retirement age could stay on. Zhao Leji, 65, currently ranked sixth, could take Wang’s fourth-ranked seat and become chairman of the advisory body in 2023.

Wang Huning, 67 in October, is expected to retain his fifth-ranked seat as the party’s top ideologist.

Party insiders have singled out Hu Chunhua, 59, and Ding Xuexiang, 60, as the two likely new faces in the standing committee.

Hu, currently the third-ranked vice-premier and who was thought to have been groomed for the top job during the leadership reshuffle at the last congress, is tipped to become executive vice-premier.

Ding, director of the party’s General Office, is the frontrunner among the President’s men to be promoted to the standing committee. He is Xi’s most trusted aide among the younger leaders.

Other aspirants are Propaganda Minister Huang Kunming, 64; Beijing party secretary Cai Qi, 66; Chongqing party boss Chen Min’er, 62; and Shanghai party secretary Li Qiang, 63.

But this scenario could well be too unimaginative for Xi, who has a penchant for departing from tradition and surprising pundits.

The surprise

In the second scenario, Premier Li will retire from the standing committee this year and as premier next year, according to several party insiders and observers.

Three other standing committee members will also step down: Li Zhanshu and Han – in accordance with the retirement rule – and Wang Huning, who was said to have indicated privately that he would like to retire earlier.

Only three of the seven standing committee members will retain their seats: President Xi, Wang Yang and Zhao.

The four other standing committee members will be newcomers and mostly the President’s men.

Regardless of whether Premier Li stays on or not, the number of standing committee members could be expanded to nine to accommodate more of the President’s allies and possibly a People’s Liberation Army (PLA) general for the first time since 1992 – a hint that China might be preparing itself for military conflict.

If so, the person who fits the bill is PLA Ground Force General Zhang Youxia, 72, one of two incumbent Central Military Commission vice-chairmen, and who has combat experience from the 1979 border conflict between China and Vietnam.Most boldIn this scenario, President Xi will be the only standing committee member to hold on to his seat – a clear sign of his iron grip on power.

This could be done if the unwritten retirement age rule is revised down instead of up.

“It will be ‘winner takes all’,” said Ho Pin, who runs Mirror Media Group, a Chinese-language publishing company in New York.

“There will still be norms, but no more factions,” said Ho, who correctly predicted the standing committee line-ups of the 16th to 19th party congresses from 2002 to 2017.

Factional balance of power has always been a major factor in the composition of the standing committee to keep the unity and stability of the party.

The current standing committee strikes a balance between Xi and his allies (Li Zhanshu and Zhao), former president Jiang Zemin’s “Shanghai Gang” (Han Zheng) and former leader Hu Jintao’s Communist Youth League faction (Li Keqiang and Wang Yang).

Even so, these factional lines are also not so clear-cut. Zhao, for instance, is also known as Jiang’s man, while Wang is also not as entrenched within the elite circles of the youth league.

Wang Huning is the exception as he was trusted by and has worked with all three leaders.

If Xi’s hold on power is as unwavering as it looks to be, this scenario could well pan out, and he will have free rein to fill the standing committee with younger allies, such as those born in the 1960s. — The Straits Times/ANN 

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RAISE YOUR 'HAPPINESS' HORMONE

 

Being in the company of loved ones will prompt the release of happiness hormones — Photos: dpa  

A homemade guacamole made from avocado not tastes good but also helps the body builds up its serotonin levels

The key to happiness is to feed your hormones. this is what you can do to help boost your serotonin levels and banish a bad mood.

WE ALL get out of bed on the wrong side some mornings: The coffee tastes bitter, the commute is exasperating, and our co-workers seem bent on getting under our skin. What’s wrong? It’s probably the day’s mixture of our body’s chemical cocktail.

Chemical messengers – neurotransmitters and hormones – determine how we feel. Neurotransmitters carry signals from one nerve cell across a small gap to the next nerve, muscle or gland cell, while hormones are conveyed via the bloodstream.

Some chemical messengers act as both neurotransmitters and hormones, interact with each other and influence our mood. Four of them – dopamine, serotonin, oxytocin and endorphins – are often dubbed “happiness hormones”.

“The ‘motivation hormone’ dopamine, for instance, is released when we tackle new tasks, are surprised or are looking forward to something positive,” says neuroscientist and author Friederike Fabritius.

“Serotonin, on the other hand, is a neurotransmitter that keeps us even-keeled and content. Our body produces it when we socially interact – or feel like a winner.”

Oxytocin, for its part, is released during pleasant physical contact, while endorphins are, in effect, endogenous opioids.

A feeling of well-being depends on the mixture of the body’s chemical cocktail at a particular moment. Many of the processes involved in the production and release of feel-good chemicals are highly complex and haven’t been studied in detail. Be that as it may, is it possible to give them a boost?

Happily, the answer is yes. But if you’re looking for a magic formula, you’ll be disappointed. When it comes to hacking your happiness hormones, there’s no getting round well-known health recommendations such as exercise and sport.

“When we push our body to the limit, it releases endorphins,” says Dr Andreas Michalsen, chief physician in the Department of Internal and Naturopathic Medicine at Immanuel Hospital in Berlin. “We know this from ‘runner’s high’ and the mild euphoria that arises on the second or third day of fasting.”

Sport also elevates dopamine levels, according to Fabritius, “but not, unfortunately, when you engage in it very reluctantly.” So don’t expect to feel a high if you’ve got to drag yourself out the door in nasty weather to go for your run.

There are other ways to get a dopamine kick though: Set goals, whether personal or job-related, and work towards them. Or plan pleasant undertakings.

“Dopamine is released in anticipation of something positive,” Fabritius says. “Beforehand, in other words, when you’re planning an activity.”

Food and our mood

Diet can affect your body’s chemical messengers too. “We know that some foods don’t do people good and put a damper on their spirits,” points out Michalsen. Among them, he says, are highly processed foods with saturated fat or sugar, so fast food is bad for your mood.

Other foods are mood-enhancing. “Foods such as soya, cashews, bananas, dates, avocados, legumes, oat flakes and mozzarella contain L-tryptophan,” says Michalsen, explaining that it’s an essential amino acid – meaning it can’t be synthesised by the body and must therefore come from our diet – and helps to normalise serotonin levels.

Fermented foods such as sauerkraut, yogurt, kimchi and kombucha are beneficial as well. The reason is that many chemical messengers are produced in our gut, and these foods have a positive effect on the processes involved.

“There’s now even a branch of medicine called nutritional psychiatry,” notes Michalsen. “It studies the connections between diet, the gut microbiome and mood.

Well-being isn’t just about what you’ve got on your plate though, but also who’s at the table with you. If you’re in the company of loved ones, laughing and feeling comfortable, this will prompt the release of happiness hormones too.

 By FRANCOISE HAUSER - dpa

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THE FIGHT AGAINST CYBERCRIME IN FINANCIAL SERVICES

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The rise of online financial fraud in Malaysia - The Star

As losses to scammers mount, users and service providers such as banks need to drastically raise security levels.  

There is a need for heightened awareness and education about scams among the public

ONLINE banking fraud is a hot topic of the day. Not only are the case numbers rising, the amount of money being scammed is reaching eye popping levels.

Many Malaysians with online banking facilities are increasingly worried about cybercrime.

In the first seven months of 2022, Malaysians have lost about Rm415mil to scammers. 

The problem had become so bad that Bank Negara stepped in this week to issue a strict directive to all Malaysian banks to migrate away from the use of Sms-based authentication in online banking services.

The police are getting more vocal about the problem, providing updates on arrests being made and constantly dishing out advice to the public on ways to avoid getting scammed.

The banks, in the past few days, have also issued statements, talking about how they are raising their defences against cybercrime.

But, what went wrong in the first place for the situation to reach this level?

And, will the new steps that banks are taking help stem the problem?

Datuk Khairussaleh Ramli, the group president and chief executive officer of Malaysia’s biggest bank, Malayan Banking Bhd (Maybank) tells Starbizweek this: “With the rise in ecommerce activity spurred by the Covid-19 pandemic, and as more consumers prefer to transact online, fraudsters are taking the opportunity to find new ways to scam unsuspecting users.

“The increasing risk of cyber attacks and the potential impact on banks and their customers is a top concern. This has been elevated with the rise in more sophisticated scams such as ‘smishing’ (phishing via SMS) and malicious software (malware) scams impersonating banks recently.”

Ho Siew Kei, cyber risk leader of Deloitte Malaysia, reckons that 70% of commercial crime cases now can be categorised as cybercrime cases.

It appears that the problem lies with the usage of SMS in online banking transactions.

Many Malaysian banks have been using SMS one-time passwords or dubbed OTPS for online financial services.

Users need to key-in authentication OTP codes, obtained through SMS, to a browser or a mobile application to carry out their online banking transactions.

However, fraudsters have been able to get control of these codes from the devices of some customers.

It all starts when a user unknowingly downloads malicious applications or clicks on links that eventually leads to the installation of malware.

Such users are enticed to follow such links sometimes due to a promise of receiving a reward or other benefits.

Fraudsters, through the malware, will then be able to intercept sensitive information, including banking credentials and credit card numbers.

It also allows fraudsters to intercept messages being sent to the device such as the OTPS received for online transactions.

Upon obtaining the OTPS, fraudsters may also delete the SMS from the device, which often leaves victims believing they did not receive any SMS.

With this method, fraudsters are able to get control over users’ bank accounts. This can lead to financial scams that often occur without the knowledge of the victims. 

Sea: The better technology is widely available ranging from the use of QR codes to the use of external dongles

According to Sea Chong Seak, chief technology officer of cyber security firm Securemetric Bhd, the problem seems to lie not so much with attacks against banks’ systems or networks but rather due to the weaknesses that exist in the security of end users’ devices.

Users that download suspicious apps or go into questionable links through their mobile devices create an entry point for the fraudsters, owing to the low security control, he says.

“This is why banks need to move away from the usage of SMS OTPS in the authentication processes. The better technology is widely available ranging from the use of QR codes to the use of external dongles,” says Sea.

Sea cites the case of Citibank Malaysia that uses QR codes and biometrics in it authentication processes as an example.

Meanwhile, Maybank points out that it has introduced the usage of Secure2u since April 2017 for an alternative secure authentication method.

“It is a safer and more convenient way for Maybank customers to authorise transactions relating to account opening, fund transfers and payments on its online banking services mobile applications, using onetap approval and a six-digit transaction authorisation code (TAC) number generated on its applications,” says Khairussaleh.

For better protection against cybercrimes, Khairussaleh says: “Currently, we only allow one Secure2u device per account holder to prevent fraudsters completing financial transactions without authorisation from the registered device.”

However, it should be noted that while more secure authentication technologies have been available to banks, the usage of SMS OTP has been largely used because of the ease of use for customers. This also helped banks migrate its customers into online banking. The usage of dongles or other technologies would have also meant higher costs to the banks.

Ho Siew Kei, cyber risk leader at Deloitte Malaysia, says that while Bank Negara’s decision to nudge financial institutions towards more sophisticated authentication methods is a step in the right direction, there will be challenges due to the widespread use of more traditional devices at this point in time.

“However, as older devices are replaced by devices that are affordable yet are more advanced and able to support the latest technology, we should see adoption of the advanced security features become commonplace,” he says.

In replies to questions from Starbizweek with regard to the usage of SMS OTP in online financial transactions, Mohd Rashid Mohamad, group managing director and CEO of RHB Bank Bhd, says: “It takes into account the needs of various segments of customer demographics, including those who do not own smartphones or do not have access to data and Internet connections.”

Rashid says RHB Bank views fraudulent activities and financial scams very seriously, and is consistently enhancing its security measures.

However, he believes there is a need for heightened awareness and education about scams and frauds among customers.

“It is equally important that customers are kept informed on the latest scam and fraud trends so that they are aware of potential threats and therefore able to avoid becoming victims,” he says.

RHB Bank uses Secure Plus for its customers’ transaction authorisation process, which uses QR codes and biometrics for authentication.

Rashid notes that RHB Bank plans to fully migrate all transactions into Secure Plus by next year.

Technology firm Marco Kiosk Bhd, which provides Sms-based OTP services to banks, shares a different view. CEO Datuk Kenny Goh, says: “Cyber criminals target individual consumers or financial institutions irrespective of the authentication method or the underlying technology deployed.”

Despite welcoming the central bank’s decision to get financial institutions to move out of the SMS OTPS, Goh says: “There is nothing insecure about using SMS OTPS as experience has shown that often the gaps were in either compromised devices, scammers tricking consumers to download apps or getting unsuspecting users to forward SMS OTPS.”

Goh says that knowledge on scam prevention for the public is more crucial.

“Educating and instilling knowledge of how to prevent cyber-based scams is key rather than discarding a long-standing tool that has been proven effective,” he says.

Goh adds that Bank Negara’s decision to nudge banks to migrate away from SMS OTPS will not have any significant impact on Macro Kiosk’s earnings because of its wide product base and the fact that Sms-based services are only a small portion of its earnings.

Notably, Bank Negara has also directed financial institutions to implement other measures.

These include further strengthening of fraud detection rules and triggers for blocking suspected scam transactions and a cooling-off period to be observed for the first-time enrollment of online banking services or secure devices.

Additionally, the central bank said customers should be restricted to one mobile device or secure device for the authentication of online banking transactions and banks will be required to set up dedicated scam hotlines.

Meanwhile, Securemetric’s Sea refers to Fast Identity Online (FIDO) Authentication, which is a security standard that is increasingly recognised internationally for its capability to replace password-only logins with a more secure and fast login, owing to its multi-factor authentication.

According to Sea, FIDO Authentication is simpler for consumers to use, easier for service providers to deploy and is more secure than passwords and SMS OTPS.

Its multi-factor authentication includes the use of biometrics, QR codes as well as unique PINS.

FIDO Authentication is not new in Malaysia, as the National Cyber Coordination and Command Centre (NC4) was the first to adopt it, Sea points out.

Clarence Chan, partner, digital trust and cybersecurity at PWC Malaysia, adds that FIDO’S passwordless authentication stemmed from the goal of minimising phishing attacks, as passwords are the root cause of most data breaches based on various studies.

Ubaid Mustafa Qadiri, head of technology risk and cyber security for KPMG in Malaysia, says: “FIDO is a more secure approach compared to Sms-based OTPS.”

“With FIDO, customers can be restricted to using only one registered device for authentication and online transactions and as a result, will help in reducing financial frauds and scams while performing online transactions,” he adds.

Deloitte’s Chan adds that FIDO standards are seeing greater adoption in recent years, including Malaysia.

Nevertheless, even something like FIDO will not be able to totally eradicate cybercrime.

“Overall security for online transactions is still heavily dependent on the security of the user’s device. So, no authentication method can guarantee 100% safety,” Chan adds.

Meanwhile, Malaysia’s InspectorGeneral of Police Tan Sri Acryl Sani Abdullah Sani has been providing constant updates of the online fraud situation.

He said this week that the Rm415mil losses from January to July this year is the result of 12,092 online fraud cases.

For the whole of last year, losses accumulated to about Rm560.8mil coming from 20,701 cybercrime cases.

For 2019 and 2020, there were a total of 13,703 and 17,227 cybercrime cases with losses of Rm539mil and Rm511.2mil respectively, according to the IGP.

“From 2019 to July 2022, a total of 33,147 suspects in cyber fraud cases were arrested, with 22,196 cases charged in court,” he said.

It should be noted that online banking fraud is not limited to Malaysia.

Globally, cybercrime is the common type of fraud in most industries, based on a survey by PWC titled “Global Economic Crime and Fraud Survey 2022”. (see table)

PWC also notes that cybercrime poses the biggest threats across organisations of all sizes, followed by customer fraud and asset misappropriation.

Additionally, a recent report by S&P Global, titled “Asia-pacific Banks’ Digital Opening Raises Cyber Risks”, notes that threats of cyberattacks are soaring in the Asia-pacific region and globally too.

The report says that for banks, data breaches not only create a direct monetary loss but also damages the reputation of a bank and can hit a bank’s credit profile.

“To prevent attacks, Asia-pacific regulators will need a dogged determination to understand and manage risks. This points to the need for collaboration, and cross-border information sharing to build cyber resilience across entities to prevent systemic risk,” the report notes.

In a separate report, the global rating agency says data breach appears to be the biggest cyber risk for banks, with association to high losses, for both emerging and developed markets. (see table).

Hence, in all likelihood, cybercrime is likely to remain part of the risks that will always exist, more so as online transactions keep growing.

KPMG’S Ubaid points out that the increasing audacity of cybercriminals will keep this threat on an upward trend.

It is left to be seen if the rising tide of cybercrime in the Malaysian financial landscape will reduce following the wide publicity it is getting and the actions being taken by all concerned. 

-  StarBiz Stories by kirennesh Nai

 

Cybersecurity experts share their views

 

THE rise in cybercrime especially in financial services is a huge talking point today.

But is it something that was predicted to happen considering the rise of online banking services?

And is Malaysia being particularly hit hard?

Does the problem lie with the usage of less secure authentication methods such as Sms-based onetime passwords (OTPS) and what can banks do to fix the problem?

Some consultants share their views on these issues.

On the rise of online banking fraud. Ubaid Mustafa Qadiri, head of technology risk and cyber security for KPMG in Malaysia:

Cybercrime in banking or any other sectors will only continue to grow due to technological changes (including digitalisation) and organisational advancements with the introduction of new technology to improve process efficiencies.

Further, the increasing audacity of cybercriminals will also keep this threat on an upward trend.

With the accelerated rate of digitisation as a result of the pandemic, cybercrime has grown more rapidly than it would have, and criminals have evolved their techniques to target more enterprises and individuals to the point that banks have to implement more effective controls.

  Ho Siew Kei, cyber risk leader of Deloitte Malaysia:

 

This is an expected result, not only because of financial institutions’ rapid shift to online banking but a general trend as organisations continue to move towards digital transformation.

It is estimated that 70% of commercial crime cases now can be categorised as cybercrime cases.

Clarence Chan, partner, digital trust and cybersecurity at PWC Malaysia:

 

There is a difference between cybercrime originating from a successful customer scam, and a cybercrime due to lapses in banking IT infrastructure.

Generally, most of the cybercrimes reported lately are due to the former, rather than the latter.

Most of these crimes, if not all, were only successful because the customers gave away their OTP or credentials via the scammer’s phishing attempt.

However, it is fair to assume that local banking customers may eventually be targeted after a similar modus operandi was used against a leading bank in Singapore, which amounted to more than S$13mil (Rm42.07mil) in losses.

Is Malaysia being particularly hit hard?

Ubaid: Online banking fraud is happening everywhere in the world, and it is expected to grow as criminals keep evolving new techniques.

According to the latest statistics, online fraud accounts for 68% of commercial crime in Malaysia. As the use of financial technology (fintech) and e-wallets have rapidly increased over the last four years, online fraud cases have also risen as the rate of adoption increased.

Ho: As a whole, banking fraud is definitely a global phenomenon – various countries have reported a general upward trend in banking fraud over the recent years, and this would apply to Malaysia as well, as Malaysian banks continue down the path of digitisation.

Chan: Online banking fraud is prevalent throughout the banking industry globally where industry players are constantly faced with the challenge of combating constantly evolving fraud techniques.

Looking closer to home, Singapore faces similar challenges as the scamming scene is largely similar. Anti-scamming divisions within the Malaysia and Singapore police force have been actively collaborating in tackling transnational scamming syndicates, participating in Project Icons (International Cooperation On Negating Scams).

In 2019, Bank Negara also introduced the Risk Management in Technology (RMIT) Guidelines, one of the most comprehensive technology and cyber risk management guidelines in this region, with the aim of elevating the banking industry’s security measures and standards, to ensure that online banking services are kept safe and secure for customers.

Since then, plenty of efforts have been made by banking institutions to improve their cyber resilience.

Does the problem lie with the usage of less secure authentication methods such as Sms-based OTPS and what can banks do to fix the problem?

Ubaid: Yes, but it also depends on the central bank’s guidance and the banks’ capability to develop secure mobile banking applications (which requires investment to produce) that would be able to authenticate and authorise transactions more securely.

Recently, the central bank of Malaysia announced that financial institutions should take additional measures to block suspicious transactions, and customers to be asked to confirm if the transactions are genuine before they are unblocked.

Some of the advanced features include:

> Secure TAC

> QR code scan

> Mobile app authentication/ approvals for transactions

> Facial recognition/biometric authentication through banking application

> Device fingerprinting

Ho: OTP and Sms-type authentication is widely supported by most devices, especially older devices. Banks tend to focus on a wider userbase, and rightly so, so as to not cut out different market segments, notably those without access to more modern devices.

Bank Negara’s recent push for financial Institutions to migrate away from SMS OTP toward more sophisticated authentication methods is a step in the right direction. However, there will still be challenges for certain market segments who use the more traditional device at this point in time.

However, as older devices are replaced by devices that are affordable yet are more advanced and able to support the latest technology, we should see adoption of the advanced security features become commonplace.

We are seeing a shift towards soft tokens on mobile devices, where transaction authorisations are sent through push notifications. This means that transactions can only be authorised from a customer’s registered device, and only after the customer has authenticated, typically with their biometrics.

These methods will also see certain restrictions such as customers authentication being bound to a specific registered device.

Chan: In general, there is a visible trend in financial institutions adopting multi-factor authentication technologies which are no longer reliant on SMS OTP.

This includes in-app, certificate-based or biometric authentication, which provides a more secure authentication mechanism and prevents potential OTP hijacking or other phishing and scamming attempts.

With Bank Negara’s directive of moving away from SMS OTPS by 30 June 2023, we can only expect the adoption of these measures to be accelerated.

Is cost holding back Malaysian banks from enhancing their level of security?

Ubaid: Any upgrades, enhancements or technology integration, be it security or others, will always have a cost component as well as skills requirements attached to it.

Typically, each organisation has its technology plans and budgets based on its business strategy, and banks will follow their approved business plans along with budgets in accordance with the guideline from the central bank.

Ho: There is certainly a cost element to enhancing security. However it should be noted that cyber risk and customer fraud have in recent years become a top risk for banks and doing well to combat these risks can also be seen as a competitive differentiator.

While cost is a consideration, I would think that this is an area that banks are fully prepared to spend on given the focus around regulatory expectations, consumer protection and preventing cybercrime.

Chan: We don’t believe that cost is a particular factor holding Malaysian banks back from enhancing their level of security.

If we consider the results of Pwc’s 2023 Global Digital Trust Insights survey, in which banking and capital markets make up the second highest proportion of Malaysian C-suite respondents, 19% of respondents say that their organisation’s cyber budget is increasing by 6% to 10% in 2023.

Also worth noting, 49% of Malaysian respondents agree to a great extent that their cybersecurity budget is allocated well against the risks they face in the next 12 months.

However, banks can continuously explore and enhance their security posture to aid in curbing scams, focusing on educating customers to combat online banking fraud.

To build customer trust, banks should invest in continuous awareness efforts to ensure that their customers remain informed and updated on the latest scam tactics, and modus operandi observed in the industry. - StarBiz 

 

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Cybercriminals beware: public must be aware of how scams work, Putting the brakes on cybercrime