All organizations are subject to fraud risks. Emerging technologies as a channel to provide digital financial services (DFS) are being embraced by the microfinance sector because of their potential to expand financial inclusion. The use of such technologies (i.e. cellphones, smartphones, tablets) often relies on third-party agents, presenting new and different operational risks and the potential for fraud to the MFI.
Large frauds have led to the downfall of entire organizations, massive investment losses, significant legal costs, incarceration of key individuals, and erosion of client and other key stakeholder confidence. MFI offering digital financial services to their clients will need to manage the associated risk to avoid negative impact on their reputations, brands, and images of many organizations around the globe.
Building on RIM’s Mission and Vision
The activities of the Fraud Risk Management in Emerging Technologies Working Group build on RIM’s mission and vision by collaboratively working on strategies, tools, and techniques to identify and mitigate fraud risks related specifically to DFS. This group complements the work being carried out by the Operational Risk Working Group.
Expected Outputs/planned Accomplishments
The working group will develop a paper on DFS fraud risks, discussing the following issues:
- Emerging trends in the microfinance sector related to fraud risk, particularly in financial inclusion and DFS
- Customer Fraud
- Agent Fraud
- Business Partner-Driven Fraud
- Provider Fraud
- Have we determined our level of acceptable financial losses due to DFS fraud risk?
- Have we identified key areas for potential fraud risk for our institutions?
- Have we developed preventative and detective fraud controls?
- Are we actively monitoring and reviewing our fraud risk management strategy (e.g. via dashboards/key risk indicators)?
- Negative social performance, possible drift from the social mission of the MFI and/or client protection issues related to DFS
Frequency of Meetings:
5-6 times a year
First Secretary: Open
Second Secretary: Open