Credit reference agencies and financial institutions should cooperate to prevent financial fraud in the Middle East, especially the Gulf countries, which have become one of the world's important financial and economic centers, according to a financial expert.
Comprehensive framework
The Head of Financial Crime Compliance at LexisNexis Risk Solutions, Jonny Bell, said that 22 percent of the GCC population does not deal with banks in a region with a 5.2 percent overall economic growth rate in 2022.
The GCC countries have developed large-scale digitization plans to help bridge the gap and transition to a cashless society.
Bell said that digital transformation is at the heart of the strategic economic plans of Kuwait, Saudi Arabia, and the UAE, where building a comprehensive framework for digital payment is an essential element of these goals.
The financial sector in the Middle East showed that digitization could expand access to financial services for society.
Global players
Bell indicated that the region attracted global players in financial technology and created local start-up companies through specialized free trade zones, including the Dubai International Financial Center and regulatory protection funds such as the Saudi Central Bank (SAMA).
The growing number of financial technology companies in the Middle East, which offer a model "buy now...pay later" and Sharia-compliant microfinance, attract millions of unbanked individuals into the financial system.
Compliance approach
Bell noted that innovative financial technology providers and banks could increase consumer access by enhancing transparency in their approach to financial crime compliance.
The operations can expand beyond the usual sources of credit checking agencies to broader credit checks and the use of anonymous data such as educational records, professional records, or court records.
The expert argued that such non-commercial data expands access to financial products for those without a long-term credit history. Companies can better understand economic conditions and make sound decisions by increasing data digitization of potential customers and consumers.
Bell noted that enhancing Financial Crimes Compliance (FCC) protocols help improve financial inclusion and identify new subsets of consumers better qualified to access financial products.
Financial authorities across the Middle East also encourage these practices, including SAMA, which requires banks to set up an administrative unit to combat and address financial fraud.
One operation out of every ten
He disclosed that, on average, one out of every ten financial transactions in the UAE is subject to "malicious bot" attacks carried by fraudsters, according to a study conducted by LexisNexis entitled "The True Cost of Fraud."
The study indicated that the monthly malicious bot attacks increased by 39 percent in the UAE compared to 12 months ago. Sophisticated transactional attacks include identity theft, creation and use of synthetic identities, account takeover, and early default.
Multiple defenses
Bell noted that, due to the current circumstances, companies need a multi-layered fraud defense that targets criminals at every point of contact with the consumer.
He explained that companies could get rid of malicious bots by coordinating verification and operations using fraud analysis technology, noting that it can reduce fraud costs for financial institutions and the risks associated with giving complete access to financial services to new consumers.
Important collaboration
It is essential to increase cooperation between the entities as the Middle East develops as a global financial and commercial hub, said the expert, noting that this requires expanding access to financial services and greater coordination between credit reference agencies, financial institutions, and fraud prevention teams.
Bell concluded that increased innovation and collaboration among all stakeholders would lead to greater inclusiveness of financial services across socio-economic groups.
