Calls for Credit References Collaboration to Prevent Financial Fraud in the Middle East

Demands for coordinating efforts to combat financial fraud amid financial inclusion and digitization (Asharq Al-Awsat)
Demands for coordinating efforts to combat financial fraud amid financial inclusion and digitization (Asharq Al-Awsat)
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Calls for Credit References Collaboration to Prevent Financial Fraud in the Middle East

Demands for coordinating efforts to combat financial fraud amid financial inclusion and digitization (Asharq Al-Awsat)
Demands for coordinating efforts to combat financial fraud amid financial inclusion and digitization (Asharq Al-Awsat)

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.



Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
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Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)

A broad internal consensus, encompassing both political and economic dimensions, is taking shape to adopt the principles outlined in the presidential inauguration address as the foundation of the new government’s program and ministerial statement. This approach aims to sustain Lebanon’s immediate and strong positive momentum, which is reinforced by widespread support on both Arab and international levels.

Economic bodies and professional unions representing business sectors have openly expressed their relief and full support for the strategic directions set by President Joseph Aoun following his election. However, they have made it clear that maintaining this positive momentum depends on the formation of a reform-oriented rescue government, composed of competent, experienced, and honest ministers. This government must also collaborate constructively with the president.

According to a senior financial official, the rescue mission will be challenging due to years of governmental inaction and constitutional voids, which led to a deterioration in public sector operations and the accumulation of economic, financial, and monetary crises over the past five years. These challenges were further compounded by a devastating war, which inflicted severe human and financial losses estimated at approximately $10 billion, thereby worsening the country’s financial gap, now estimated at $72 billion.

Economic and banking circles are looking to the new government to swiftly capitalize on extensive international support by restoring trust and reestablishing financial channels between Lebanon and its regional and international partners. Key to this effort are explicit and transparent commitments to combating illegal economic activities, corruption, smuggling, money laundering, and drug trafficking. In parallel, the government must prioritize strengthening judicial independence and implementing strict controls over land, sea, and air borders.

The national consensus evident in the presidential election, according to Mohammad Choucair, head of Lebanon’s economic associations, paves the way for constructive collaboration among political factions. This collaboration is crucial for addressing challenges, rebuilding the state, and benefiting from renewed international and Arab—particularly Gulf and Saudi—interest in Lebanon. Choucair emphasized the importance of normalizing relations with Gulf nations, supporting Lebanon’s recovery, and providing resources for reconstruction efforts.

One of the urgent tasks for the new government, according to the financial official, is revisiting the draft 2024 state budget, which was previously submitted to parliament. Adjustments are necessary to address fundamental discrepancies in expenditure and revenue projections, taking into account significant changes brought about by the Israeli war.

Ibrahim Kanaan, chairman of the Parliamentary Finance Committee, described the budget as “unrealistic, if not entirely fictitious,” particularly in its revenue estimates. He pointed out that revenue increases were based on income and capital taxes, internal duties, and trade-related fees, all of which have been severely impacted by the war.

Reassuring depositors, both domestic and expatriate, who have suffered massive losses over recent years, is another pressing issue. These losses were exacerbated by the inability of successive governments to implement a comprehensive rescue plan addressing the $72 billion financial gap fairly. The situation was worsened by mismanagement in the electricity sector and the squandering of over $20 billion in central bank reserves following the onset of the financial crisis.

In response to Aoun’s commitment to a fair resolution for depositors, the Association of Banks in Lebanon welcomed his emphasis on safeguarding deposits. It also expressed its readiness to collaborate with the central bank and the government to protect depositors’ rights, citing a recent State Council ruling that prohibits any financial recovery plans from including measures that would erode depositors’ funds.

In its final session, the caretaker government addressed long-standing creditor issues by unanimously agreeing to suspend Lebanon’s right to invoke statutes of limitations on claims by foreign bondholders under New York law. This suspension, effective until March 9, 2028, aims to facilitate future negotiations.

With this decision, the caretaker government tacitly acknowledged Lebanon’s pending debt obligations, including over $10 billion in suspended interest payments on Eurobonds and approximately $30 billion in principal debt. The resolution now awaits direct negotiations under the new administration, which faces the challenge of resolving a nearly five-year-old crisis triggered by the previous government’s uncoordinated decision to halt payments on all Eurobond obligations through 2037.

Caretaker Finance Minister Youssef Khalil emphasized that despite the difficult circumstances, “Lebanon remains committed to reaching a fair and consensual resolution regarding the restructuring of Eurobond debt.”