MANILA, Philippines – Filipinos have lost at least P155.20 million due to scams in the first eight months of 2023 alone, and now the pressure is on for lawmakers to stop fraud from creeping into an increasingly digital economy.

Around the world, the rise of digital fraud has taken out as much as 2% from global gross domestic product figures, according to Senator Mark Villar, who chaired a Senate hearing on the proliferation of bank-related fraud on Monday, September 18.

“While digitalization and the widespread use of digital finance opened opportunities for the banking sector, it is also apparent that opportunists also devised new methods to take advantage of this emerging financial market,” said Villar.

The Philippines is no exception. From February to April 2022, the country had the highest cases of financial phishing attempts in Southeast Asia, according to cybersecurity firm Kaspersky. 

In general, most attempted fraud comes in the form of phishing attacks, which try to get users to give sensitive personal information that scammers can use to take money from someone’s bank or e-wallet account. This can be done through email, through calls (known as vishing), or through text messages (known as smishing).

The Philippine National Police Anti-Cybercrime Group (PNP ACG) also revealed during the hearing that the top 10 most common scamming schemes have cost Filipinos at least P155.2 million. The total figure could be far more, as some fraud incidents go unreported.

According to the PNP ACG, the most common modus by far is the online selling scam, with 3,615 cases from January to August 2023 alone. (READ: Online buyers, beware! ‘Pasabuy’ scams target Filipinos abroad)

These scammers – who mostly target self-employed individuals from 21 to 40 years old – often use Facebook to sell an attractive product. They request the consumer to make a downpayment on the product through an electronic payment system like GCash before cutting off contact completely.

When it comes to which platforms they use, scammers overwhelmingly operate on Facebook Messenger, which is followed by Whatsapp, Telegram, Instagram, and SMS. 

What are authorities trying to do?

As fraud evolves to become more and more complex, existing laws struggle to keep up. 

Elmore Capule, senior assistant governor and general counsel of the Bangko Sentral ng Pilipinas (BSP), warned that, although the country already has the cybercrime law, SIM registration law, and Financial Consumer Protection Act, these are “not a guarantee that we can protect the consumers because [fraud] is constantly evolving.”

Currently, cybercrime laws are designed more to protect systems of financial institutions. Meanwhile, the provisions in the Financial Consumer Protection Act are regulatory in nature, not penal. These leave gaps for scammers to target individual account holders – rather than the systems of e-wallets or banks themselves – and get away with it. 

Another problem is that the existing “Know Your Customer” procedures for anti-money laundering can falter when financial institutions go digital. The PNP ACG found that some e-wallet and even bank accounts are “fictitious” – meaning that even when they track down the scammer’s transactions, it could lead to an account registered using made-up identification documents. 

Law enforcement can also run into a blank wall when fraudsters and money mules transfer money into bank accounts, given that the Philippines has some of the strictest bank secrecy laws in the world – on par with the likes of Switzerland.

What’s the proposed solution to all of this?

The BSP is pushing for the passing of a new law, the Anti-Financial Account Scamming Act (AFASA), which cleared the House of Representatives in May 2023.

AFASA would criminalize attacks on financial accounts using phishing, vishing, smishing, and the like. It would also impose minimum standards on financial service providers, which, if they fail to meet, would automatically presume them liable to return the funds of defrauded consumers. This could include measures like multi-factor authentication for all accounts.

Under AFASA, the central bank and law enforcement partners would also have more teeth to actually look into bank deposits and other accounts of fraudsters that try to hide behind the veil of bank secrecy.

“What we’re envisioning here is that if you commit this type of fraud, you cannot just jump into a bank account, and then you have immunity. We have to have a bigger jurisdiction to go after fraudsters of this type,” Capule said during the hearing. – Rappler.com

EXPLAINER: What is digital fraud and how do you protect yourself from scams?