The Bank for International Settlements released a discussion paper on digital fraud, noting that technological banking advancements can increase risks to bank soundness and financial stability.
Criminals are exploiting digitalization to commit online fraud at a greater scale and scope than previously – notwithstanding important data caveats and gaps – as digitalization enables fraudsters to be more agile. The cybercriminal ecosystem is increasingly industrialized and includes ways for non-technical criminals to access/use cyber tools without having technical expertise (also known as crime as a service). There are dedicated marketplaces on the dark web for selling and purchasing payment card data and online banking access.
The techniques used by fraudsters/attackers are getting more sophisticated: malicious codes adapted to many banking applications could bypass current security measures (eg two-factor authentication, biometrics). Fraud risks have also evolved in response to the Covid-19 pandemic.
The discussion paper provides a high-level assessment of the supervisory and financial stability implications of digital fraud for the global banking system. It is structured around three broad sets of questions: (i) What is digital fraud? What are its main defining features? How does digital fraud affect banks and how should policymakers think about it? (ii) What are the supervisory and financial stability implications? How are supervision and financial stability affected by digital fraud? Why is digital fraud of relevance to the Committee and its mandate? What empirical data are available to assess its magnitude and prevalence? (iii) What is being done to mitigate digital fraud risks within the banking sector? What initiatives have been pursued, or are planned, at the domestic, regional and global level?
There is no formal distinction made between retail and wholesale digital fraud. While the majority of the paper is primarily focused on retail, there are also some elements that may have a connection to wholesale digital fraud. It also focuses primarily on external sources of fraud.