Preventing Remote Financial Fraud... Banks Advancing System Upgrades [1mm Financial Talk]

Woori Bank Initiates Development of Facial Recognition System
Hana and KB Kookmin Also Establish AML and FDS
"Can Reduce Compensation Costs for Non-Face-to-Face Financial Incidents"

Since January of this year, as banks that have not properly prevented non-face-to-face financial fraud have seen an increase in compensation sharing, efforts are being made to advance FDS (Fraud Detection System) to prevent such incidents. Specifically, this includes strengthening biometric authentication systems such as facial recognition and monitoring remittances.

According to the financial sector on the 22nd, Woori Bank announced a request for proposals to establish a facial recognition system on the 14th. This project will take about 5 months and 2 weeks. The project involves building a system within the group’s shared cloud and establishing processes for extracting and distributing facial information. It will also build login processes such as service guidance and registration. The project budget is approximately 1.4 billion KRW. A Woori Bank official stated, “We are adding a facial authentication process when transferring accounts, and this system is being established as part of the FDS advancement process.”

The reason Woori Bank is building this system is due to the policy of “activating non-face-to-face biometric authentication” emphasized by Eun Sung-soo, Governor of the Financial Supervisory Service. The governor has stated that biometric authentication methods should be used to prevent financial crimes affecting the public and said, “We will support the establishment of a non-face-to-face biometric authentication ecosystem.”

Other banks are also accelerating the advancement of IT-related systems, including FDS. Hana Bank is conducting consulting for overseas abnormal remittance monitoring systems and enhancing customer risk assessment models for anti-money laundering. All of these are related to anti-money laundering systems. Money laundering is the act of disguising illegally sourced funds as legitimate, and it is one of the non-face-to-face financial frauds.

In the case of Kookmin Bank, since last year, it has been advancing FDS together with KPMG and Kim & Chang. The internal control FDS, which will be completed in the second half of this year, will be equipped with AI (artificial intelligence) and various data analysis, prediction technologies, and fraud detection solutions. The purpose is to manage internal reputation risks and prevent financial accidents by advancing the FDS prepared to prevent situations exploited by external criminals.

This movement is part of the “Agreement for the Promotion of Non-Face-to-Face Financial Fraud Prevention” signed last year between the Financial Supervisory Service and banks. This agreement includes a provision that banks compensate up to 50% of monetary damages caused by electronic financial transactions where a third party has used someone’s identity without consent.

If consumers contribute to the occurrence of incidents by storing personal information on their phones or providing it to fraudsters, compensation is limited. Also, if consumers make efforts to prevent damage by using the accident prevention devices provided by banks, the compensation ratio may increase. Conversely, if banks actively introduce strong measures to prevent incidents, the compensation ratio can be lowered. The advancement of FDS is one of the measures to prevent incidents, and banks aim to catch “two rabbits” by preventing non-face-to-face financial fraud while also lowering the compensation ratio.