Authorities and regulators are stepping up efforts to prevent financial fraud, especially online scams, with measures ranging from plugging legal loopholes to the use of advanced technology.
Last week Finance Minister Arkhom Termpittayapaisith instructed the Securities and Exchange Commission (SEC) and the Bank of Thailand to examine any legal loopholes to prevent another foreign currency exchange Ponzi scheme from happening.
He said the Forex-3D foreign exchange group case, which allegedly cheated thousands of victims out of 2 billion baht, illuminates the legal loopholes that have to be reviewed.
The Department of Special Investigation (DSI) opened a channel for people to file complaints in the Forex-3D case in late 2019, before the case reached the spotlight recently when some celebrities were found to have allegedly had roles in the scam.
Mr Arkhom said neither the SEC nor the central bank have ignored the Forex-3D case, but are examining the legal aspects and alerting the public to the dangers.
However, this case does not fall under the supervision of the SEC as prescribed by Thai law, he said.
In a statement issued last week, the SEC explained it has no authority to supervise the foreign exchange sector. The regulator supervises the stock exchange and the trading of corporate bonds and digital currency tokens. It also monitors related businesses committing unfair practices, according to the scope of powers and duties prescribed by laws.
Among those laws are the Securities and Exchange Act, Derivatives Act, Royal Decree on the Business of Digital Assets, Provident Fund Act, and the Trust Act for Transactions in Capital Market.
The SEC said the currency exchange law requires transactions of foreign currencies to be made with entities approved by the Finance Ministry. So far, no licences have been issued to any individuals or legal entities that are not banks or finance companies allowing them to trade foreign currencies.
Once the SEC receives a whistleblower complaint concerning dishonest behaviour of a person or juristic person who is not a business operator under its supervision, the SEC will list the names in the “Investor Alert” section on its website and the “SEC Check First” application.
The regulator said it will also issue public statements to remind the public to use caution when making investments.
The commission also conducts an in-depth investigation into the facts when the matter is under the SEC’s supervision.
Know the law
The Bank of Thailand agreed that for forex trade, people should only engage in transactions with parties approved by the Finance Ministry.
The bank reiterated the ministry has not licensed any individual to trade forex for investment, speculation or profit via online platform or websites.
The central bank said according to the DSI, alleged victims can file complaints against forex scams, based on the law on obtaining loans through cheating the public, defrauding the public, and computer crime.
Though none of the legal charges in the Forex-3D case are related to laws enforced by the central bank, it is fully cooperating with relevant authorities by providing them related information according to their requests, said Alisara Mahasandana, assistant governor for financial markets operations group at the Bank of Thailand.
The central bank is working to keep the public alert on forex trading scams to prevent them from falling victim, she said.
One theory is the rising number of fraud cases is attributed to people coercing youngsters into opening bank accounts for them so the fraudsters can use the accounts to deposit or transfer money they obtain from illegal transactions.
According to the central bank, youth can open bank accounts if they meet the banks’ age criteria. The regulator has asked all banks to closely monitor the financial transactions of youth customers because they are viewed as a group susceptible to scammers.
If banks find any suspicious transactions in the accounts, they are requested to take swift action, said the central bank. The Bank of Thailand said it has been working closely with relevant authorities to tackle this crime.
According to the Royal Thai Police, the number of suspicious bank accounts in this category that banks have sent to the Anti-Money Laundering Office for probes rose from 6,211 in May to 14,369 in August.
The increase is credited to authorities and financial institutions stepping up efforts to track such accounts.
The central bank warns people to ignore the benefits offered to them in exchange for opening a bank account for another person because the account opener could risk arrest for breaking the law.
According to the central bank, people should not trust those who contact them claiming to be state officials or bank staff who want to check a money trail because real government officials or bank staff would never use such an approach.
Payong Srivanich, chairman of the Thai Bankers’ Association and president at Krungthai Bank, said banks typically discuss and share information with one another regarding financial fraud when such problems occur to prevent it from affecting the entire banking sector.
Improving banks’ cybersecurity systems is key to preventing risks, he said.
Kattiya Indaravijaya, chief executive at Kasikornbank (KBank), said the bank has been monitoring transactions, especially on the mobile banking channel.
For new deposit account openings, the bank has complied with the Bank of Thailand’s regulations, she said. KBank has closed irregular or fraudulent accounts to prevent possible fraud and protect customers from financial risk, said Ms Kattiya.
Banks share data with other banks or related agencies, helping the sector to prevent problems, she said.
No stone unturned
Meanwhile, the Digital Economy and Society (DES) Ministry recently held a meeting with relevant state authorities and regulators to seek ways to prevent cybercrime and similar forex trading scams.
DES Minister Chaiwut Thanakamanusorn said the meeting determined the ministry will utilise social listening tools to comb the online world, collecting the names of all websites or social media platforms that are soliciting people to invest in forex trading.
He said the ministry will forward this list to the central bank and SEC to check if they are licensed operators. If they are found to breach relevant laws, the ministry will ask for a court order to shut them down, according to the computer crime law.
The meeting also considered a recent case of remote mobile phone hacking. In this case, a scammer sent a link to the mobile phone of a victim and tricked the victim into clicking on the link.
Once the link was opened, the victim’s mobile phone was remotely controlled by this scammer, allowing access to certain information the scammer could use to transfer money from the victim’s account via the victim’s mobile banking app.
Mr Chaiwut said the central bank instructed all commercial banks to upgrade their mobile banking systems to be able to stop this kind of money transfer once the system finds such activity is being done by remote hacking.
Failure to keep up
Ajarin Pattanapanchai, permanent secretary of the DES Ministry, said existing laws cannot keep up with the dynamic digital economy, allowing fraudsters to prey on victims online, including through e-commerce and bogus asset investment.
Thailand is one of the most active countries for social media usage and online shopping.
She said anyone can operate an e-commerce business without being supervised, while e-marketplaces are not required to register or receive licensing to operate.
The Electronic Transactions Development Agency (ETDA) is seen as the only major agency that governs the e-commerce ecosystem in the country, said Ms Ajarin.
The Electronic Transactions Act allows the board of ETDA to step in and govern any businesses deemed to have a profound impact on the economy or the public through their transactions.
The act aims to find a balance between regulating and promoting digital service businesses, she said.
The legislation gives ETDA a role as regulator as well as a digital business facilitator.
Ms Ajarin said she understands why ETDA may be reluctant to use its full authority to supervise transactions of every online business, as this would be a tough task.
Most business sectors usually have their own regulators to monitor behaviour, she said. The problem is such regulators may not use their full authority to govern for the sake of the public interest, said Ms Ajarin.