PHILIPPINE BANKS may be exposed to increased reputational risks as the number of Filipino individuals and entities linked to romance scams rose in 2024, Moody’s said.
Moody’s on Thursday said it recorded 1,193 new entities and people with potential ties to romance scams in 2024, up by 14% year on year and the highest in six years.
“In 2024, the US accounted for over a third (38%) of new romance scam profiles among top 10 countries, followed by Nigeria (14%), India (12%), the UK (11%), Malaysia (5%), China (5%), the Philippines (4%), Brazil (4%), Canada (4%) and Australia (3%),” it said in a note on Thursday..
In the Philippines, the number of Filipino entities and individuals with potential links to romance scams increased to 45 in 2024 from 10 in 2023, Moody’s said.
“Criminals often seek to launder the money generated from romance scams like sextortion via the traditional financial system. Banks can face significant reputational risks and fines,” the credit rater said.
“Financial grooming scams increased greatly during the COVID-19 pandemic, as isolation led to a greater need for emotional connection — and increased vulnerability. Sextortion is a type of romance scam targeting teenagers, particularly boys. Perpetrators use fake profiles to solicit explicit images or videos from victims, then extort money by threatening to expose the images to friends, family or on social media,” it added.
The Bangko Sentral ng Pilipinas (BSP) requires Philippine financial institutions to immediately report reputational risk events that could impact their financial standing and stakeholder confidence.
The BSP’s guidelines define reputational risk as those that could affect earnings, capital and liquidity due to negative perception of the financial institution and adversely impact their business relationships and hinder new venture establishments or continuous access for funding
These risks could be caused by customers, shareholders, investors, employees, market analysts, the media, and other stakeholders, including regulators and government agencies.
Financial institutions are expected to implement mechanisms meant to monitor reputational risks through early warning indicators such as volume of complaints, number of negative news, number of violation of laws or regulations, and codes of conduct with material penalties or sanctions for noncompliance.
Meanwhile, the Anti-Financial Account Scamming Act signed in July 2024 prohibits and punishes crimes committed using financial accounts, such as acting as money mules, performing social engineering schemes, and committing economic sabotage.
The law allows the BSP to examine and investigate bank accounts, e-wallets, and other financial accounts that are involved in the prohibited acts.
An analysis by TransUnion Philippines released last year showed that 18% of digital transactions originating from the country across the communities industry — which includes online forums and dating websites — were suspected to be digital fraud in the first half of 2024.
Data from the Philippine National Police’ Anti-Cybercrime Group (PNP-ACG) showed there were a total of 121 sextortion cases in the Philippines in 2023. The PNP-ACG has said that sextortion is among the top five cybercrimes that they receive complaints about.
