Post by : Rohit Dhiman

KUALA LUMPUR: Criminals are increasingly turning to artificial intelligence to make financial fraud more sophisticated, automate deceptive activities and identify weaknesses in digital systems, Bank Negara Malaysia governor Abdul Rasheed Ghaffour has warned. Speaking at the Intelligence-Led Financial Crime Prevention: The Power of Data, Insights and Collaboration conference organised by the Asian Institute of Chartered Bankers, Rasheed said the rapid development of AI was creating new challenges for banks, financial institutions, regulators and law enforcement agencies. He said criminals were using technology to automate financial fraud, find vulnerabilities and strengthen cyberattacks, making it increasingly difficult for authorities and financial institutions to identify suspicious activity before victims suffer losses.

Criminals Using AI to Automate Fraud

Rasheed said artificial intelligence is giving criminals new tools to make fraudulent schemes faster and more convincing. AI can assist criminals in creating personalised communications, automating interactions with potential victims and identifying weaknesses that could be exploited. Such capabilities can make online scams harder for ordinary users to recognise. The use of AI also increases the scale at which fraudulent operations can be conducted. Instead of relying entirely on manual communication, criminals can use technology to automate parts of their operations and target a larger number of people. Rasheed said the financial sector was effectively facing an “arms race” against criminals as both sides increasingly rely on technology. The challenge, he said, is to ensure that financial institutions do not simply react to fraudulent activity after it occurs but develop systems capable of identifying suspicious behaviour at an earlier stage.

Financial Sector Prevented RM1.9 Billion in Fraud

Despite the growing threat, Malaysia has recorded significant progress in preventing fraudulent transactions. Rasheed said the country's financial sector had stopped fraudulent transactions worth approximately RM1.9 billion during the first half of this year. That figure was already higher than the RM1.2 billion in fraudulent transactions prevented throughout 2025. The figures indicate the increasing role of banks and other financial institutions in identifying and blocking suspicious transactions before money can be successfully transferred to criminals. The BNM governor also said more than RM37 billion in assets had been recovered over the past five years. He described these results as evidence of cooperation involving multiple institutions and agencies across the country.

Online Fraud Remains a Major Challenge

One of the key concerns highlighted by Rasheed is the role played by victims themselves in many online fraud cases. He said about 95% of online fraud cases involved people being deceived into transferring their own money. This type of fraud can include scams in which criminals impersonate trusted organisations, individuals or authorities and persuade victims to make payments or disclose sensitive information. The increasing use of AI could make such manipulation more convincing by allowing criminals to personalise their approach and respond more quickly to potential victims. The technology can also increase the volume of fraudulent communications, making it more difficult for individuals and financial institutions to distinguish genuine interactions from sophisticated scams.

AI Creates New Risks for Banks and Regulators

The growing use of artificial intelligence is not only a concern for consumers. Financial institutions must also prepare for criminals using technology to study their systems, identify weaknesses and attempt to bypass existing security measures. Rasheed said this has created a need for the financial sector to strengthen automated detection systems alongside existing monitoring and investigative capabilities. The approach would involve using technology to identify unusual patterns and suspicious activity more quickly. This is particularly important as criminals increasingly use digital channels to move money and communicate with potential victims.

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Malaysia Has Strengthened Its Financial Crime Framework

Rasheed said Malaysia's efforts to combat financial crime have developed significantly over the past 25 years. He attributed the progress to stronger laws, institutions and a better understanding of financial risks and supervisory approaches. Several amendments to the country's anti-money laundering legislation have strengthened the ability of authorities to investigate suspected financial crimes, prosecute offenders and recover illicit assets. Malaysia has also strengthened other laws and mechanisms related to terrorist financing, restricted activities and proceeds generated through unlawful activities. These measures have created a broader framework for dealing with increasingly complex financial crimes.

Agencies Working Together to Fight Financial Crime

Rasheed stressed that financial crime cannot be tackled effectively by one institution acting alone. Malaysia has established several platforms designed to improve coordination, intelligence sharing and responses to financial crime. These include the National Anti-Financial Crime Centre, National Scam Response Centre, Multi-Agency Task Force, National Fraud Portal and MyFINet. Together, these platforms bring different agencies and organisations into the country's wider financial crime prevention framework. Rasheed said the combined efforts of these institutions reflect a whole-of-nation approach to tackling financial crime.

More Than 27,000 Reporting Institutions Involved

The BNM governor said Malaysia now has more than 27,000 financial and non-financial reporting institutions operating within its financial crime monitoring framework. These organisations are supported by technology-enabled supervision and are expected to play a role in identifying suspicious activities and reporting potential financial crime. The large number of institutions involved also demonstrates the scale of the country's financial system and the challenge of maintaining consistent monitoring across different sectors. With criminals adopting new technologies, regulators and financial institutions must continually update their methods to keep pace with emerging threats.

From Detection to Prevention

The growing use of AI has increased the importance of moving from traditional investigation methods towards more proactive detection. Rasheed's warning comes as financial institutions face a rapidly changing environment in which criminals can use technology to automate deception and exploit vulnerabilities. The challenge for banks and regulators is therefore not only to investigate fraud after money has been lost but also to identify warning signs before transactions are completed. Technology can play an important role in this process by analysing large amounts of transaction data and identifying patterns that may indicate suspicious behaviour.

Malaysia's Fight Against Financial Crime Enters a New Phase

The latest warning from Bank Negara Malaysia highlights how artificial intelligence is becoming an important factor in the fight against financial crime. While AI can provide financial institutions with more advanced tools for monitoring and detecting suspicious transactions, criminals can also use the same technology to improve their methods. The increasing sophistication of AI fraud means that financial institutions, regulators, law enforcement agencies and consumers will need to remain alert to new forms of deception. Malaysia has already developed a network of laws, agencies and reporting institutions to tackle financial crime. The next challenge will be ensuring that these systems can keep pace with criminals who are rapidly adopting artificial intelligence and other emerging technologies.

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