Fraud can occur in a variety of ways: the inappropriate actions of a rogue employee can cause huge losses; hackers can access a bank’s mainframe or databases, which in the past few years, has resulted in increasing losses due to the theft of confidential customers’ information. Depositors affected by ATM or Internet banking fraud also continue to increase. Although fraud is impossible to fully prevent, financial institutions can reduce the probability of fraud occurrence and minimize losses with stronger oversight and tighter controls. This leads me to the Bank of Thailand’s views on the critical elements for fraud prevention. There are three critical elements that all institutions must possess to most effectively combat fraud: Strong corporate governance, up to date systems and processes, and effective internal controls and risk management. The first and most important element is strong corporate governance. Today, more than ever, boards of directors and senior management must provide close monitoring and oversight as the business activities of their institutions are increasingly complex and as the level of sophistication of their customers continues to increase. In almost every case where fraud has resulted in huge losses, ineffective corporate governance was identified as one of the primary causes. Boards and top management must set the “tone at the top” by creating an organizational culture that places high priority on risk management, compliance with policies and regulations, and high standards of ethical behavior at every level.
But there may be scope to widen and deepen the set of financial instruments covered by prudential requirements, to give a richer array of internationally-oriented macro-prudential tools. These would then be better able to lean against global fluctuations in a wider set of asset markets. Conclusion This time was different: never before has the world suffered a genuinely global financial crisis, with every country on the planet falling off the same cliff-edge at the same time. This fall laid bare the inadequacy of our pre-crisis understanding of the complexities of the financial system and its interaction with the wider economy, locally but in particular globally. It demonstrated why the global macro-financial network is not just a complex adaptive system, but a complex system of systems. The crisis also revealed gaps and inadequacies in our existing policy frameworks. Many of those gaps have since been filled. Micro-prudential microscopes have had their lens refocused. Macro-prudential macroscopes have been (re)invented. And global telescopes  BIS central bankers’ speeches  15  have been strengthened and lengthened. Institutional arrangements have also been adapted, better enabling co-ordination between the micro, macro and global arms of policy. So far, so good. Clearly, however, this remains unfinished business. The data necessary to understand and model a macro-financial system of systems is still patchy. The models necessary to make behavioural sense of these complexities remain fledgling. And the policy frameworks necessary to defuse these evolving risks are still embryonic.