tarisa watanagase : mitigating fraud risk in financial institutions keynote address by dr tarisa watanagase, governor of the bank of thailand, at the seminar on “ mitigating fraud risk in financial institutions ”, bangkok, 29 april 2008. * * * khun kaisri, distinguished guests, it is my great pleasure to join you at this seminar on “ mitigating fraud risk in financial institutions ”, hosted by kpmg thailand. i would also like to thank the host for giving me this important opportunity to share the views of the bank of thailand on this topic. the globalization of the financial services industry, the increased sophistication and complexity of financial institutions and their services, and the ongoing advancement of technology continue to introduce new risks and opportunities for fraud. the pace and complexity of these advances have vastly accelerated beyond the risk associated with traditional credit and market risk activities. one of those emerging risks in financial institutions is fraud risk, which needs to be effectively controlled through effective governance and sound operational risk management processes. fraud risk in financial institutions has increased as perpetrators use advanced innovation and technology to identify and exploit weaknesses in banks ’ it systems, databases, and delivery channels, including atms and the internet. financial institutions must take care to ensure that system security measures are effective as a means to combat fraud. 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.

, with myanmar, laos and thailand has been completed. also, the east - west corridor which links vietnam, laos, thailand and myanmar is near completion. this will make the whole region more closely interconnected, hence investments in any of the gms country stand to benefit the rest. 11. the final point is on the demand side. the gms will enjoy a larger consumer market base with distinct needs and increased purchasing power. the aec is home to over 600 million people. in tandem with this is the significant rise of the middle class population. the asian development bank estimates that the share of asean ’ s middle class is expected to increase to 65 % by 2030. 3 moreover, asean continues to pursue closer integration into the global economy through various free trade agreements. this includes china and india, both superpowers at the crossroads of the gms. therefore, the aec will also be an important gateway, connecting the gms to major markets of the asia - pacific region. 12. the bright future is ours for the making. the gms economies are blessed with abundant resources and promising growth prospects. with the realization of the aec, the region ’ s opportunities will be multiplied. yet there remain important challenges. the bright future is ours only if we work to overcome the challenges together. i will list two important challenges : first is how we can share our resources and expertise to capitalize on the region ’ s growth. second is how we can match regional demand with regional supply of savings and investment for the much - needed infrastructure development. 13. on the first challenge. our resources will be better utilized if we regard our neighbors not as competitors but rather as partners in the regional production network. here, we need to explore new opportunities to create industry clusters in the region by taking on our diverse comparative advantages and specialization. an existing example here is the cluster of industries relating to the garment industry, where one gms country imports textile yarn from another country, manufactures it into apparels and then exports it to countries outside the region. 14. the second challenge concerns infrastructure financing. the projects that i mentioned earlier cannot be efficiently realized without proper funding mechanisms. what we need is to match the huge amounts of regional savings with the much - needed investment in infrastructure, which is as high as 8 trillion dollars over the next decade as estimated by the adb website ( 2012 ) ( http : / / www. adb. org / features / fast - facts - asean - prc - and