Financial Supervisory Service (FSS) is planning to apply AI (Artificial Intelligence) on various financial regulations and to uncover any fraudulent act. Its plan is to secure stability and credibility with financial systems and to protect financial consumers by introducing ‘RegTech’, which is a word that combines ‘regulation’ and ‘technology’.
FSS announced that it developed an AI algorithm that is able to tell if a message that is sent to a cellphone is a smishing (SMS + phishing) along with KB Bank and Amazon Web Service.
Smishing indicates ‘phishing’ through text messages. According to FSS, more than 80% of financial frauds occurs through smishing.
FSS, KB Bank, and Amazon Web Service formed a task force that developed an AI algorithm that prevents smishing after 8 months of research and pilot tests.
“During pilot tests, our AI algorithm had made satisfactory results by being able to expose 90 smishing frauds out of 100.” said Team Leader Kim Jung-hoon of FSS Research Center. “As we have established a fundamental AI algorithm for preventing smishing, we are going to add more data to it so that it is able to accurately pick out frauds based on smishing.”
This is not the first time when FSS is utilizing AI for its services. Previously, FSS formed a partnership with National Information Society Agency (NIA) and IBK Bank and decided to establish a system that prevents fraudulent callings in real-time through AI application. During this process, FSS provided about 8,200 incidences involving frauds to improve accuracy of this system. FSS is also planning to introduce a system that evaluates terms of funds through AI.
Other foreign countries are already attempting to combine regulations and technologies with their respective financial authorities at the center. FCA (Financial Conduct Authority) from UK had collected opinions from interest groups through ‘Call for Input (CPI)’ and is developing blockchain-based mortgage loan distributed ledger system with a blockchain consortium called R3. ASIC (Australian Securities and Investments Commission) and MAS (Monetary Authority of Singapore) are also continuing to push for RegTech projects and forums.
The People’s Bank of China announced its ‘5-year plan to develop 13 financial information technologies’ and is planning to focus on research regarding FinTech and RegTech. It also set up a plan to legislate one to two international standards by placing experts in mobile financial service, non-banking payment, and cryptocurrency fields.
It is expected that RegTech will be more generalized in South Korea. Director Yoon Seok-heon of FSS announced that it will be pushing for Asia’s first pilot project of ‘Machine Readable Regulation (MRR)’. MRR is a technology that converts financial regulations into language that machines are able to recognize. “We need to form an ecosystem that goes from FinTech to RegTech and then to SupTech.” said Director Yoon. “We will be able to quickly and accurately analyze enormous and difficult financial information and services if we utilize SupTech.”
Meanwhile, MSS is planning to introduce an AI algorithm for preventing smishing and a system for evaluating terms of funds as examples of protecting consumers through SupTech at an international symposium that will be held on the 29th.
“We are planning to introduce SupTech at an international symposium.” said a representative for FSS. “We are going to explain and demonstrate our AI algorithm for preventing smishing.”
Staff Reporter Park, Yoonho | yuno@etnews.com