KUALA LUMPUR: More than half of Malaysians surveyed are okay with inflating income for loan applications according to a FICO survey.
This is significantly more than the global average of 39 per cent.
The survey, which was conducted in November last year revealed alarming attitudes toward first-party financial fraud both globally and in the Malaysian market.
The research polled 1,001 Malaysian adults, along with about 12,000 other consumers in Canada, United States, Brazil, Colombia, Mexico, The Philippines, Indonesia, India, Singapore, Thailand, United Kingdom and Spain.
On the local front, three in five Malaysians think it is normal or acceptable in some cases to misrepresent their income on applications for a bank account (66 per cent), automotive financing (64 per cent), or mortgage (59 per cent). Similarly, many Malaysians are comfortable with exaggerating income on personal loan applications, further complicating financial integrity.
"Malaysian banks are facing the threat of 'liar loans' with over half of Malaysian consumers viewing income falsification as either acceptable or justified. "It is crucial for Malaysian consumers to understand that misrepresenting income, even unintentionally, can lead to serious consequences," said FICO's APAC segment leader for risk lifecycle and decision management Aashish Sharma. About a third (36 per cent) of Malaysian consumers believe it is not acceptable to exaggerate income on a personal loan application, while another third (37 per cent) find it acceptable under specific conditions.
About one in six views exaggerating income on personal loan, mortgage and auto loan applications as common and acceptable behaviour.
More than two in five (41 per cent) Malaysian consumers believed it is acceptable under certain circumstances to lie on mortgage applications, and close to one in five (18 per cent) viewed it asnormal.
With residential mortgages accounting for 64 per cent of consumer loans in Malaysia, the findings highlight significant risk assessment challenges and potential bad loan rates that financial institutions face.
Income exaggeration such as inflating self-employment earnings or overstating bonuses, as well as omitting debts or misrepresenting personal circumstances would enable applicants to manipulate the loan process, making it difficult for lenders to detect these discrepancies without thorough and proactive verification measures, said FICO.
"Financial institutions can overcome the unique challenges presented by application fraud by leveraging cutting-edge data analytics for risk assessments. This will provide holistic views of each customer, enabling early detection of anomalies and signs of sleeper fraud," said Sharma.
Falsifying insurance claims is viewed as the most taboo form of fraud, according to FICO's research, with around two-thirds of consumers globally believing it is never acceptable to exaggerate the value of stolen property or add false items to a claim.
This sentiment is echoed by close to half of Malaysian respondents (49 per cent).
Half of consumers globally, including more than a quarter of Malaysians (29 per cent), felt that it is unacceptable to exaggerate income on a mobile phone contract or an application for automotive financing.
"The FICO survey reveals that cost-of-living pressures on consumers are potentially shaping views about application fraud. This is a strong signal to financial institutions to implement effective fraud prevention strategies to safeguard their business and customers," said Sharma.