Outsourcing and Fraud Risk Management

Podcast Beta

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is a primary consideration when assessing service providers located outside Malaysia?

The service provider's advertising budget

Existence of data protection standards comparable to those in Malaysia (correct)

The number of clients the service provider has

The service provider's market share in Malaysia

Which measure is essential for a service provider to ensure data security for an EMI?

Engaging in regular public relations campaigns

Maintaining compliance with established security standards (correct)

Offering the lowest price among competitors

Having a large office space

When a service provider serves multiple clients, what must be ensured regarding the EMI's information?

It is stored in a public database

It should be archived indefinitely

It can be shared with other clients for transparency

It is segregated from other clients' information (correct)

What should an EMI do in response to a customer information breach reported by a service provider?

Review their data protection measures and remedy the breach Signup and view all the answers

What type of risks should an EMI consider when outsourcing activities to a service provider outside Malaysia?

Emerging risk events and their appropriate response mechanisms Signup and view all the answers

What is a key consideration for an EMI when assessing the risks associated with a single service provider?

The extent of concentration risk and its mitigation measures Signup and view all the answers

Which of the following is NOT a data protection measure that an EMI should verify with a service provider?

Social media presence of the service provider Signup and view all the answers

What must an EMI ensure regarding outsourcing arrangements conducted outside Malaysia?

It should not affect effective monitoring of the service provider. Signup and view all the answers

During due diligence, what aspect should an EMI assess regarding a subcontractor's role?

Excessive complexity added to the operational chain Signup and view all the answers

What must an EMI do to ensure that an outsourcing agreement is effective and enforceable?

Document the outcomes of the due diligence process Signup and view all the answers

In what situation can an EMI rely on third-party certifications for audits?

When supported by an understanding of the audit scope. Signup and view all the answers

Which of the following constitutes an undue risk that should be evaluated by an EMI?

Relationship complexities with the service provider Signup and view all the answers

What must an EMI access regarding the cloud service provider's BCP?

Information on the robustness of controls from BCP testing. Signup and view all the answers

Why is it crucial for an EMI to conduct on-site inspections of cloud service providers?

To validate and assess the integrity of third-party reports. Signup and view all the answers

When performing due diligence on an affiliate, what should an EMI focus on?

The affiliate’s capability to perform the outsourced activity Signup and view all the answers

Which factor should NOT be delegated solely to the service provider in data security measures?

Access restrictions for EMI staff Signup and view all the answers

What key aspect must an EMI assess when managing fraud risk?

The effectiveness of fraud risk mitigation processes. Signup and view all the answers

What is a critical element that must be included in an outsourcing arrangement proposal to the board?

Details of the due diligence outcomes Signup and view all the answers

What does effective disaster recovery arrangements for an EMI entail?

Maintaining the EMI's ability to recover data promptly. Signup and view all the answers

Which statement about access to systems by the Bank is true?

The Bank must have timely and unrestricted access to relevant systems. Signup and view all the answers

How can an EMI ensure effective monitoring of a service provider?

By regularly reviewing the service provider’s internal controls. Signup and view all the answers

Study Notes

Outsourcing

EMIs must ensure that outsourcing arrangements outside Malaysia are conducted in a manner that does not affect the EMI's ability to monitor the service provider, the ability to recover data if the service provider fails, and the Bank's ability to exercise supervisory powers.
When an EMI relies on third-party certification and reports from cloud service providers for audits, this does not substitute the EMI’s right to conduct on-site inspections where necessary.
When engaging with cloud service providers, EMIs must be able to access information regarding the robustness of the provider's controls arising from BCP testing.

Fraud Risk Management

An EMI must have risk management processes, procedures, systems, and controls in place to effectively mitigate and manage fraud risk.
EMIs must conduct due diligence on affiliates, assess their ability to perform the outsourced activity, and document these findings in the outsourcing proposal.
When outsourcing, an EMI must ensure a legally enforceable written agreement that includes all the minimum requirements specified in Appendix 6.
An EMI must ensure the service provider is subject to data protection standards that are at least comparable to Malaysia's if they are located or performing the outsourced activity outside of Malaysia.
EMIs must ensure their information is segregated from the information of other clients when the service provider provides services to multiple clients.
EMIs must ensure that the service provider stays compliant with applicable security requirements and established security standards at all times.
EMIs must ensure that the service provider undertakes measures to safeguard customer information and reports any breaches to the EMI within an agreed timeframe.

Due Diligence

EMIs must conduct due diligence when considering outsourcing arrangements where the service provider is located or performing the outsourced activity outside Malaysia and ensure the assessment addresses the additional risks associated with outsourcing outside Malaysia.
EMIs must also understand the ability of the EMI or the service provider to implement responses to emerging risk events in a timely manner.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers the essential principles of outsourcing and fraud risk management for Electronic Money Institutions (EMIs). It explores the responsibilities of EMIs in monitoring service providers, conducting audits, and managing fraud risk effectively. Participants will enhance their understanding of compliance and risk management strategies relevant to outsourcing.