In the ever-evolving landscape of financial crime, Australian institutions face a dynamic and challenging environment. The increasing sophistication of criminal methodologies, coupled with the rapid development of technology, has created a complex arena for those tasked with safeguarding the integrity of our financial systems.
But what are the issues the market is facing and how can we look to tackle them?
The impact of cryptocurrency and cybercrimes on financial crime in Australia
One of the significant challenges that continue to gain prominence is the rise of digital currencies and the anonymity they can provide to users. In Australia, 1 in 4 adults own some type of cryptocurrency, and there has been a significant spike in the daily active users of cryptocurrency wallet apps. Cryptocurrencies, while offering numerous benefits for legitimate users, also provide a potent tool for criminals to mask their identities and launder money across borders.
Australian regulatory bodies are finding it increasingly difficult to track and control the flow of funds through these digital channels, and there is increased focus on crypto crime prevention from AUSTRAC, the country’s anti-money laundering and counter terrorist financing (AML/CTF) regulator.
With more financial transactions moving online, cyber-enabled financial crimes are on the rise. According to the Australian Cyber Security Centre (ACSC), 500 ransomware attacks were reported in the 2020-1 financial year, an increase of 15% from the previous year.
Keeping up with the regulators
As predicate crimes to money laundering, the intergovernmental Financial Action Taskforce (FATF) urges countries to intercept ransomware attacks. But, financial institutions need to keep up with those they are looking to disrupt – criminals are leveraging AI and machine learning to bypass traditional security measures, requiring Australian businesses and regulatory bodies to continually adapt their cybersecurity strategies with similar technologies.
As Australia tightens its regulatory framework to address these evolving threats, businesses face the dual challenge of keeping up with complex regulations and ensuring compliance. The cost of compliance is soaring, particularly for smaller institutions. According to Deloitte, the cost of compliance in Australia is $155 billion AUD a year.
Driving the cost of compliance down with emerging technologies
As our controls get more sophisticated, so too do criminals. We must adopt emerging technologies as controls in the same way they are using it to evolve. Artificial intelligence, machine learning, and blockchain technology offer significant opportunities to enhance detection and prevention capabilities. However, integrating these technologies into existing systems poses substantial challenges, both in terms of technical implementation and workforce adaptation.
Despite advances in technology, the human factor remains a critical vulnerability. Insider threats, whether malicious or due to negligence, continue to pose a significant risk. Strengthening internal controls and continuously training employees on the latest financial crime tactics and regulatory changes is essential for maintaining security.
Future-proofing against financial crime in Australia
Combating financial crime effectively requires a collaborative approach. Public-private partnerships are vital, as sharing information between institutions and regulatory bodies can lead to more effective regulatory reporting, identity management, due diligence and transparency.
As we look towards the future, continuous investment in technology, alongside a commitment to regulatory compliance and international cooperation, will be pivotal. Only through a concerted and unified effort can we hope to stay one step ahead of criminals and protect the integrity of Australian financial systems.
Read about the optimal path to AI implementation for financial crime compliance in our eBook created in partnership with FINTRAIL and Dr Janet Bastiman.
Photo by Mitchell Luo on Unsplash
