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Combating financial crime is big business worth billions

by Alexandra Cain | 14 May 2019

Financial crime is a big business in Australia with more than $500m recouped from criminals.

Latest statistics from the Serious Financial Crime Taskforce show its effort have recouped $152.53 million from criminals and raised $391.93 million in tax liabilities. 

Even so, it acknowledges, “it is difficult to quantify the annual loss of funds to financial crime committed by serious and organised crime groups and criminal individuals.”

Experts suggest financial services businesses already have robust tools to combat financial crime such as money laundering in their operations. What’s important is that they are using them appropriately.

Scott Mandell is the Oceania financial crime leader for professional services firm EY. 

“Financial crime transcends borders. It's something that has been an issue for an extended time in the US, Europe and Asia and it’s becoming a focus in Australia,” he said. 

“These threats have been there for a long time and banks have been managing their financial crime exposures well. Now it's a matter of making sure everything they are doing is not just compliance, it's also looking at innovations around threat management.”

Unsurprisingly, technology is key. 

But Mandell says it’s important for banks to look at what they already have in place that can drive innovation in combatting financial crime. 

He said: “Reporting is key. Technology can allow for transactions to be reported on in an accelerated manner. It’s important to ensure everything that needs to be reported is captured and data is accurate and information coming into the bank is being actioned and reported.”

Mandell says the major financial crimes banks face are money laundering, sanctions and fraud.

He said: “Those are the areas where you need a lot of information and it's important to make decisions from the right information. 

“When it comes to the correct level of information, it's understanding and knowing your customer and their source of funds, as well as the purpose of your products and whether they are fit for purpose.

“On the services side, you need the right information about how products and services are provided to the customer, bringing together customer and transactional information and even information around marketing.”

Additionally, financial services businesses must ensure the fundamentals of how they are managing financial crime are sound. 

“Otherwise, all you're doing is using bad data and information. All banks are trying to ensure they meet compliance expectations while also managing costs and shareholders' and executives' expectations around profit and loss; it's important to be able to balance all of that. 

Mandell says it's good to have an understanding about what the industry as a whole is doing. “There's lots of cool tools and technology that has been driven by US or European regulations that can be applied in Australia. There are so many wheels out there that don't need to be reinvented.”

Chris Hooper, founding partner of digital professional services firm Accodex, says banks are facing increasing regulatory pressures as a result of financial crime.

“There's also a lot of fallout on the back of the Royal Commission, which will continue to permeate the market. There's a lot of uncertainty across the board. Technology is the most obvious solution to mitigating the cost rising compliance requirements.”

Digital disruption is assisting banks to beat financial criminals, says Hooper.

He said: “Looking to the future, there are some very interesting things happening around big data and machine learning. The crypto asset and blockchain spaces also continues to show great promise in addressing financial crime.”

As a result, risk management must be top of mind at every bank, from the board of directors down. Says Hooper: “Australia has an opportunity to take a leadership role here.”

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