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Former AUSTRAC CEO urges holistic national anti-fraud strategy

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During the 2023 Australian Financial Review (AFR) Cyber Summit, former Australian Transaction Reporting and Analysis Centre (AUSTRAC) CEO Paul Jevtovic urged an approach targeting the root causes of financial crime alongside recent regulator initiatives to compensate scam victims.

“[W]e are all accountable within the ecosystem, and it is inevitable that will translate, where appropriate, to how victims will be compensated,” commented Jevtovic, now National Australia Bank’s Chief Financial Crime Risk and Group Money Laundering Officer. Yet he argued that this approach alone might not be effective without a more holistic national anti-fraud strategy. 

Addressing rising fraud

Australians paid $3.1 billion to scammers in 2022 – a new record. According to the Australian Securities and Investment Commission (ASIC), customers suffer 96 percent of banking scam losses, with reimbursement or compensation rates between 2 and 5 percent. So in May 2023, Financial Services Minister Stephen Jones announced regulator plans to introduce a cross-industry code to hold banks, telcos, and social media platforms responsible for scam safety. 

The code would make these firms liable for reimbursements to people who lose money through scams. This move follows several anti-fraud measures outlined in the 2023-24 Federal Budget, including establishing a new National Anti-Scam Centre (NASC) within the Australian Competition and Consumer Commission (ACCC).

According to Jones, Australia may take its cue from similar measures in the UK, where regulators included important caveats in their proposed authorized push payment (APP) fraud reimbursement rule. These included a stipulation that fraud victims who had been negligent of financial institution warnings, or who had acted fraudulently themselves, would not qualify for reimbursement. This also incentivized firms to take proper steps to notify customers about possible scams.

An approach to fraud that looks at financial crime holistically further complements these measures. Not only is fraud a part of a greater financial crime system, but financial crime has its roots in predicate crimes such as organized crime, human trafficking, and environmental crime. A robust approach to addressing these criminal systems can develop insights into effective deterrents – and sometimes stop fraud before it occurs or worsens.

For example, in April 2023, AUSTRAC announced that reports from financial institutions, including suspicious matters reports (SMRs) and international funds transfer instructions (IFTI), had helped it to identify the victim of a $2 million fraud that had occurred over at least seven years. Authorities then alerted the victim, who stopped paying the international crime syndicate that had orchestrated the fraud.

What this means for firms

Australian firms are encouraged to watch for updates regarding the new reimbursement requirement. The code’s first iteration is expected around the end of 2023.

Firms may also want to review their fraud and loss prevention processes to ensure they are taking vulnerable customer groups into account. This should include robust customer education and timely warnings to customers suspected of vulnerability to a scam.

As regulators focus on financial crime and its connections to other types of criminality, holistic risk management becomes increasingly important. Firms are encouraged to proactively strengthen and integrate their financial crime risk management, from fraud to anti-money laundering and counter-terrorist financing (AML/CFT), and to consider connected risks, including predicate crimes. By implementing advanced risk management solutions, firms may be able to stop criminal activity sooner, prevent loss, and stay ahead of evolving regulator expectations.

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Originally published 22 September 2023, updated 08 February 2024

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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