Financial Crime - Managing the growing threats of financial crime

13 February 2023

Cyber threats will continue to be the number one financial crime risk on board agendas in 2023. However, other financial crime risks must be managed as the economy contracts and regulation struggles to keep up.

Don’t forget your own backyard
Demands on businesses to manage external financial crime threats will increase. The greatest business risk is the damage that can be inflicted by those that know a company best—the employees, subcontractors and suppliers that work within.

2022 saw rising geopolitical instability, the wind back of pandemic stimulus, record levels of inflation and sharp interest rate rises. There is no question that the current economic conditions are starting to expose commercial pressures on businesses and their supply chains.

These conditions will present fertile ground for fraud, corruption and misconduct as businesses struggle to meet market expectations and maintain the levels of growth that low interest rates and COVID-19 handouts afforded.

Understanding the source of funds
Although the sophistication of Australia’s Anti-Money Laundering and Counter Terrorist Financing (AML/CTF) controls within financial institutions are constantly evolving, criminals continue to exploit system weaknesses. Fraudsters are using increasingly sophisticated techniques to circumvent sanction regimes, and target under-regulated industries.

Last year we saw serious allegations of money laundering against major casinos, record fines from AUSTRAC, and widespread reporting of AML/CTF issues. While 2023 is unlikely to bring the long-awaited Tranche 2 reforms, we expect an increased focus on AML/CTF compliance across a broad range of sectors, including gaming, hospitality, real estate and accounting.

Cryptocurrencies in crisis but here to stay
In 2023, any discussion on financial crime will involve cryptocurrencies. 2022 was a seismic year as the industry was plagued by both a “crypto winter” and a relentless storm of scandals.

The year ended with the implosion of one of the industry’s major players, FTX. US prosecutors are now drawing comparisons between FTX and Ponzi-style frauds perpetrated by Bernie Madoff and Enron. The fallout, contagion and collateral damage across the sector is yet to be fully realised.

In 2023, we will no doubt see further consolidation and government intervention relating to cryptocurrencies, as well as the continued use of digital assets to demand ransoms, pay bribes and launder the financial proceeds of crime.