Forecast Review: 2021 Risk – Part Two

Increased board malpractice and cyber threats to escalate roles of Chief Risk Officers and Chief Security Officers

We predicted that there would be many instances of fraud and financial crime uncovered in 2021. The same can be said for what occurred immediately following the onset of the GFC in 2007/08.

This prediction is playing out as various financial crime schemes surface as a result of greater scrutiny on transactions, improper relationships, conflicts of interest or poor procurement practices. Even in some of the larger and more public instances, criminal intent and well-planned financial crime appear to be at play.

This year we have been working on two of the highest profile financial crime investigations. The media has been extensively covering the Melissa Caddick and Chris Marco cases, as well as the Forum equipment financing investigation. Other recent matters such as Rosemary Rogers’ NAB investigation, Gus Nosti at Moriah College, and allegations against AMA Group’s former CEO, have required our expert team to apply advanced asset and fund tracing techniques to track down missing dollars. Uncertainty, driven by the impact of the COVID pandemic on people’s lives and livelihoods, has led to irrational thinking and some individuals doing things they usually would not, including committing fraud.

With the eastern states of Australia experiencing high COVID numbers and lockdowns, the financial impact on livelihoods is yet to be seen, as is the extent to which some people have sought to supplement any loss of income.  We expect to see more fraud cases on the rise, but to counter this, we also expect businesses will continue to strengthen controls and undertake transaction reviews.

Heightened risks of cyberattacks and foreign interference

At the start of 2021 we expected to see increased regulatory activity as a result of the NSW Bergin inquiry, but did not foresee the subsequent Commissions that are now underway. The majority of media attention has focused on the roles of high-profile Directors and Executives. Money laundering and junket operators that traded within a business which failed to meet its taxation obligations have now caught the public and regulator’s attention.  Conducting Enhanced Counterparty Due Diligence that goes beyond public databases and watchlists is becoming the weapon of choice to obtain critical information in order to assess the suitability of high-risk counterparties.

In parallel to the risk of orchestrated financial malpractice, there is a proliferation of cyberattacks by cybercriminals and foreign state-based actors against Australian businesses. Most victims will ask themselves why and how they have been breached, and our cyber specialists now regularly partner with foreign interference specialists to identify the early warning signs, analyse why an organisation has been targeted and assess the likelihood of future attacks.

What is clear from these trends is that the roles of the Chief Risk Officer and the Chief Security Officer are being escalated within large corporations. We have seen this trend over the past five years and expect it to continue as risks associated with cyber, foreign interference and trusted insiders become more visible.