Australia’s multibillion-dollar financial markets are vulnerable to an increasing risk of cyber-enabled fraud, a new report has found.
Overseas-based crime syndicates are also exploiting Australia’s financial infrastructure to manipulate markets and launder money, the report by Austrac, the government’s financial intelligence agency, found.
Austrac said the risk of criminal exploitation of the nation’s securities and derivatives sector was “at the high end of medium”.
Austrac’s work relied on an analysis of 663 reports of suspicious activity from the corporate sector, made by 68 entities. About half the reports involved suspected fraud.
Austrac warned the shift to online trading had heightened the risk of cyber-enabled fraud, which was increasing in both “volume and the level of sophistication”. About half of all fraud reports involved cyber fraud, it said.
Such fraud could involve hacking an online trading account and using it to conduct trades or siphon off funds.
“In some cases this activity was enabled by fraudsters finding out the answers to the customer’s security questions by trawling through the customer’s social media,” the report found.
Cyber fraud could also involve hacking a business email to send fraudulent instructions to a financial institution to transfer client funds or close a trading position. Roughly one-fifth of the reports to Austrac involved cases of money laundering, and 13% related to insider trading.
Concerns about the financing of terrorism were low, at less than 1%. Only a “very small number” involved politically exposed persons.
Almost a third of the reports named foreign companies or individuals who were trading on Australia’s financial market. The report also identified the use of overseas-based agents and third parties in trading as a “significant vulnerability”.
The report named China, the UK, Hong Kong and Canada as areas of particular risk, the acting Austrac chief executive, Peter Clark, said.
“Australia has a very large and liquid financial market,” he said.
“It’s the second largest market in the Asia-Pacific in terms of trading. So you would expect that a lot of the countries that are of interest to us are in this region – that’s no surprise.”
Launching the report on Wednesday, the justice minister, Michael Keenan, said protecting financial markets from crime was “not just a matter for government”.
He said the private sector needed to take steps to address the vulnerabilities.
But he rejected suggestions that the Australian Securities and Investments Commission lacked the resources to police the sector. A review last year found the corporate regulator was under-resourced and suffering from cultural dysfunction.
Keenan said the federal government had “some pretty serious firepower” to combat corporate crime, pointing to its investment in the serious financial crime taskforce, which brings Asic, intelligence agencies and law enforcement together.
“They are having great success,” Keenan said.
“I mean about $200m in tax liabilities, over $100m in criminal proceeds – that is some pretty serious firepower that we have brought to the fight against fraud and corruption and people who are doing the wrong thing.”
The report found complex ownership structures were being used to cloud the identity of those committing insider trading, market manipulation and money laundering.
Australians were also using foreign entities to obscure their identity to commit illegal activity.
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