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Fighting financial crime with the technology that criminals use

By, Liz Fisher, journalist


Technology has brought huge and varied benefits, but with it come the opportunists who use it for criminal activity. However, as a new report shows, tech is fighting back



Estimates of the annual global cost of financial crime vary enormously,

but every number quoted is huge. Some estimate that financial crime costs US$3.5 trillion a year – more than the GDP of the UK. The true cost is hard to quantify, partly because financial crime is difficult to define, encompassing anything from bribery and fraud to cybercrime, slavery and human trafficking.


While crime is hardly a new problem, the digital age has brought new opportunities for criminals and many new risks for businesses. One of the biggest challenges for regulators in the fight against economic crime is that technology has allowed criminals to expand the geographical reach of their operations. The cost of sending an email across a border is no greater than that of sending it next door. There are other advantages too – while a target might be wary of a letter with a foreign postmark or a phone call from someone with an unfamiliar accent, spoofing an email or web address can remove all of these warning signs from an online attack.


Technology has also opened up new vectors for crime. The development of

cryptocurrencies and their ability to store or transmit value in an anonymous or pseudonymous fashion has transformed some aspects of economic crime.


Cryptocurrency transactions are particularly difficult to track back to the beneficial owner. Financial crime has also become a more accessible activity – the barriers to entry have been lowered thanks to the proliferation of information available on the internet.


Financial criminals no longer meet a set stereotype – potentially, anyone with internet access can be a threat – and the element of gamification that is apparent in many cyberattacks adds a further unwelcome dimension. Hacking a system, for some, is simply a challenge with unintended consequences.


While it has long been clear that technology has offered lucrative new avenues to criminals – experts are unanimous that digitalisation has led to an increase in the volume and velocity of economic crime attacks, as well as an expansion in scope - a new report from ACCA and EY argues that the benefits and legitimate uses of technology far outweigh the risks posed by its abuse. Even so, the digital age presents specific challenges for businesses, regulators and, in particular, the auditing profession.


The report, Economic crime in a digital age, notes that ‘trust, accountability and integrity are fundamental to the relationships that enable trade, build society and support economies across the globe’. For centuries, the accountancy profession has provided the building blocks for the trustworthy exchange of information. Investors and authorities alike place their trust in audited accounts, but a string of high-profile frauds and the global economic crisis have damaged public trust in business – and, fairly or unfairly, turned the spotlight on the auditing profession.


The report argues that the digital age is changing the information that investors and other decision-makers rely on, and the way in which it is delivered. ‘The role of auditor, perhaps never properly understood, stands ripe for evolution in the increasingly complex environment of technologically enabled business,’ it says. The ‘integrity agenda’ in the digital age, as the report calls it, is a jigsaw of business, regulators and public opinion – and the auditing profession must find its place.


The report points out that while technology and innovation are developing rapidly, that has not changed the basic objective of regulation. There has always been a tension between innovation and regulation – the digital age is just the latest form of it. Laws cannot be created to cover every possible scenario, so there will always be a need to balance regulation with innovation. ‘The big challenge for regulators is that technology has allowed collaboration between criminals and it has also broken down borders,’ says the report’s author, Jason Piper, policy lead, tax and business law, in ACCA’s professional insights team. ‘Laws tend to operate on a country-by-country basis, but criminals don’t have to.’


Innovative technology is already playing its part in the fight against economic crime, both in terms of detection and prevention. The use of artificial intelligence to enhance risk assessment in the banking sector, for example, has already improved the effectiveness and efficiency of anti-money laundering and sanctions screening. Other tools are supporting due diligence and investigation, and identifying out-of-the-ordinary activity. As the report says: ‘Criminals are more likely to refrain from illegal activities if they judge that the risk of detection is too great.’


These tools are increasingly finding a role in audit. It is possible that emerging technology could enhance the ability of audit to verify and enhance the internal control environments intended to detect fraud. Of course, detecting every economic crime will always be impossible in the face of determined criminals, but if the cost of hiding a crime outweighs the benefits of committing it, that could be deterrent enough for the rational criminal.


Irreplaceable Auditors


However far technology takes us in combating economic crime, it will never fully replace the skilled and sceptical auditor. In his introduction to the report, Kevin Dancey, CEO of the International Federation of Accountants, says that ‘every financial crime is an abuse of trust. This is where professional accountants can make their mark. Technology cuts both ways – it is a vector for crime, but it is also a tool for creating tremendous value and protecting it from financial criminals.’ Tools alone, though, are not enough. ‘People will make the difference and professional accountants, as widely trusted actors, are at the centre of the action in every organisation.


"The profession has always stood out for its independence and scepticism. Our challenge is to adapt – and keep adapting – to a continuously changing economic and technological environment. We are up to the challenge and we embrace it."

Source: https://www.accaglobal.com/gb/en/member/member/accounting-business/2020/01/insights/crime-technology.html

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