With the rise of internet banking and digital currencies, banks are under heavy liability to ensure that their customers are protected from fraud and money laundering. The Australian Transaction Reports and Analysis Centre (AUSTRAC) has recently targeted the National Australia Bank (NAB) due to its struggle in fixing legacy problems with customer identification.
Big banks are under scrutiny for their failure to appropriately address internal problems that have led to financial crime. The Commonwealth Bank of Australia (CBA) was the first victim by AUSTRAC. CBA neglected to limit a withdrawal rate on cash deposits on its ATMs, leading to millions of dollars being unlawfully laundered through its machines. As such it was fined $700 million and ordered to develop an internal compliance program to educate staff. AUSTRAC enforces strict requirements on how banks are to report and engage with suspicious activities, however, these stringent reports have also led to employees cutting corners and bolstering numbers to satisfy AUSTRAC. This issue has now been resolved by reshuffling reward incentives for reporting requirements and the detail of information necessary for other governmental investigations, such as those used by the Australian Federal Police. Similarly, Westpac’s negligent staff processed funds for paedophiles, leading to fired executive management and a fine of $1.3 billion. Westpac now has created an executive role specifically to combat financial crime and addressed its poor accountability standards.
The problem behind these banks and their failures is their medieval technology. Not only does antiquated tech make it difficult for employees to perform their jobs but it creates systematic blind spots that are exploited by criminals and bad actors. The reason why NAB is in the crossfire of AUSTRAC is due to a 70-year-old customer falling victim to a case of cryptocurrency fraud. Investing in cryptocurrency has become commonplace but an error on NAB’s side meant that thousands of customers were not properly identified and consequently slipped through ‘know your customer’ (KYC) requirements enforced by cryptocurrency exchanges.
As technology further intertwines itself with finance, it will only be a matter of time before further exploits by these banks are uncovered. Accordingly, AUSTRAC is fed up with these financial institutions and their neglect of consumers. This sort of crackdown will likely continue to update banks to modern times and prioritise consumer security. Whether it be by an overarching regulatory regime or an internal policy correction, AUSTRAC is ready to make a change.
