Crime gangs targeting financial markets

The Australian 12:00am July 12, 2017

David Uren

Criminal syndicates, many based in China and Hong Kong, are ­infiltrating Australia’s financial markets, with more than 660 ­suspicious transactions covering fraud, insider trading and money laundering reported in the past two years to the financial intelligence agency AUSTRAC.

The agency’s review of vulnerability in the financial sector finds the risk is increasing as cybercrime becomes increasingly sophisticated, exploiting gaps in com­mu­ni­cation between financial institutions.

“Serious and organised crime groups have exploited the sector to launder money and engage in market manipulation,” says the report, which focuses on trans­actions involving securities and derivatives.

Fraud is the biggest source of criminal activity, accounting for half the suspicious transactions that financial institutions must by law to report to AUSTRAC.

Just more than a fifth of suspicious transactions (21 per cent) involved money laundering while a further 21 per cent involved insider trading or market manipulation. Relatively few cases of tax evasion (less than 2 per cent) were reported, and three reports of fin­ancing terror in the two years.

Justice Minister Michael Keenan, who has responsibility for AUSTRAC, said the report underlined the need to guard against criminal activity.

“Financial markets are integral to Australia’s economy. We have the second most active stockmarket in the Asia-Pacific region, more than 6.7 million Australians own shares, and in the last financial year alone there were 929,000 trades per day on the ASX worth $4.7 billion,” he said. “But we know criminal gangs will seek to exploit any weaknesses in our financial systems, putting our economy, nat­ional security, and international reputation at risk,” he said.

The agency says two main strategies are used to defraud corporate and individual customers. “A cyber-criminal hacks a customer’s email account and sends fraudulent instructions to financial institutions to close out the client’s trading positions and/or transfer client funds to other ­accounts or third parties,” it said.

The second tactic is to hack a customer’s online trading ­account, conducting trades and transferring funds to other ­accounts or third parties.

AUSTRAC says individuals often make themselves vulnerable by providing clues to security questions on social media ­accounts.

Stolen identities are also often used to establish fraudulent trading accounts or withdraw funds. Stolen credit card information is also used to fund trading.

The agency says 31 per cent of suspect transactions reported in the past two years involved a foreign jurisdiction. China and Hong Kong accounted for a quarter of these, while a similar number involved Britain, Canada or South Africa. “The majority of these reports related to suspected cases of fraud, such as accounts funded with fake credit cards or trading accounts set up with fake (IDs),” it said. There were also cases of money laundering.

AUSTRAC has had some success tracing the activities of a big money-laundering syndicate active throughout the Asia-­Pacific region, making large cash deposits into accounts held with an Australian financial institution.

A common money-laundering strategy involves shuffling funds between general transaction and trading accounts.

AUSTRAC said insider trading and market manipulation were also attracting foreign operators.

The agency also received 23 reports of suspicious transactions involving foreign exchange and contract-for-difference trades.