Frontline vital in fraud prevention

Robert Brown

Taking fraud prevention back to basics can make all the difference in financial services businesses, according to speakers at the Investment and Financial Services Association (IFSA) national conference.

Ausmaq chief executive Robert Brown said training “front-line staff” in fraud prevention and security can be extremely beneficial, as client-facing staff may be able to identify criminal behaviour.

And according to Dr Russell Smith, principal criminologist at the Australian Institute of Criminology, the risk of criminals planting people within financial institutions and smaller companies puts the onus back on personnel checking for both new and existing employees.

“A failure to call referees creates enormous opportunities for people to get inside businesses, and once they’re in, it’s very difficult to defend against sophisticated internal collusion,” Smith said.

While it’s “cultural among Australians to be trusting” of employment information provided by employees, in the fight against fraud, background checks are vital.

While many of the smaller entities required to report to Austrac under the new anti-money laundering and counter-terrorism financing regulations are yet to comply, Brown said they may be doing so at their own peril.

“If small businesses don’t comply, criminals will start targeting them,” he said.

Conversely, Smith said while reports made to Austrac regarding suspect transactions had increased in recent years, a fear of enforcement action and a lack of clarity about when to report has led to over-reporting from some regulated entities.

Smith acknowledged that the shift in crime control from the Government to the private sector had led to concerns about increased compliance and service costs, but argued that the long-term benefits for businesses and clients include the reduction of fraud, an increase in profitability and the diffusion of other risks.

The IFSA Fraud and Security Group conducted a fraud and security survey in May and will release the results later this year. Brown said the majority of respondents rated the threat from fraud and information security events as ‘moderate’, with two key issues being internal fraud and data security.

The institutions surveyed named the security of personal records and risk of identity theft as of most concern to their clients. Other areas of concern include internal staff misconduct, uncontrolled portable devices and malicious software.