Follow the money, they say. But what happens when it enters the criminal underworld? Across the intricate network of global commerce, financial crime lurks as a very real threat. From fraudulent schemes to manipulative tactics, financial crime is always evolving. It is increasingly cross-border. And it has a major impact on individuals, businesses and even national economies.

But we are not powerless. We can fight it.

Understanding the nature of financial crime is the first step to creating effective countermeasures. So in this post, we’ll learn what is financial crime, explore its main categories, examine the process of financial crime investigations, and illuminate career opportunities you can explore in this dynamic field.

What is a financial crime?

In essence, financial crime refers to an array of illicit activities aimed at exploiting, deceiving and defrauding financial systems for personal or organisational gain. These activities erode integrity within financial markets and also pose grave risks to investors, consumers and society at large.

“Financial crime inflicts serious harms on society’s most vulnerable. From increased housing prices to enabling gang violence and human trafficking to feeding organised crime – it has wide-reaching consequences. Ultimately, financial crime erodes trust, undermines our democratic institutions, weakens our social fabric, diminishes collective ethical standards and undermines the rule of law.”

These crimes exploit regulatory gaps, technological loopholes and enforcement capabilities
to achieve their malicious objectives. And the consequences of financial crime can be
far-reaching, impacting individuals, organisations, communities and market confidence.

What are the main types of financial crime?

Let’s take a look at some of the more serious forms of financial crime, and some cases that exemplify them.

Money laundering

Example: In 2017, the financial intelligence agency AUSTRAC initiated legal action against the Commonwealth Bank of Australia – alleging over 53,000 breaches of anti-money laundering and counter-terrorism financing laws. The bank was accused of failing to report suspicious transactions totalling $624 million. They were fined $700 million by AUSTRAC.

Fraud

This involves intentional deception for financial gain, often through misrepresentation, false statements or deceptive practices. These schemes can target individuals, businesses or government entities and include identity theft, credit card fraud, investment scams and insurance fraud.

Example: Bernie Madoff’s ‘Ponzi scheme’ defrauded investors of billions, promising high returns with minimal risk, until its collapse led to criminal charges against Madoff.

Terrorist financing

Involves providing financial support or resources to those involved in terrorist activities, which can include covering the cost of planning and executing attacks or sustaining terrorist networks and organisations.

Example: The 9/11 attacks in the US, orchestrated by al-Qaeda, were resourced by various entities, including wealthy individuals, charities and illicit networks.

Cybercrime

Criminal activities conducted through digital channels that exploit vulnerabilities in technology, leading to online fraud, phishing and malware attacks for financial gain.

Example: The 2016 cyberattack on the New York branch of the Bangladesh Central Bank. It resulted in the loss of $81 million USD, through fraudulent transactions to accounts in the Philippines.

Insider trading

This involves trading securities based on non-public material information about a company, resulting in unfair advantages for those with access to such information. It also distorts market efficiency and undermines investor confidence in financial markets.

Example: Former Australian politician Eddie Obeid used his political influence to gain insider information about government decisions related to mining licenses in New South Wales. He then leveraged this information to benefit his family’s business interests.

Bribery and corruption

Offering or soliciting something of value to influence actions. This undermines the rule of law, distorts market competition and also erodes public trust.

Example: The ‘Australian Wheat Board (AWB) scandal’ involved the AWB, Australia’s largest wheat exporter, paying kickbacks to the regime of Saddam Hussein in Iraq to secure lucrative contracts under the United Nations Oil-for-Food program.

What is financial crime investigation?

Agencies such as the Australian Federal Police (AFP), Australian Securities and Investments Commission (ASIC) and Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Taxation Office (ATO) play key roles in investigating and prosecuting financial crimes.

Financial crime investigators, analysts, officers and specialists may be involved in:

• Forensic analysis: You meticulously sift through financial records, transactions and documents using specialised software and analytical tools. All to uncover patterns of suspicious activity. Your goal? Identifying fraud, money laundering or other illicit practices.
• Interviews: You conduct interviews with witnesses, suspects and other involved parties to gather crucial information, testimonies and evidence.
• Collaboration and coordination: You team up with domestic and international law enforcement agencies, regulatory bodies and other stakeholders to share intel, coordinate investigations and prosecute offenders. Expect to take part in task forces and inter-agency initiatives targeting financial crime networks.
• Evidence collection and preservation: You’ll collect, document and preserve evidence in accordance with legal and procedural requirements. Ensuring the chain of custody, securing digital evidence and guaranteeing admissibility in court proceedings are all part of the job.
• Expert testimony: Your expertise may land you in courtrooms, administrative hearings or regulatory activities. There, you’ll present findings, interpret complex financial data and offer insights crucial for securing convictions.

The role of technology in prevention

In the realm of policing, technology is becoming increasingly important. It’s already a cornerstone in combating financial crime and empowering analysts and investigators to detect and mitigate risks more effectively. Here’s how technology is shaping the future of financial crime prevention.

• AI and machine learning: Powered by AI algorithms and machine-learning models, financial institutions and regulatory agencies can sift through vast data volumes to spot patterns, anomalies and trends signalling fraudulent activities. By learning from historical data and user behaviours, these algorithms swiftly flag suspicious transactions for intervention.
• Big data analytics: This tool enables organisations to aggregate, process and analyse large datasets from various sources. By correlating transactional data, customer information and external sources, financial institutions can pinpoint high-risk customers, monitor transaction flows and proactively address compliance breaches.
• Blockchain technology: Known for underpinning cryptocurrencies like Bitcoin and Ethereum, this technology offers enhanced transparency, security and traceability in financial transactions. Institutions and regulatory bodies explore its use for transaction monitoring, reporting and securing cross-border payments.
• Digital identity verification: Biometric authentication methods such as fingerprint scanning and voice/facial recognition bolster digital identity verification. They help institutions confirm customer identities, mitigating the risk of identity theft and fraudulent transactions.
• Predictive analytics and risk scoring: These models assess the likelihood of fraudulent behaviour. They allow organisations to prioritise investigations based on risk levels. This ensures resource allocation is efficient and focused on high-risk areas.
• Cybersecurity measures: Increasingly, financial institutions and regulatory bodies invest in cybersecurity technologies like intrusion detection systems, endpoint protection software and encryption protocols. These measures safeguard against cyber attacks, mitigate risks and uphold the integrity and confidentiality of financial data.

Exploring career paths

Jamie Ferrill sees lots of exciting options for professionals.

You could work as a financial crime investigator or intelligence officer in a law enforcement agency, regulatory body or private firm to investigate and prosecute financial crimes. Compliance officers ensure that financial institutions adhere to relevant laws, regulations and internal policies to prevent financial crimes.

As an anti-money laundering (AML) analyst, you’ll be on the frontline within financial institutions. You’ll detect and flag suspicious activities indicative of money laundering or illicit transactions.

Alternatively, unravel the threads of deception as a fraud investigator, delving into scams plaguing individuals and businesses alike. Or safeguard organisations from digital malevolence as a cybersecurity analyst, protecting them against cyber threats like data breaches, ransomware and phishing schemes.

Become a risk management specialist, and you’ll navigate the operational, regulatory and reputational risks tied to financial crimes. Or work as a financial intelligence analyst, deciphering trends, patterns and emerging threats within financial data.

These pathways merely scratch the surface of career opportunities in the dynamic landscape of financial crime. As criminal tactics evolve and become more sophisticated, demand for skilled professionals in this field will grow. As a result, there will be diverse and rewarding career options for those interested in combating financial crime and protecting the integrity of financial systems.

Start your financial crime prevention career

Moving into a career in financial crime prevention offers a pathway into a dynamic and critical field.

And the best way to start is to gain academic qualifications. These provide the foundational knowledge and skills necessary for understanding the complexities of financial crime.

At Charles Sturt we have several financial crime courses to help you get where you want to go.

Firstly, you can start with our micro-credentials: a suite of short, online modules that tackle various aspects of financial crime. Then take your skills to the next level with the Master of Fraud and Financial Crime or Master of Anti-Money Laundering and Counter Terrorist Financing – both of which allow you to build your studies through a graduate certificate and a graduate diploma, so you can get the right level of qualification.

Chat to our team to find the best option for you.