The use of technology to enable financial crime has grown steadily over the past decade, according to the Asia Pacific Group on Money Laundering.
The inter-governmental organisation of 41 jurisdictions has just released its annual report on money laundering (ML) and terrorist financing (TF) across the region, which focuses on both the use of the internet to carry out crimes and on the internet-centric laundering of illicit funds.
Every year, APG members and observers provide information on ML and TF cases, trends, research, regulatory action, and international cooperation. This data not only builds a useful library of case studies over time, but also helps authorities to design in-depth studies on particular types of crime, and therefore also to remedy them.
Cyber fraud is a particularly serious threat in the region, with 35 percent growth in cybercrime year-on-year, notably in account takeovers and payment fraud. Illicit trafficking in narcotics, arms, stolen goods, and illegal porn are also prevalent, as are identity theft, scams, robbery, extortion, and ransomware attacks seeking payment in cryptocurrencies.
The report makes particular reference to the growing challenge of cryptocurrencies to crime-fighting initiatives. In addition to the Budapest Convention (which seeks to establish consistent legal frameworks and investigatory powers among its signatories), some APG jurisdictions have sought to address concerns over cryptocurrencies in anti-money-laundering (AML) programmes and in combating the financing of terrorism (CFT).
For example, Malaysia has imposed AML/CFT requirements on digital currency exchangers by including them as reporting institutions under Schedule 1 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001. This requires digital currency exchangers to ensure they have effective measures in place against the ML/TF risks associated with cryptocurrencies, and to increase the transparency of digital currency activities in Malaysia.
In addition, digital currency exchangers must also provide further information on their business profile and activities, as well as submit monthly reports on transactions.
Australia has also imposed AML/CFT requirements on digital currency exchangers via the AML/CTF Digital Currency Exchange Register Policy Principles 2018, which was issued under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. Digital currency exchangers are required to, among other things, register with the government’s financial crime intelligence centre AUSTRAC, have an AML/CFT programme in place, report suspicious transactions, and maintain sufficient records.
Internet-enabled ML and TF pose a number of other challenges in the region, including a lack of law enforcement agency expertise in investigating cybercrime, says the report. This can be further complicated by poor domestic coordination between the agencies.
There may also be a lack of legislation to combat cybercrime in a fast-changing technology environment, while the transnational nature of many cybercrimes demands strong international cooperation between jurisdictions linked by both geography and ICT.
Cybercrime and internet-facilitated ML/TF investigations also require strong cooperation with the private sector, says APG. The online infrastructure operated by the private sector is not often developed with security and cooperation with law enforcement agencies as a priority.
Cooperative rather than punitive approaches to gaining assistance from private companies may reap more benefits, says the APG. Any lack of confidence in the security of online transactions and trading could limit the number of financial transactions occurring in a jurisdiction as customers move to other markets which are perceived to be safer.
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