Review of Fraud in the Banking Industry in Australia

Running head: BANK FRAUD
BANK FRAUD
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Bank Fraud
Introduction
This paper is a review of fraud in the banking industry in Australia. The paper has
started by reviewing types of fraud and how the banking industry has responded them. Unlike
other criminal activities, fraudulent activities are rarely captured in the media hence giving
fraudsters ample time to continue carrying out the vice. The losses from such fraudulent
activities have been greatly felt by the community and banking industry. According to the
inaugural KPMG Global Banking Fraud Survey, 61% of banks have reported an increased
case of fraud between 2016 to 2018. In 2018, there were 177,000 scam reports that costed
Australia’s economy half a billion dollars. The US and the UK have recorded a scam alert of
85,000 combined ("Australia suffers from increases in bank fraud," 2019). This tells us of the
need to focus on the efforts to control bank fraud.
2.0 Cyber-crime in the Banking Sector
In a research done in 2016 by “Carbank”, Australian banks have been a major target through
cybercrimes. In 18 months, over 1.3 billion was stolen using malwares to issue transfers from
the bank systems such as ATMs. The Security and Exchange Commission (S.E.C) was
hacked in 2016 (Stevenson, and Tejadasept, 2017). Hackers accessed private information
used for insider trading. S.E.C recommends cyber risk management t avoid similar crimes.
Fraudsters use different methods to carry out financial crimes.
Bank and financial fraud can be committed in various ways:
Digital banking – Compromising online banking via porting or phishing emails. Scams –
Investment or romance scams. Application fraud- The Application of lines of credit or
lending by a fraudster who uses other individuals’ credentials via identity theft. Card fraud –
Illegal use of card fraud from skimming to computer generating card numbers and
performing a BIN attack. Mortgage fraud – Individuals that do not register for tax and earn
income via cash applying for home loans via made up payslips with assistance from brokers.
Most banking fraud is channelled through electronically, via the internet and used on
computers, tablets, and smartphones. Electronic banking is driving the world towards smarter
and faster cashless systems. Methods of data security breaches can be through Phishing,
Smishing, Scamming and Public Wi-Fi access.

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Banks need to take accountability and concede negligence in the contribution of Bank fraud.
Financial institutions continue to provide faster and convenient banking as a way of business
strategy to gain more clientele, but have not yet met the standard in the security and defence
to prevent fraud within their technologies, which has made it easier for customers but also
provided the same opportunity to a fraudster.
From digital online banking, 24-hour telephone banking, worldwide instant money
transfers and smart ATMS being some of the contributing factors. The issue is that the
methods to protect the integrity of these creative technologies are slowing down, leaving a
major gap within the system that is being exploited aggressively by worldwide hackers or
fraudsters despite the efforts of government and/or regulatory measures (Norton, and Walker,
2014).
Lack of documented fraud operating model and enterprise-wide fraud risk assessment.
Failure to detect impact management information and investment decisions.
Optimizing and focusing on innovative technology versus weak security breaches.
2.1 Government initiatives
The government has brought out many resources to assist in the defence and reporting of
bank fraud to keep people, businesses and communities safer.
Commonwealth Fraud Prevention Centre was established in July 2019 to partner with
government and non-government related agencies to: Detect and promote better practice
approaches to mitigate fraud vulnerabilities. Focus on barriers to effectively boost fraud
prevention. It offers assistance to agencies to design fraud prevention systems and promote
resistant strategies and procedures (Prenzler, 2011).
CFPC provides advise on fraud defence initiatives and adjustments to legislation and policy
to further progress Australia’s battle on bank fraud and cybercrime.
Collaboration and knowledge shared amongst government agencies (state and national),
international community to raise awareness, promote training and skills, and enhance tools
("Government responsibility for fraud | Attorney-General's Department," n.d.).
Scamwatch (ACCC) was developed and sourced by the ACCC for the purpose of our
reporting and educating people, businesses, and communities to avoid scams that are
currently widespread. Collaborating with state and territory government agencies, scamwatch

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promotes people to reporting a scam in which the ACCC can monitor trends and act where
necessary to look for innovative ways of defence to prevent and disrupt scams (Scamwatch
role, 2019).
Australian cyber security centre (ACSC) was established by the Government in the efforts
to enhance security and defence of online cyber threats and to keep our communities safer
from malicious viruses, malware, hackers by creating a 24-hour monitoring system (Chapter
4: Banking, Credit Card Fraud, and Money Laundering – Parliament of Australia).
Working with business and government agencies, cyber-security incidents can be reported by
professionals to gain a response on how to better protect their workplace and avoid becoming
vulnerable to constant new technology’s and cyber risks ("About," 2019).
National Identity Fraud Awareness week is promoted by the AFP to fight identity theft in
Australia by creating awareness to protect business and individuals. The organisation is set
out to create encouragement of enhanced security habits and the implementation of
organisations security procedures. The awareness program was launched due to year by year
national losses of approximately $1.6 billion per annum due to identify theft, credit card fraud
and scamsRaising public awareness of consumer fraud in Australia (2019, February 1).
2.1.1 Legislation
Despite the adequacy and appropriateness of offence provisions by the security and
fraud specialists, the level of sentencing is inadequate. Armed attacks and white-collar crimes
are not being prosecuted adequately. Banks have been reported to frustrate the effort by law
enforcers to process and prosecute similar crimes. Customer details must be kept confidential
but the law must be complied with to fully prosecute such crimes.
The Australian Law Reform has been reviewing the Financial Transaction Reports
Act and the Crime Act since 1998 (Sathye, 2008). There has been increased police powers to
obtain information that can help deal with financial crimes. The banking sector and the law
enforcement team must work together for successful prosecution. The Australian Banker’s
Association have lauded the move as an important approach to strengthening cooperation
between law enforcers and the banking sector.
Following the increase in cases of fraud in the banking sector, the Australian
government has come up with different legislation to control the crime. There are numerous
ways through which fraud can be committed under the Australian tax system and community.