Private-Public Collaboration and a Toolbox Approach to Preventing Economic Crime

16 November 2023

by Toby Evans, Head of Economic Crime, AusPayNet

This content was originally published by The Paypers in its Fraud Prevention in Ecommerce Report 2023-2024. The report can be downloaded here.

The earliest recorded fraud case was an attempted insurance policy scam in 300 BC by Greek merchant Hegestratos. Unfortunately for him, he was caught in the act after taking an insurance policy to pocket borrowed money, and then drowned during a daring escape.

Technological advances since Hegestratos may have increased fraudsters’ operational sophistication, but the principle of scams (tricking victims into giving away money or authorising payments) remains the same.

Today, economic crime is a growing threat to individual victims and national security. Scams, which are considered high reward and low risk by fraudsters, often see their proceeds laundered directly into the pockets of transnational organised crime. Exploiting technology, real-time payments, digital currency assets, and law enforcement’s jurisdictional limitations, scammers can efficiently steal from the economy on an ongoing basis. The growth in scams has been referred to as a tsunami but is likely just a rising tide compared to what we will see from generative AI in the coming years.

The average net worth of Australian households is over USD 1 million today. This high net worth, coupled with Australia’s movement into the digital economy, which was accelerated by the COVID-19 pandemic, has created a fertile ground for criminals. Australians lost a reported USD 3.1 billion to scams in 2022.

Public-private partnerships need to ensure real, tangible action against these crimes. For this to happen effectively, a ‘toolbox approach’ is required.

The toolbox approach

I often reference the ‘toolbox approach’ when it comes to tackling economic crime because there is no one solution to this rapidly evolving threat, compounded by the fact that scams, fraud, cybercrime, and money laundering all intersect. The ‘toolbox’ refers to the need for a multifaceted, collaborative, and future-proofed approach targeting the entire scam lifecycle. This should include setting standards, sharing data, and collaboration across all industries, with touch points along the scam lifecycle. The outcome would be that the perpetration of scams in Australia becomes fraught with greater risks and diminishing potential rewards.

A ‘toolbox approach’ is needed because the lucrative nature of scams is attracting more hardened, serious, and organised criminal networks. These networks include professional manipulators, who socially engineer victims into authorising payments, thus bypassing bank technological controls. Worse still, scams have become so lucrative that many boiler rooms (outbound call centres focused on fraudulent activity) are staffed by victims of human trafficking and torture.

Australian Payments Network (AusPayNet) has been facilitating workshops via its Economic Crime Forum (ECF) to better understand evolving manipulation trends and develop effective response strategies. A key finding from the workshops is that UK-based transnational organised crime groups have been particularly successful because of their use of the British accent to engender a false sense of security with Australian victims. This success has seen groups upping the ante with higher-value scams such as investment, bank impersonation, business email compromise, and remote access scams.

Australia’s experience tackling card-not-present (CNP) fraud shows the value of a toolbox approach based on industry collaboration and enforceable frameworks. Facilitated by AusPayNet and introduced in 2019, the CNP Fraud Mitigation Framework encourages merchant uptake of secure technologies such as tokenisation, strong customer authentication, real-time monitoring, and machine learning. Merchants who exceed certain fraud threshold targets are required to submit to tighter customer authentication.

CNP fraud accounts for about 90% of fraud on Australian cards. The CNP framework has assisted in the stabilisation of the rate of CNP fraud, which had been increasing in line with the growth in total spending on cards before the framework’s introduction. AusPayNet’s latest fraud data showed a 5% decline in CNP fraud overseen by the framework (i.e., in Australia on Australian cards), compared to a 50% increase in CNP fraud elsewhere (i.e., on Australian cards used overseas). This is likely to be linked to transnational organised crime groups targeting Australians in phishing and online shopping scams involving overseas merchants, with the data obtained often then used in other higher-value scams.

A global problem requiring a global response

The recent launch of the Australian Government’s National Anti-Scam Centre (NASC), which AusPayNet is actively supporting via its Advisory Board and fusion cells, is a promising development. It works to ensure all industries which touch the scam lifecycle share data and insights and work together to shut down vulnerabilities, hardening the ecosystem, and protecting consumers.

The ECF further supports the NASC and law enforcement by sharing insights and risk mitigation techniques, as well as leading public-private projects to assist in disrupting economic crime and seizing ill-gotten gains. It also prioritises tracking and taking down of ‘mule’ accounts used by criminals to launder stolen money.

However, we need to remember that criminals are adaptive. In addition to protracted disruption projects, there is a need for real-time data sharing, along with rapid-response fusion cells involving all scam lifecycle participants to support the blocking of new scams as they emerge. This will help harden the ecosystem which, alongside educating consumers and engaging global law enforcement partners to better intercept crimes, will frustrate fraudsters by making scams less cost effective, thereby limiting Australia’s losses.

Supporting the criminal justice system’s response

In last month’s edition of UN News, the UN noted that, ‘...only such a holistic approach can break the cycle of impunity and ensure protection and justice for the people...’. A key supporting pillar of the ‘toolbox approach’ is supporting the global criminal justice system’s response to disrupting the ease with which current criminal operations are conducted. The future of modern policing requires a partnership between public and private sectors to tackle limitations like resourcing, globalisation, and the sheer volume of economic crime.

There needs to be a collective, global effort to improve transnational information sharing and partnerships to deliver real action. Disruption through individual arrests is not enough on its own, but not acting has dire consequences. Victims also deserve justice.

Government and law enforcement need to be able to take advantage of the rich data, expertise, and preventative and technological controls available in the private sector, particularly in the banking and payments industries. AusPayNet and the ECF are already supporting collaboration across the ecosystem to address vulnerabilities within the scam lifecycle and working with the government to develop national codes and enhanced minimum standards. But while these initiatives are effective mitigants, they won’t stop scams alone.

There’s no one silver bullet that will prevent economic crime, but a global collaborative ‘toolbox approach’ is an urgently needed step in the right direction.