What’s the link between technology and economic crime, and how can we address it?
Economic growth flourishes on technological advances, but criminal activity also responds and reacts creating challenges for regulators, legitimate businesses and their customers, auditors and advisers alike. As Kevin Dancey, CEO of IFAC, highlights in the foreword to ACCA and EY’s report, financial crime costs the world more than the GDP of the UK every year – and even that US$3.5 trillion figure is just one measure of the human toll as people lose savings, jobs and sometimes more.
Against the backdrop of the current rapidly changing technological landscape, ACCA and EY have explored the evolving role of accounting and finance professionals, regulators and government institutions in combating economic crime in the digital age.
For regulators and policy makers, economic crime in a digital age presents some particular new policy challenges - anonymity, accessibility and accountability.
Criminals can disguise their identities and activities, and reach out more effectively than ever before to a far wider pool of potential victims. Many cryptocurrencies are anonymous by design and create a new method for facilitating payments, creating new challenges for policy makers, regulators, compliance and audit professionals working to tackle activities such as money laundering.
Financial crime has become more accessible thanks to the proliferation of information on the internet alongside the ease of communications and money crossing international borders. Dark web marketplaces mean the perpetrators need not even be technologically skilled themselves.
Perhaps for the first time ever we have to achieve the right regulatory balance between human oversight and reliance on the machine. We must somehow develop proportionate and fair regulatory and associated regimes that allow innovation to flourish while providing safeguards for accountability.
To meet these challenges, the report identifies three layers of cooperation and coordination that will drive a consistent and coherent approach to effectively counter the threat posed by abuse of the new technology.
This hierarchy of cooperation is perhaps not in itself revolutionary, but implementing it in the digital era will need fresh thinking and innovative approaches
Within the individual organisation, the approach to gathering, recording and processing data must be reviewed and refreshed. Once the business has a coherent, consistent, coordinated approach to its data, then the benefits of AI and machine learning can be reaped at a local level.
But action at the business level is only part of the story.
For society to benefit from a coordinated approach to tackling crime, business and law enforcement need to be able to act together, and that relies upon a coordinated approach at the second level built upon a regulatory approach which recognises the new landscape and reflects its new features.
Yet it’s the third level, globalisation, that the biggest step change needs to occur.
Cyberspace does not recognise national borders – but law enforcement must. While criminals may have no regard for the rights of the individual, businesses, regulators and the authorities are bound by the rules of society.
New tensions arise around the right to privacy. National approaches vary, but in many cases the rules put in place to protect residents of one jurisdiction can hinder the efforts of others to combat criminals. Even here, revolutionary technology such as homomorphic encryption can perhaps offer solutions to otherwise intractable issues of policy. But the conclusion of all the senior figures who fed into the report is that international cooperation is essential to an effective approach to tackling economic crime.
The importance of ethics
But there was one other common theme, and that is the human element. Jason Piper, Head of Tax and Business Law at ACCA, summarises: 'Our Economic Crime in a Digital Age report finds that people, processes and governance remain key. Every successful crime starts with individual decisions, whether to deliberately break the rules, or to place trust in information that isn’t trustworthy.
‘And whether it’s in double checking who really sent a payment instruction, or teaching humans how to properly use AI, being sure that the humans in the chain have the right attitudes, the right rules to follow, and the right tools to counter the advances in criminal behaviour are the most important elements to keep the impacts of economic crime to a minimum'.
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"Business technology is no longer an administrative tool; it’s fundamental component of the compliance environment, and an integral part of the defences as it becomes a vector of attack. Making the right decisions, at both strategic and tactical levels, will depend on the right talent having the right skills and the right information to tackle the rapidly changing digital world"Mike Suffield, Director – Professional Insights ACCA
Some AI and FDA technologies increasingly used in fraud detection and compliance monitoring include:
Rules based descriptive tests
Topic modelling and linguistic analysis
Statistic analysis and machine learning
Data visualisation and link analysis
Robotic process animation (RPA)
"Driven by globalization and digitalization, the fraud risk landscape is continuously taking on increasing complexity and velocity. Modern-day auditing professionals are increasingly making use of forensic specialists and technology to identify and respond to these fraud risks."Andrew Gordon, Global Forensic & Integrity Services Leader, EY