ASEAN-Australia Counter-Terrorism Conference

ASEAN-Australia Counter-Terrorism Conference

ASEAN-Australia Counter-Terrorism Conference

Leaders Conference – CEO speech


The critical role of the private sector in countering terrorism financing - Potential models of cooperation with industry

The Fintel Alliance

As we have been discussing here today, the threats we face are adaptable, well-resourced and borderless, and we are finding it increasingly more difficult to combat these threats alone.

The recognition of the role the private sector must play in financial crime and countering terrorism financing, was the impetus for the establishment of what we have called, the “Fintel Alliance”.

The Fintel Alliance is a public-private partnership working collaboratively to develop shared intelligence and deliver innovative solutions to contribute to the growth of the Australian economy, help protect the Australian financial system from criminal abuse and countering terrorism financing.

Established in early 2017, it is a centre of excellence in financial intelligence, underpinned by leading edge technology. We use new methods, new technology and work with new partners to combat the rapidly changing environments of money laundering and terrorism financing. This is achieved through intensive side-by-side collaboration with government agencies, law enforcement and most importantly, our reporting population.

We have only to look at the considerable changes over the last 20 years to appreciate the need to collaborate outside our traditional partners.

Technology is of course, rapidly changing in all sectors, and the financial sector is no different. The development of artificial intelligence and robotics, the rise of FinTech and other digital disrupters, and the community’s insatiable desire to undertake more personal and commercial transactions digitally, all contribute to the growing challenges we currently face.

We rightly embrace this advancement in technology and the improvements it brings; however we also need to accept that terrorist and serious and organised crime groups are also examining ways to exploit every opportunity.

We also need to recognise that in this evolving environment, the traditional regulatory model of Government is being challenged and our historical transactional and siloed approach to financial intelligence will result in fewer answers at the risk of greater effort and cost.

The Fintel Alliance is – at its heart – an operating model for collaboration between industry and government, and currently comprises 16 representatives across the banking, remittance and payments sectors, as well as law enforcement, policy and regulatory partners.

Under this model, we integrate partner members – virtually and physically – into our intelligence teams resulting in timelier access to financial intelligence, including vital information about typologies and methodologies, and therefore increased detection of emerging threats.

The vision of the public-private partnership framework in the Fintel Alliance is building the financial intelligence picture together, and I would like to share two case studies that whilst not specifically focussing on terrorism financing, outline how we are delivering on this vision.

In early 2017, the Fintel Alliance initiated a project focused on child exploitation – an issue that greatly impacts Australian and international communities. This particular initiative was driven by Western Union – recognising the criticality of bringing information sources together.

This project relied heavily on information on suspected or known offenders both in Australia and internationally, previously unavailable to Fintel Alliance members. For example:

  • Law enforcement agencies shared with industry partners inside knowledge and classified information on suspected overseas facilitators.
  • The International Justice Mission in the Philippines provided a list of known or arrested facilitators, which were then matched against AUSTRAC data and shared among the Fintel Alliance.
  • The ANZ Bank and Western Union provided details of internal monitoring to assist in the development of a Financial Indicators Paper which was shared with all partners.

The results of the project included:

  • improved transaction monitoring by industry and government,
  • increase in intelligence generated on previously unknown offenders,
  • in excess of 20 referrals of actionable high quality targets to law enforcement, and
  • the disclosure of suspected facilitators to international counterparts in high risk areas in the South East Asian region.

Additionally, this project resulted in a 316 per cent increase in suspicious transaction reports over the past 12 months relating to the purchase of objectionable goods including child exploitation material.

The International Centre for Missing and Exploited Children has recognised the benefits of the project, and has invited the Fintel Alliance to play a leading role in educating and informing corporations like Facebook, MasterCard and Google as part of the Financial Coalition Against Child Pornography.

The second example involved approaching the Australian Financial Crimes Exchange, or AFCX, an independent, non-profit entity assisting in coordinating the fight against Cyber and Financial crime.

Current members of the AFCX include Australia’s four largest banks, the Department of Home Affairs and the Customer Owned Banking Association.

Through the Fintel Alliance, compromised Australian credit card details were provided to the AFCX as a test case to better understand if data in the same or similar forms would be of benefit to participant banks in detecting and preventing financial crime.

As a result, it was found that 78 per cent of compromised customers/cards were active at the time the information was circulated.

The majority of cards still active were immediately stopped or cancelled as a result of the intelligence.

Based on overall average fraud per card values for each bank, it is estimated that around 500 thousand dollars in fraudulent transactions were prevented as a result of this intelligence. Whilst a relatively minor amount, for a small test case on fraud and a difficult crime type to halt prior to offending, it was significant.

Other projects

These low-risk projects were deliberately selected to build trust amongst partners over the past 12 months.

The Fintel Alliance is now at a state where it is embarking on a range of other projects, including on terrorism financing, tax evasion, cybercrime and supporting law enforcement to disrupt criminal organisations.

One is specifically planning to look at how to better understand financial activity of known and suspected terrorists, including a more detailed understanding of their financial activity than would be possible using transaction and suspicious matter reports alone.

A current project, involving partner Westpac, is examining money mules. This particular project aims to disrupt criminal networks recruiting money mules, and harden the financial sector and job recruitment sites from exploitation.

In 2018, the Fintel Alliance will also be expanding membership domestically, and we are also looking to enhance collaboration with our international partners.

The type of successes I have spoken about today can only be done effectively through true collaboration with financial sector partners which can be applied to the spectrum of challenges we currently face.

I anticipate that as the Fintel Alliance grows and matures, it will become a centre of excellence for AML/CTF in this country and hopefully our region.

Enhancing regional collaboration on financial intelligence and information sharing: Financial Intelligence Consultative Group (FICG) and the South East Asia Counter Terrorism Financing Working Group (SEA CTFWG)

CTF Summit

If we look back to before the first CTF Summit in 2015, regional collaboration of financial intelligence units occurred through the Egmont Group and the Asia/Pacific Group on Money Laundering.

Both Egmont and APG have, and will continue to, serve our region well in assisting members to build relationships, capability and compliance with global AML/CTF standards.

These forums have built a strong foundation for all of us to collaborate and share intelligence.

But it is no secret there was a gap in our ability to collectively focus on and harden the South-East Asia region specifically against threats such as terrorism financing.

The impetus of the first CTF Summit was to bring together representatives from financial intelligence units, regulators, law enforcement, national security, policy and ministries, as well as industry participants from across the region and the globe, to build an alliance against terrorism.

The original vision encapsulated collaborating and sharing financial and other intelligence to the fullest extent to identify, understand and counter threats posed by terrorism financing, foreign terrorist fighters and violent extremism, and complementing the work of Egmont and APG by operationalising our financial intelligence units.

The Financial Intelligence Consultative Group, or FICG was established as an outcome of the 2015 CTF Summit.

The role of the FICG is to further operationalise outcomes that arise as proposals during the CTF Summits.

It is co-chaired by Australia and Indonesia and comprises the heads of Intelligence (or their representative) from the FIUs of Philippines, Indonesia (co-chair), Malaysia, Thailand, Singapore, Brunei and New Zealand. Cambodia, Laos PDR, Vietnam, and Myanmar have also been invited to participate.

The FICG was responsible for the first Regional Risk Assessment, which identified primary terrorism financing risks across the region and provided the basis for future collaboration to understand our region’s terrorism financing risks and where appropriate, coordinate actions to respond.

Building on this, the FICG tabled at the 2017 CTF Summit, the first regional risk assessment of non-profit organisations and an operational assessment of intelligence related to the cross-border movement of cash throughout the region.

The regional risk assessment on Non-Profit Organisations (NPOs) has been an important milestone in the evolution and expansion of the CTF Summit.

The 2016 Regional Risk Assessment identified the need to more closely examine NPOs to get a better sense of the risk they pose.

The subsequent assessment in 2017 concluded that NPOs pose an overall medium terrorism-financing risk in the region.

The assessment is a strong example of the collaboration we are fostering through the CTF summit.

To guard against any changes in the level of risk, the assessment recommended that regional partners continue to improve their understanding of the small subset of NPOs most vulnerable to terrorism financing misuse, and target their efforts accordingly to help those NPOs protect themselves from terrorism financiers.

As part of this, a regional project group has been formed and work is underway to review the indicators currently available on suspicious NPOs.

The project intends to identify any gaps or areas where more information is required, with data collection to follow.

A set of more refined red flag indicators, that match the distinctive risk profile of our region, will be published at the 4th CTF Summit, to be held in Bangkok in November, for authorities, financial institutions and NPOs to use.

This important project will not only enhance detection of high-risk NPOs, but will help to deliver a risk-based approach to prevent NPOs being exploited while at the same time not interfering with the important social and development work the majority of NPOs perform.

One of the key working groups that will operate under the FICG is the South East Asian Counter Terrorism Financing Working Group.

Announced by the former Australian Minister for Justice, the South East Asian CTF Working Group reinforces Australia’s commitment to tackling ISIL and is a critical step in identifying and addressing the terrorism financing challenges faced by our regional and industry partners.

The Working Group, through engagement with law enforcement, regional partners and industry aims to deny ISIL access to the financial system.

The Group will do this through establishing and implementing recommendations that members can take to harden the regional financial system against ISIL financing.

The Working Group was set up specifically to deal with the current priority of financing of ISIL affiliate organisations in the region, but its mandate is broad enough to cover financing of other terrorist organisations as new threat groups emerge.

The Working Group is independent from, but broadly based on the Counter-ISIL Finance Group (CIFG), a working group of the Global Coalition to Counter ISIL.

In addition to improving regional understanding of ISIL financing methodologies and participants, the group has a clear mandate to improve sharing of financial intelligence and coordinate disruption opportunities, which could include coordinated sanctions listings, asset freezing, AML/CTF compliance/regulatory options or coordinating law enforcement engagement.

The first meeting of the working group was held during the CTF Summit in Kuala Lumpur last November.

From this first meeting, the group agreed on several priority areas that have now become work packages for the group to drive:

Ultimately, we think this regional model could be adapted in other regions to combat terrorism financing.

Conclusion

The FICG and its working groups will continue to mature, with agreement this year to broaden the focus of work beyond terrorism financing to also include money laundering and other serious financial crimes.

AUSTRAC looks forward to working closely with our ASEAN partners as we continually adapt to changing threats impacting all our countries in the region.

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