Financial Crime World

Emerging Financial Crime Risks in Norfolk Island: How to Identify and Mitigate the Threats

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Norfolk Island, a territory of Australia, has been increasingly vulnerable to emerging financial crime risks, including AI and deep fake technology, blockchain, non-fungible tokens (NFTs), fake news, and deepfake technology. These technologies have brought new opportunities for criminals to launder money, finance terrorism, and commit fraud.

Blockchain Technology: A New Avenue for Money Laundering

The rapid growth of blockchain and distributed ledger technologies has made virtual assets increasingly accessible and popular as payment products. However, these technologies are also susceptible to being misused by wrongdoers who exploit their high transaction speeds, global reach, and anonymity to bypass regulators and enforcement authorities.

  • High transaction speeds make it difficult for law enforcement agencies to track transactions
  • Global reach enables criminals to operate across borders with ease
  • Anonymity allows individuals to remain hidden and avoid detection

NFTs: A New Means for Money Laundering

NFTs have gained immense popularity in recent years, but their rise has also brought new risks. NFTs can facilitate money laundering and terrorist financing due to their subjective value and ease of manipulation.

  • Subjective value makes it difficult to determine the true value of an NFT
  • Ease of manipulation enables criminals to alter the ownership records of an NFT

Fake News: A Growing Concern

The spreading of fake news and online disinformation has become increasingly prevalent, making it challenging for anti-money laundering (AML) subject persons to identify reliable online sources.

  • Rise of language-model AI systems like ChatGPT has exacerbated these concerns
  • Fake news can be used to manipulate public opinion and undermine trust in institutions

Deepfake Technology: A Serious Threat

Deepfake technology enables the creation of convincing content that convincingly shows people saying or doing things they never said or did. This technology is frequently used to spread disinformation and poses significant risks to society, particularly in the context of financial crime.

  • Can be used to facilitate fraud, extortion, and identity theft
  • Difficult to detect, as deepfakes can be highly convincing

Mitigating Emerging Financial Crime Risks

To stay ahead of emerging financial crime risks, AML subject persons must identify and understand these risks and design mitigating controls to address them. This includes:

  • Familiarizing themselves with new technologies
  • Ensuring that their AML/CTF framework keeps pace with emerging risks
  • Adequately training employees to identify and mitigate the risk posed by these emerging threats

Deloitte’s Expertise

As a leading financial crime risk management and compliance firm, Deloitte can assist subject persons in setting up frameworks to mitigate the risk of their services being misused for money laundering, terrorist financing, or financial crime.

  • Experienced team in identifying and mitigating emerging risks
  • Can help design mitigating controls to address these risks

Author: Gianluca Busuttil, Senior Manager at Deloitte Malta

Gianluca is a warranted lawyer forming part of the Tax team at Deloitte Malta, having also completed the Malta Institute of Taxation’s Course on Taxation. His main areas of specialisation are gambling and financial services tax.