As the world shifts to instant payments, fintech should be a force for good in fighting financial crime

In December, the Federal Treasurer, Josh Frydenberg announced “the most significant reforms” to Australia’s payments system in 25 years.

Frydenberg said the policy package will “ensure Australia is at the front of the pack when it comes to harnessing the benefits of the digital economy.”

Real-time payments are already proving very popular. Sadly, this popularity also extends to bad actors who are quick to exploit new payment methods for their own purposes.

In the digital economy, people rely on fast payments and quick access to money, however, there are often unintended consequences.

It’s not just time to reform our payments system regulations; it’s also time to take advantage of the technological innovations that can detect and prevent financial crime in real-time.

Australia’s fintechs can play a key role in challenging and improving the mainstream financial services industry, for the benefit of our society, through the adoption of real-time technology that monitors and prevents financial crime in all its forms.

Payments text fields are being used for abuse

The changing nature of real-time transactions, and increased text limits and emojis, can enable an offender to coerce, stalk, threaten or harass their victim. Westpac research from 2021 shows that one in four of the sample population have sent or received inappropriate language in payment transactions.

Here’s an actual example:

A financial services provider monitored and reported a series of suspicious transactions made to a female customer that included threatening language within payment text fields.

A man sent 170 same day payments valued at $1 or less to the woman, and the payment text fields included references to her not reporting anything to the police, insulting and labelling her in derogatory terms, as well as threatening and abusive language.

This activity was escalated to law enforcement for investigation with the offender apprehended for breaching a court Protection Order.

The new financial crime guide released by AUSTRAC’s Fintel Alliance will help businesses understand, identify and report technology-facilitated abuse through financial transaction payment text fields.

Staying in front of bad actors and supporting victims

In the 24/7 digital economy, payments must move in real-time. This means that old-school tools, like daily payment limits and overnight batch screening, are not fit for purpose.

Real-time technology has a key role to play in supporting the right controls and systems to identify, restrict and target the misuse of payment text fields for the purposes of domestic and family violence and criminal activity.

HaaS partners with leading real-time fraud and anti-financial crime system, Featurespace, via a microservice API. This enables KYC, KYB, real-time AML, CTF and fraud monitoring across all payment channels, including scheme and non-scheme rails. Our checks cover all transactions using a real-time fraud engine, monitoring and reporting suspected financial crime.

Indicators of abuse

A key indicator of financial transaction fields being used for abuse includes high volume payments at a low value, typically between $0.01 and $10. Often these multiple transactions are made outside business hours, particularly in the evenings and weekends.

The common types of abuse are the use of emojis to convey threatening or abusive messaging to a payment recipient depicting weapons, injury, death or a sexual connotation and coupled with threats of harm to the sender or recipient if comments are reported.

Fintechs can play a key role for good

Fintechs can use a variety of indicators to improve profiling and transaction monitoring to target, detect and disrupt the use of the payment text fields by criminals and those seeking to gain access to, control and intimidate victims.

To protect customers from abusive messages via payment text fields, HaaS is implementing a range of measures to identify and block abusive or offensive messages, including monitoring and field analysis tools, a lexicon of keywords or terms related to specific themes for comparison, and triggers on payments.

We have also changed transaction behaviour models with an expansion of those that do not support economic outcomes.

Where irregularities are identified, our system will prepare and lodge Suspicious Matter Reports with AUSTRAC for use and referral to other agencies.

The interaction of payments, transparency and control is a key element of many innovative fintech and start-up entities to support consumers to have better financial wellbeing.

Fintech has a key role to play in leading the broader financial services industry to solutions that benefit society as a whole.

If you or someone you know is experiencing offensive or threatening messages through payment text fields, report the issue immediately to your financial services provider.