Tech ‘no silver bullet’

PayPal’s global head of financial crime says Australia’s financial institutions need to mix technology with people power in order to get compliance in order.

Brisbane Square Suncorp store. Photographer: Liam Kidston.

Australia’s banks and financial institutions need to mix high-powered tech with people power to best fight financial crime, according to PayPal’s global head of financial crime and customer protection.

Speaking to The Australian, the New York-based David Szuchman, who runs one of the world‘s largest private financial crime fighting unit, said that technology is not a silver bullet when it comes to tackling financial-based crime like money laundering, scams and frauds.

Last week Westpac revealed it had failed to disclose hundreds of thousands of transactions to AUSTRAC, while 365,000 may have included incomplete or inaccurate information. The bank has largely blamed technology for its failure to adhere to anti-money laundering compliance.

“Technology is a key for any program,” Mr Szuchman told The Australian. “You have to be using the latest technology, the latest data you can get your hands on, to run through your detections. But technology is not going to cover it all for you. It‘s a huge component, but I’m a big believer in marrying that up with curious investigators, people who understand the way a fraud event works or how a terror event can be financed and have them look through the data.

“My advice to anybody standing up any of these programs, whether it‘s a bank or money service business, is to think about this mix of talented investigators and invest in them. And think about he technology and how you’re going to find the right parameter between those two places.”

Mr Szuchman’s unit works with law enforcement in handling everything from petty scams to child sex exploitation. The team works on combating criminals using the PayPal platform for a range of financial-based crime like money laundering, scams and frauds, to serious crimes like terror financing.

The executive, who spent two decades working as a public prosecutor in the US, said the prevalence of these crimes has accelerated as more Australians go online due to COVID-19. PayPal in recent months has recorded record transaction numbers in Australia.

It comes after The Australian reported PayPal itself has been referred to AUSTRAC, which is reportedly considering legal action under the Anti-Money Laundering and Counter-Terrorism Financing Act as the regulator awaits findings, expected in August, from an external auditor.

When asked about the company’s own AUSTRAC audit, a PayPal Australia spokesperson said, “PayPal Australia is working closely with an external auditor and AUSTRAC to satisfy the requirements of an audit commissioned late last year. Given the audit is still in progress, it would not be appropriate to discuss further details until the audit is completed.”

Mr Szuchman said PayPal has invested heavily into its financial crime fighting operations.

“When I joined PayPal it has just spun off from eBay, and was starting a new trajectory. And now we have invested literally hundreds of millions of dollars in the program, and we‘ve brought in a nice mix of outside people, everybody from public prosecutors like myself, law enforcement people and data science folks, and mixed them with people at PayPal who understood the business,” he said.

Mr Szuchman added PayPal now has about 3000 people in its financial crime and customer protection teams, working around the clock particularly given the ramp up in online activity as a result of the pandemic.

“If law enforcement knows that there‘s someone out there looking to commit a terror attack, they have that needle in the haystack. Creating those relationships where you get that proactive intelligence through proper legal channel, and then being able to search your systems and combine that with the information that you are getting from your AI, or your rule based detections, that is really a really important mix, and we’ve invested a lot of time globally in those relationships, especially in Australia.”

As for consumers, the executive said his number one message is to always be sceptical. The consumer watchdog has identified more than 1000 COVID-19-related scams, and has warned that scammers are adapting existing technology to play on people’s fears around coronavirus.

“If the offer seems too good, it probably is. Just be sceptical and smart as you approach your transactions and the information you‘re giving up to do it. It’s still amazing how creative the scammers can get, so just be vigilant,” Mr Szuchman said.

“And if you look at what‘s happening with the pandemic, we’ll see even more creative scans that are being perpetuated as a result of it. I wouldn’t say there’s going to be a new crime pattern, what’s always amazing to me is what’s old becomes new again, with a flavour or variation of what we’ve seen before.”