Home Strategy Call for machine learning to be applied to minimise financial risk

Call for machine learning to be applied to minimise financial risk

The financial sector should undertake risk mitigation strategies with machine learning and data analytics at the forefront in view of the rising threat of criminal exploitation faced by the sector, according to an official from BAE Systems Applied Intelligence.

Michelle Weatherhead (right, below), the company's head of Financial Crime Solutions for Australia and New Zealand, said: "By gathering and analysing data from all parties involved in protecting our financial system, machine learning models can identify criminal patterns and new fraud techniques, as well as anticipate where risks and vulnerabilities might be exploited next.”

Her comments were made in connection with Wednesday's Australian Transaction Reports and Analysis Centre (AUSTRAC) report on financial risk, titled Securities and derivatives sector: money laundering and terrorism financing risk assessment.

The report found that:

  • The risk of criminal exploitation for the securities and derivatives sector is at the high end of 'medium'.
  • Fraud, including cyber-enabled fraud, was by far the highest reported threat to the sector (51%), with a significant number of customer email accounts and trading accounts being hacked and, in some cases, money stolen.
  • Money laundering and insider trading and market manipulation were equally the second highest areas of suspected criminal activity in the sector (21%); and
  • Tax evasion (2%) and terrorism financing (1%) were the least reported threats to the sector.

Weatherhead said: “With fraud, including cyber-enabled fraud, and money laundering cited as the top two threats to our financial system, today’s AUSTRAC report shows more needs to be done to reduce the risk rating for Australia’s financial services sector.

michelle weatherheadShe said financial institutions were facing an increasingly sophisticated and dynamic set of criminals.

"The profiles of fraudsters and their tactics are changing at a rapid pace, with mules increasingly replacing professionals, and insiders ever more involved in crimes such as money laundering,” Weatherhead added.

“Improving Australia’s response to financial crime involves an integrated and collaborative approach, within Australia and across borders. We encourage the financial services industry to share more data and intelligence in order to learn from each other’s experience. A renewed focus on industry collaboration and the use of smart analytic models can reduce the risk posed by fraudsters and criminals.”


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Sam Varghese

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.