1 00:00:04,059 --> 00:00:06,540 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,540 --> 00:00:10,930 Sean Aylmer: Aylmer. Financial crime is evolving and business must evolve with 3 00:00:10,930 --> 00:00:14,710 Sean Aylmer: it. The challenges facing business leaders cut across every sector, 4 00:00:14,710 --> 00:00:19,169 Sean Aylmer: every industry and every region. Global cyber crime cost is 5 00:00:19,170 --> 00:00:22,520 Sean Aylmer: expected to grow by 15% per year over the next 6 00:00:22,520 --> 00:00:27,730 Sean Aylmer: five years, reaching $ 10. 5 trillion US dollars annually by 7 00:00:27,730 --> 00:00:32,589 Sean Aylmer: 2025, up from $ 3 trillion US dollars 10 years earlier, 8 00:00:32,930 --> 00:00:35,920 Sean Aylmer: but it's not all cyber crime. While the world has 9 00:00:35,920 --> 00:00:38,810 Sean Aylmer: changed and the threats are evolving, there are some elements 10 00:00:38,890 --> 00:00:42,500 Sean Aylmer: that stay the same, like fraud. I'm joined today by 11 00:00:42,659 --> 00:00:47,220 Sean Aylmer: McGrathNicol partner, Matt Fehon, and Director Sara Deady. McGrathNicol is 12 00:00:47,530 --> 00:00:50,050 Sean Aylmer: a supporter of this podcast of course. Matt, Sara, welcome 13 00:00:50,050 --> 00:00:50,790 Sean Aylmer: to Fear and Greed. 14 00:00:51,120 --> 00:00:51,440 Matt Fehon: Hi Sean. 15 00:00:51,700 --> 00:00:52,570 Sara Deady: Thanks for having us. 16 00:00:52,760 --> 00:00:55,580 Sean Aylmer: First, the basics. Matt, I'm going start there. What are 17 00:00:55,580 --> 00:00:57,470 Sean Aylmer: the different types of financial crime? 18 00:00:57,840 --> 00:01:01,770 Matt Fehon: Thanks Sean. I think from my perspective, having investigated financial 19 00:01:01,770 --> 00:01:03,820 Matt Fehon: crimes for a long time now, 10 years in the 20 00:01:04,380 --> 00:01:07,580 Matt Fehon: police force and over 20 years now as a forensic 21 00:01:07,580 --> 00:01:11,459 Matt Fehon: accountant, I think the one observation I'd like to emphasize 22 00:01:11,459 --> 00:01:14,410 Matt Fehon: is, the definition of financial crime re remains the same 23 00:01:14,410 --> 00:01:17,810 Matt Fehon: and is fairly constant, but the types of schemes continue 24 00:01:17,810 --> 00:01:21,690 Matt Fehon: to evolve as you'd outlined in your introduction. I think 25 00:01:21,910 --> 00:01:25,209 Matt Fehon: 30 years ago was bank robberies and old traditional crimes. 26 00:01:25,440 --> 00:01:30,139 Matt Fehon: Today it's crypto related crimes, cryptocurrency related crimes. And I 27 00:01:30,140 --> 00:01:34,340 Matt Fehon: think the types that we see, they are related to the theft 28 00:01:34,340 --> 00:01:40,630 Matt Fehon: of funds, assets, either directly or indirectly. But when we 29 00:01:40,630 --> 00:01:45,030 Matt Fehon: look at a business, generally, we're looking at internal fraud 30 00:01:45,480 --> 00:01:49,750 Matt Fehon: or external fraud, and often it's either by an employee 31 00:01:49,750 --> 00:01:54,180 Matt Fehon: or an employee colluding with someone externally. We still see 32 00:01:54,280 --> 00:01:58,440 Matt Fehon: large amounts of financial crime within the financial services sector, 33 00:01:58,490 --> 00:02:01,500 Matt Fehon: where we've got traditional bank related fraud, but the types 34 00:02:01,500 --> 00:02:05,240 Matt Fehon: that we often come across and what's evolved, embezzlement, as 35 00:02:05,240 --> 00:02:08,280 Matt Fehon: you've touched on, cyber attacks are just increasing and the 36 00:02:08,490 --> 00:02:14,320 Matt Fehon: theft of IP or intellectual property. Ransomware is well reported 37 00:02:14,320 --> 00:02:19,139 Matt Fehon: these days, but significantly impacts companies. International bribery and corruption, 38 00:02:19,139 --> 00:02:22,480 Matt Fehon: I think with COVID, we've seen an inability of organizations 39 00:02:22,480 --> 00:02:26,980 Matt Fehon: to oversee their operations internationally, but a lot of bribery and corruptions scandals, 40 00:02:27,220 --> 00:02:30,540 Matt Fehon: domestically over the last few years. The financial markets and 41 00:02:30,540 --> 00:02:34,500 Matt Fehon: insider trading is another type that we see regularly in 42 00:02:34,500 --> 00:02:38,329 Matt Fehon: our business. But I think financial misstatement is something that 43 00:02:38,330 --> 00:02:41,380 Matt Fehon: we did a lot of work on, post the global 44 00:02:41,380 --> 00:02:44,340 Matt Fehon: financial crisis, and I think the eye of the storm, 45 00:02:44,340 --> 00:02:46,600 Matt Fehon: which I think we're in at the moment with the 46 00:02:46,600 --> 00:02:51,440 Matt Fehon: economic wins, shifting financial accounts and misstatement will become something 47 00:02:51,440 --> 00:02:54,260 Matt Fehon: that we'll probably see a little bit more of over the 48 00:02:54,260 --> 00:02:56,760 Matt Fehon: next few years. But the one thing that, as I 49 00:02:56,760 --> 00:03:01,250 Matt Fehon: said earlier, cryptocurrency and digital asset crime is really increasing. 50 00:03:01,760 --> 00:03:03,930 Matt Fehon: And I think the final one I'll just touch on 51 00:03:03,930 --> 00:03:08,019 Matt Fehon: is, with the casino inquiries that we've seen around Australia 52 00:03:08,020 --> 00:03:12,609 Matt Fehon: over the last two years, foreign interference and influence, and 53 00:03:12,610 --> 00:03:15,190 Matt Fehon: the money laundering schemes behind that with the flow of 54 00:03:15,190 --> 00:03:19,390 Matt Fehon: funds from international organized crime groups is one that has 55 00:03:19,430 --> 00:03:23,240 Matt Fehon: been significantly highlighted, but is a new financial crime, I 56 00:03:23,240 --> 00:03:28,030 Matt Fehon: suppose, with the influence across political parties and others, that 57 00:03:28,090 --> 00:03:30,609 Matt Fehon: has certainly become more prevalent over the last two years. 58 00:03:30,910 --> 00:03:33,090 Sean Aylmer: Certainly sounds a lot more complex than trying to find 59 00:03:33,090 --> 00:03:36,080 Sean Aylmer: a bank robber. And it's a bit of a trite 60 00:03:36,150 --> 00:03:37,850 Sean Aylmer: comment, but it's kind of true. 61 00:03:38,270 --> 00:03:41,380 Matt Fehon: It is. I won't say that it was always that easy to find 62 00:03:41,380 --> 00:03:45,650 Matt Fehon: a bank robber, but today I must say, everything really 63 00:03:45,650 --> 00:03:50,360 Matt Fehon: does relate and revolve around the digital footprint or the 64 00:03:50,360 --> 00:03:54,100 Matt Fehon: digital fingerprint these days, whether that be an email, whether 65 00:03:54,100 --> 00:03:59,330 Matt Fehon: that be in financial records that are held electronically, whether 66 00:03:59,330 --> 00:04:03,420 Matt Fehon: that be on social media. And through the COVID period 67 00:04:03,420 --> 00:04:07,590 Matt Fehon: with people working from home, a lot harder for organizations 68 00:04:07,590 --> 00:04:13,000 Matt Fehon: and managers, executives to have that oversight or for internal 69 00:04:13,000 --> 00:04:17,350 Matt Fehon: controls to be really monitored. So it has been a 70 00:04:17,350 --> 00:04:21,520 Matt Fehon: lot harder and is getting harder I think with, often 71 00:04:21,520 --> 00:04:25,630 Matt Fehon: the faceless perpetrator who is sitting behind a computer anywhere 72 00:04:25,630 --> 00:04:26,210 Matt Fehon: in the world. 73 00:04:27,089 --> 00:04:30,320 Sean Aylmer: Yeah. Sarah, Matt just mentioned COVID and what's happened during 74 00:04:30,320 --> 00:04:32,859 Sean Aylmer: the COVID period. What are the trends that you're seeing 75 00:04:33,020 --> 00:04:35,100 Sean Aylmer: with financial crime as we come out of COVID? 76 00:04:36,020 --> 00:04:38,820 Sara Deady: Thanks, Sean. Yeah, clearly, it's been a really tough time. 77 00:04:38,820 --> 00:04:41,390 Sara Deady: The way that we work, the way that we do things has completely 78 00:04:41,390 --> 00:04:43,839 Sara Deady: changed over the last couple of years. And with that, 79 00:04:43,839 --> 00:04:46,659 Sara Deady: financial crime has evolved, it's had to evolve and it's 80 00:04:46,660 --> 00:04:49,720 Sara Deady: taken advantage I think, of those systems and changes that 81 00:04:49,720 --> 00:04:52,880 Sara Deady: have occurred within workplaces. I think if we separate and 82 00:04:52,910 --> 00:04:55,580 Sara Deady: we look at things from an external fraud threat and 83 00:04:55,580 --> 00:04:59,190 Sara Deady: an internal fraud threat perspective, as Matt spoke to, those 84 00:04:59,190 --> 00:05:03,409 Sara Deady: external fraud threats have become increasingly sophisticated over the last 85 00:05:03,410 --> 00:05:06,640 Sara Deady: couple of years. Cyber crime, without question, as you've both 86 00:05:06,640 --> 00:05:09,650 Sara Deady: spoken to, remains the most significant threat to business, it's 87 00:05:09,650 --> 00:05:12,620 Sara Deady: at the front of mind of boards across the country. 88 00:05:13,070 --> 00:05:16,440 Sara Deady: And we've seen an exponential increase in organized crime within 89 00:05:16,440 --> 00:05:19,539 Sara Deady: that cyber crime area. And I don't think there's any 90 00:05:19,540 --> 00:05:22,530 Sara Deady: question that's in part being driven by the fact that 91 00:05:23,360 --> 00:05:26,860 Sara Deady: these criminals are targeting vulnerable employees that are working from 92 00:05:26,860 --> 00:05:30,250 Sara Deady: home. They're sitting at their desks without the ability to 93 00:05:30,589 --> 00:05:32,930 Sara Deady: question and ask other people that they sit next to 94 00:05:33,240 --> 00:05:35,290 Sara Deady: whether they should or shouldn't do something that they've been 95 00:05:35,290 --> 00:05:38,849 Sara Deady: requested to do. I think the other thing that we are seeing within that 96 00:05:38,850 --> 00:05:41,750 Sara Deady: external fraud threats fear, and that we're going to continue 97 00:05:41,750 --> 00:05:45,279 Sara Deady: to see, are these state based attacks and organized crime 98 00:05:45,279 --> 00:05:50,600 Sara Deady: attacks, targeting businesses. These groups are, it's not your single 99 00:05:50,600 --> 00:05:55,370 Sara Deady: hacker sending a poorly worded email requesting money. These are groups 100 00:05:55,370 --> 00:05:58,659 Sara Deady: that are incredibly well resourced and skilled. They operate for 101 00:05:58,660 --> 00:06:02,520 Sara Deady: a profit and they've got significant funding behind them. And 102 00:06:02,520 --> 00:06:06,359 Sara Deady: we're seeing these actors, they target organizations for a multitude 103 00:06:06,360 --> 00:06:09,529 Sara Deady: of different reasons, be that financial gain in the case 104 00:06:09,529 --> 00:06:13,720 Sara Deady: of ransomware or just to cause mass disruption, we've had 105 00:06:13,720 --> 00:06:17,300 Sara Deady: so much disruption over the last couple of years, they 106 00:06:17,300 --> 00:06:20,440 Sara Deady: want to disrupt supply chains. They want to disrupt networks 107 00:06:20,460 --> 00:06:23,130 Sara Deady: for no other reason, but to do so. So I think we're seeing a lot 108 00:06:23,130 --> 00:06:24,409 Sara Deady: of that. And I think we're going to continue to see 109 00:06:24,589 --> 00:06:28,089 Sara Deady: that emerge as this new normal comes in the world. 110 00:06:28,089 --> 00:06:30,609 Sara Deady: And then I think also, there's this thread of, it's the 111 00:06:30,610 --> 00:06:33,720 Sara Deady: stealing of data. Data is, as Matt's touched on, data 112 00:06:34,640 --> 00:06:39,210 Sara Deady: is absolutely crucial, private information, people stealing that information for 113 00:06:39,460 --> 00:06:42,250 Sara Deady: either to sell on or again, just to wreak havoc 114 00:06:42,350 --> 00:06:46,400 Sara Deady: across markets. Secondly, I think we talk about internal fraud 115 00:06:46,400 --> 00:06:48,349 Sara Deady: threats a lot, and that's where I've spent most of 116 00:06:48,350 --> 00:06:52,950 Sara Deady: my career is investigating internal workplace fraud. And as we 117 00:06:52,950 --> 00:06:56,279 Sara Deady: said, workplaces have changed. I think early on in the 118 00:06:56,279 --> 00:06:59,450 Sara Deady: pandemic, we probably saw with people working from home, there 119 00:06:59,450 --> 00:07:02,630 Sara Deady: was this aspect of more fraud was being reported because 120 00:07:02,630 --> 00:07:04,779 Sara Deady: suddenly you weren't sitting next to the person that you 121 00:07:04,779 --> 00:07:08,150 Sara Deady: had long held suspicions about. So there was that element 122 00:07:08,150 --> 00:07:11,940 Sara Deady: of separation there. Whereas, now I think we're emerging from 123 00:07:11,940 --> 00:07:15,010 Sara Deady: two years of perhaps teams not operating next to each 124 00:07:15,010 --> 00:07:17,740 Sara Deady: other at all. And there's come to this point where 125 00:07:18,170 --> 00:07:22,800 Sara Deady: we've got extreme levels of isolation have occurred, hardship, anxiety, 126 00:07:22,800 --> 00:07:25,380 Sara Deady: mental illness, and this can drive people to make some 127 00:07:25,380 --> 00:07:27,800 Sara Deady: pretty poor decisions. And when you've got teams that are 128 00:07:27,800 --> 00:07:32,240 Sara Deady: operating in a really decentralized environment, people can't see that, 129 00:07:32,240 --> 00:07:34,610 Sara Deady: your colleagues can't see that. And I think probably what we're going to see 130 00:07:34,610 --> 00:07:36,990 Sara Deady: play out over the next 12 months is, as people 131 00:07:36,990 --> 00:07:40,220 Sara Deady: return to this new normal, back in the office, a 132 00:07:40,220 --> 00:07:43,420 Sara Deady: certain level of oversight and control from a people perspective 133 00:07:43,420 --> 00:07:45,470 Sara Deady: is going to return. And I think we might see 134 00:07:45,470 --> 00:07:48,970 Sara Deady: these red flags and issues start to emerge as those 135 00:07:48,970 --> 00:07:51,560 Sara Deady: pressures that have been faced by staff become a reality. 136 00:07:52,030 --> 00:07:53,970 Sean Aylmer: Stay with me, Matt and Sara, we'll be back in a 137 00:07:53,970 --> 00:08:03,500 Sean Aylmer: minute. My guest this morning is McGrathNicol partner, Matt Fehon, 138 00:08:03,690 --> 00:08:06,900 Sean Aylmer: and Director Sara Deady. Matt, can you give us some 139 00:08:06,900 --> 00:08:10,180 Sean Aylmer: sort of example, make it more practical for us? Some 140 00:08:10,180 --> 00:08:13,420 Sean Aylmer: sort of example of the typical financial crime that McGrathNicol 141 00:08:13,880 --> 00:08:14,820 Sean Aylmer: might come across? 142 00:08:15,300 --> 00:08:17,650 Matt Fehon: The first thing I'd say, no two matters are the 143 00:08:17,650 --> 00:08:20,520 Matt Fehon: same. And I think that's probably what is the most 144 00:08:20,520 --> 00:08:23,440 Matt Fehon: interesting aspect of the work we do. And I think, 145 00:08:23,670 --> 00:08:28,870 Matt Fehon: for forensic accountants or forensic technology specialists, it is the 146 00:08:28,870 --> 00:08:33,900 Matt Fehon: variety of work, as financial crime evolves, it's getting insights 147 00:08:33,900 --> 00:08:38,150 Matt Fehon: as to what is new? What are these criminal entrepreneurs 148 00:08:38,790 --> 00:08:43,200 Matt Fehon: designing and undertaking? So I might talk to a matter 149 00:08:43,380 --> 00:08:46,849 Matt Fehon: both Sara and I are involved in, but this involved some 150 00:08:46,910 --> 00:08:51,970 Matt Fehon: government funding that was being let out to support businesses 151 00:08:52,030 --> 00:08:56,150 Matt Fehon: in times of economic downturn. And that funding became known 152 00:08:56,150 --> 00:09:01,640 Matt Fehon: to one of our clients' contractors who approached our client 153 00:09:01,840 --> 00:09:04,709 Matt Fehon: and one of their senior executives and offered them half 154 00:09:04,710 --> 00:09:09,570 Matt Fehon: a million dollars if they provided them the preferential treatment 155 00:09:09,670 --> 00:09:12,750 Matt Fehon: to give them the work. What we had to do 156 00:09:12,860 --> 00:09:18,059 Matt Fehon: was, work through that matter and understand whether allegations that 157 00:09:18,059 --> 00:09:20,540 Matt Fehon: had been put forward were in fact, correct. So we 158 00:09:20,650 --> 00:09:23,750 Matt Fehon: did an initial piece of work across a range of 159 00:09:23,750 --> 00:09:26,050 Matt Fehon: emails that we're able to capture from our client. 160 00:09:26,050 --> 00:09:29,010 Sean Aylmer: And so, this is very much making sure what you 161 00:09:29,010 --> 00:09:30,410 Sean Aylmer: just said, actually happened. 162 00:09:30,559 --> 00:09:33,510 Matt Fehon: Yeah, that's right. So we get often the matter or 163 00:09:33,510 --> 00:09:38,469 Matt Fehon: our client, the business may have received some information, bring 164 00:09:38,470 --> 00:09:41,050 Matt Fehon: some allegations or a staff members' come forward or a whistleblower 165 00:09:41,050 --> 00:09:43,900 Matt Fehon: has come forward to make some allegations or put some 166 00:09:43,900 --> 00:09:48,290 Matt Fehon: information forward to say, they think something's not right here, 167 00:09:48,290 --> 00:09:51,679 Matt Fehon: or this is specifically what's happened. So that first step 168 00:09:51,679 --> 00:09:54,410 Matt Fehon: is really, okay, let's look at what's available to the 169 00:09:54,420 --> 00:09:57,110 Matt Fehon: organization that they can provide us, just to see if 170 00:09:57,110 --> 00:10:00,030 Matt Fehon: there's any substance to those allegations before kicking off a 171 00:10:00,030 --> 00:10:04,300 Matt Fehon: full blown investigation. In this instance, yes. We could see 172 00:10:04,920 --> 00:10:08,360 Matt Fehon: some email correspondence that didn't look like it was normal 173 00:10:08,360 --> 00:10:11,300 Matt Fehon: business. And then, we went a few steps further where 174 00:10:11,300 --> 00:10:15,290 Matt Fehon: we were able to then get some bank account information 175 00:10:15,520 --> 00:10:19,280 Matt Fehon: from our client, which confirmed a number of transactions that 176 00:10:19,280 --> 00:10:23,500 Matt Fehon: were in the allegations. So they then sought to secure 177 00:10:23,500 --> 00:10:28,100 Matt Fehon: other electronic information that they had available to them and that 178 00:10:28,100 --> 00:10:33,490 Matt Fehon: the actual employee, the executive had stored on servers in 179 00:10:33,490 --> 00:10:38,980 Matt Fehon: remote locations. And it confirmed that there was website hosting, 180 00:10:39,040 --> 00:10:43,410 Matt Fehon: other services going on. And within the data that was 181 00:10:43,410 --> 00:10:47,309 Matt Fehon: held externally, this employee was actually running a set of 182 00:10:47,309 --> 00:10:51,350 Matt Fehon: financial accounts for his own little business, which included recording 183 00:10:51,750 --> 00:10:55,840 Matt Fehon: this $ 500,000. So there's a digital aspect, but there's actually 184 00:10:55,840 --> 00:10:59,370 Matt Fehon: a craft in, at what time do we go more 185 00:10:59,370 --> 00:11:03,190 Matt Fehon: overt and more open with the investigation, but the initial 186 00:11:03,190 --> 00:11:05,650 Matt Fehon: inquiries is what we look to confirm. 187 00:11:05,809 --> 00:11:09,189 Sean Aylmer: Even it means you need to get access to information. 188 00:11:09,630 --> 00:11:11,450 Sean Aylmer: It's quite forensic and you need to get access to 189 00:11:11,450 --> 00:11:15,120 Sean Aylmer: information that might be pretty difficult. I presume the employees 190 00:11:15,120 --> 00:11:15,961 Sean Aylmer: not just going to give you that information. 191 00:11:15,961 --> 00:11:21,820 Matt Fehon: No. And obviously they've got rights, which we all uphold 192 00:11:22,370 --> 00:11:24,430 Matt Fehon: and we work with lawyers and we work with the 193 00:11:24,630 --> 00:11:28,020 Matt Fehon: client obviously, to ensure that there's nothing untoward in the 194 00:11:28,020 --> 00:11:31,610 Matt Fehon: approach. We need to maintain the integrity of every investigation and 195 00:11:31,700 --> 00:11:35,510 Matt Fehon: our approach, should that ever be questioned by a regulator 196 00:11:35,510 --> 00:11:38,110 Matt Fehon: or more importantly, our work is tested in court and 197 00:11:38,780 --> 00:11:41,520 Matt Fehon: that's the standard we work towards all the time. I 198 00:11:41,520 --> 00:11:44,339 Matt Fehon: think the one thing is what we do find with 199 00:11:44,450 --> 00:11:48,640 Matt Fehon: fraudsters, often, once they realize the game is up, you 200 00:11:48,640 --> 00:11:51,880 Matt Fehon: do start to see a lot of compliance and offering 201 00:11:51,880 --> 00:11:54,319 Matt Fehon: of that information. But to your point, we work with 202 00:11:54,320 --> 00:11:57,410 Matt Fehon: lawyers. It could be civil matter that we're working on. 203 00:11:57,410 --> 00:12:00,550 Matt Fehon: And if that's the way it's going, there's civil procedures 204 00:12:00,610 --> 00:12:02,809 Matt Fehon: and subpoenas and whatnot that can be sought to get 205 00:12:02,809 --> 00:12:06,910 Matt Fehon: that information. Or secondly, if it's really serious, often the 206 00:12:06,910 --> 00:12:09,410 Matt Fehon: matter is reported to the police and we may, the 207 00:12:09,410 --> 00:12:13,820 Matt Fehon: company and also ourselves, may receive the benefit of information 208 00:12:13,820 --> 00:12:15,730 Matt Fehon: that the police are then able to get ahold of. 209 00:12:15,740 --> 00:12:18,770 Sean Aylmer: Okay. Sara, a moment ago, you talked about returning back 210 00:12:18,800 --> 00:12:21,900 Sean Aylmer: to the workplace might slow some internal financial crime. In the 211 00:12:21,900 --> 00:12:24,740 Sean Aylmer: example Matt just gave there, I wonder whether, if people 212 00:12:24,740 --> 00:12:27,150 Sean Aylmer: are sitting next to each other, that's less or more likely 213 00:12:27,150 --> 00:12:30,510 Sean Aylmer: to happen. What do you think will happen though with financial crime 214 00:12:30,559 --> 00:12:33,510 Sean Aylmer: overcoming months and years? Do you think that return to 215 00:12:33,510 --> 00:12:37,700 Sean Aylmer: the workplace might mean that there's less internal financial crime, 216 00:12:37,700 --> 00:12:40,650 Sean Aylmer: but more external financial crime? What's the trend? 217 00:12:41,120 --> 00:12:44,210 Sara Deady: I think we're probably still going to see both aspects play 218 00:12:44,210 --> 00:12:48,110 Sara Deady: out. I think the rise in external financial crime, which 219 00:12:48,309 --> 00:12:50,719 Sara Deady: covers the front pages of the papers most days, I 220 00:12:50,720 --> 00:12:54,069 Sara Deady: think we're going to still continue to see that rise. I 221 00:12:54,070 --> 00:12:56,610 Sara Deady: think the world that we're emerging in is probably not 222 00:12:56,610 --> 00:12:58,890 Sara Deady: what we'd all hoped for. We're in a position now 223 00:12:58,890 --> 00:13:01,990 Sara Deady: we've got the war in Ukraine, interest rates are rising. 224 00:13:01,990 --> 00:13:05,510 Sara Deady: This huge disruption to global supply chains that has obviously 225 00:13:05,510 --> 00:13:08,880 Sara Deady: been brought about by COVID, and we're seeing spend within 226 00:13:08,880 --> 00:13:11,449 Sara Deady: business really tightening. So this creates a huge amount of 227 00:13:11,450 --> 00:13:13,590 Sara Deady: pressure on the economy. I think we were able to 228 00:13:13,590 --> 00:13:15,970 Sara Deady: ride the wave over the last couple of years, obviously 229 00:13:15,970 --> 00:13:19,360 Sara Deady: due to the huge amount of funding and stimulus and 230 00:13:19,360 --> 00:13:21,620 Sara Deady: benefits that were provided. But I think we're entering this 231 00:13:22,650 --> 00:13:25,850 Sara Deady: area similar to what we saw out of the GFC 232 00:13:25,850 --> 00:13:28,260 Sara Deady: and what we saw out of that was a real 233 00:13:28,420 --> 00:13:32,270 Sara Deady: increase in, I guess, those internal frauds, both on a 234 00:13:32,270 --> 00:13:35,350 Sara Deady: large and small scale. I think the pressure that's coming 235 00:13:35,350 --> 00:13:38,579 Sara Deady: within business at the moment, puts pressure on that bottom 236 00:13:38,580 --> 00:13:42,070 Sara Deady: line and it puts pressure on the people and the executives within businesses. 237 00:13:42,559 --> 00:13:44,660 Sara Deady: There's that pressure there within business. And I think you've 238 00:13:44,660 --> 00:13:48,720 Sara Deady: got what is black and what is white, becomes gray in 239 00:13:48,720 --> 00:13:51,559 Sara Deady: times like these, I think, and people make decisions and 240 00:13:51,559 --> 00:13:54,750 Sara Deady: make the wrong moves. And they stray into territory that 241 00:13:55,000 --> 00:13:58,130 Sara Deady: can very quickly gray into this area of financial crime, 242 00:13:58,200 --> 00:14:01,380 Sara Deady: as they're trying to present a particular position to the 243 00:14:01,380 --> 00:14:03,340 Sara Deady: market, that things are looking okay. So I think we're 244 00:14:03,340 --> 00:14:07,430 Sara Deady: going to see probably, an increase in that financial statement, disclosure type, 245 00:14:07,870 --> 00:14:11,319 Sara Deady: fraud type issues, but then as far as those, the 246 00:14:11,320 --> 00:14:14,220 Sara Deady: other threats that I think we're going to see, they're external, 247 00:14:14,280 --> 00:14:16,470 Sara Deady: there's a great deal of external threats that I think are 248 00:14:16,470 --> 00:14:18,840 Sara Deady: going to continue to play out. Cyber's here to stay. 249 00:14:19,370 --> 00:14:22,440 Sara Deady: Businesses have really got that challenge of both building their 250 00:14:22,440 --> 00:14:25,830 Sara Deady: resilience, but responding swiftly when this occurs, because it's not 251 00:14:25,830 --> 00:14:29,190 Sara Deady: a matter of if, it's really when. We're also going 252 00:14:29,190 --> 00:14:31,960 Sara Deady: to see, I think, with as I said, the huge government 253 00:14:31,960 --> 00:14:35,510 Sara Deady: stimulus that's been handed out across various sectors and industries 254 00:14:35,510 --> 00:14:38,570 Sara Deady: over the last couple of years, there is no question 255 00:14:38,570 --> 00:14:43,460 Sara Deady: that organized crime and fraudsters have infiltrated those processes. This 256 00:14:43,460 --> 00:14:45,340 Sara Deady: funding was handed out very quickly and yes, there were 257 00:14:45,340 --> 00:14:47,230 Sara Deady: checks and balances in place, but we all know that 258 00:14:47,230 --> 00:14:50,530 Sara Deady: criminals will take advantage of systems where they can. So 259 00:14:50,530 --> 00:14:52,410 Sara Deady: I think we going to see that play out. I think there's going 260 00:14:52,410 --> 00:14:53,840 Sara Deady: to be reports of that and there's going to be 261 00:14:53,840 --> 00:14:55,950 Sara Deady: a real need to identify where those funds have been 262 00:14:55,950 --> 00:14:58,710 Sara Deady: misused and where they've ended up, because it's taxpayers money. 263 00:14:59,310 --> 00:15:02,530 Sara Deady: And then crypto, I don't think any discussion around financial 264 00:15:02,530 --> 00:15:06,520 Sara Deady: crime in 2022 doesn't involve crypto. We're seeing crypto scams 265 00:15:06,520 --> 00:15:09,570 Sara Deady: hit the market every second day. Crypto is definitely the 266 00:15:09,570 --> 00:15:13,160 Sara Deady: favored method for payment of ransom demands, because of the ease 267 00:15:13,490 --> 00:15:17,530 Sara Deady: with which value can be transferred relatively anonymously. And I 268 00:15:17,530 --> 00:15:21,350 Sara Deady: think we may also see crypto become a method for 269 00:15:21,400 --> 00:15:24,280 Sara Deady: the payment of bribes and kickbacks. It's the brown paper 270 00:15:24,280 --> 00:15:27,370 Sara Deady: bag, isn't it that we've seen historically? It's a great 271 00:15:27,370 --> 00:15:30,400 Sara Deady: way of transferring funds. And I think we're still operating 272 00:15:30,400 --> 00:15:33,500 Sara Deady: in a very unregulated market when it comes to cryptocurrencies 273 00:15:33,540 --> 00:15:36,210 Sara Deady: and this is where criminals really thrive. So I think there's 274 00:15:36,210 --> 00:15:38,330 Sara Deady: going to be a big demand for services there around 275 00:15:38,760 --> 00:15:42,370 Sara Deady: freezing and securing those assets that have been misappropriated. 276 00:15:42,610 --> 00:15:45,450 Sean Aylmer: Talking through that. There's a real spectrum and indeed there 277 00:15:45,450 --> 00:15:50,160 Sean Aylmer: are shades of gray in fraud itself. It still surprises 278 00:15:50,160 --> 00:15:53,410 Sean Aylmer: me, not so much state activity and just straight out 279 00:15:53,410 --> 00:15:58,720 Sean Aylmer: criminal activity. That's one basket. It still surprises me though, 280 00:15:58,720 --> 00:16:02,200 Sean Aylmer: that people commit forward because they push the boundaries just 281 00:16:02,200 --> 00:16:05,120 Sean Aylmer: a little too far. They may not think themselves that 282 00:16:05,120 --> 00:16:08,360 Sean Aylmer: it's criminal activity, but it actually does turn into fraud, 283 00:16:08,970 --> 00:16:12,020 Sean Aylmer: given that the checks and balances now, it surprises me 284 00:16:12,020 --> 00:16:14,060 Sean Aylmer: at that end, people still do it. 285 00:16:14,540 --> 00:16:18,180 Sara Deady: Ah, totally Sean. Having done this now for 15 years showing my 286 00:16:18,180 --> 00:16:21,010 Sara Deady: age, I'm still shocked by the schemes and the things 287 00:16:21,610 --> 00:16:25,090 Sara Deady: that we do see. It's a very slippery slope and 288 00:16:25,090 --> 00:16:27,300 Sara Deady: what goes on in the mind of a fraudster as 289 00:16:27,300 --> 00:16:31,040 Sara Deady: they commit that first crime, can very quickly become justified. 290 00:16:31,470 --> 00:16:35,220 Sara Deady: Whether that be an invoice fraud through to, huge financial 291 00:16:35,220 --> 00:16:39,360 Sara Deady: misstatement. People make decisions and then they justify those decisions. 292 00:16:39,360 --> 00:16:42,080 Sara Deady: They rationalize them in their minds that they're okay. 293 00:16:42,900 --> 00:16:44,030 Sean Aylmer: Yeah. And they're not. At the end of the day, 294 00:16:44,350 --> 00:16:44,391 Sean Aylmer: they're not. 295 00:16:44,391 --> 00:16:44,631 Sara Deady: Exactly. 296 00:16:45,630 --> 00:16:49,240 Sean Aylmer: So Matt, every business leader out there that's listing to this must 297 00:16:49,240 --> 00:16:52,370 Sean Aylmer: be worried about this. What do they need to be 298 00:16:52,370 --> 00:16:54,310 Sean Aylmer: doing to meet these challenges? 299 00:16:54,750 --> 00:16:58,020 Matt Fehon: It's just back to basics and the basic controls and 300 00:16:58,020 --> 00:17:02,250 Matt Fehon: governance structures that organizations need to have in place. I 301 00:17:02,250 --> 00:17:07,720 Matt Fehon: think with new technology, obviously that presents a challenge for 302 00:17:07,720 --> 00:17:10,859 Matt Fehon: the workplace and the business, but it also presents an 303 00:17:10,859 --> 00:17:14,379 Matt Fehon: opportunity for anyone that wants to exploit it. And the 304 00:17:14,380 --> 00:17:16,390 Matt Fehon: number of times, I must say, that we've been involved 305 00:17:16,390 --> 00:17:20,770 Matt Fehon: where it's been someone involved in a technology implementation program 306 00:17:20,770 --> 00:17:24,750 Matt Fehon: or change program where someone has taken advantage of that 307 00:17:24,750 --> 00:17:31,280 Matt Fehon: change to exploit the financial accounts, that highlights just the 308 00:17:31,280 --> 00:17:34,840 Matt Fehon: controls that need to be in place around any change 309 00:17:34,910 --> 00:17:38,070 Matt Fehon: in the workplace. But I think understanding, and as I 310 00:17:38,070 --> 00:17:42,760 Matt Fehon: say basics, risk managers are really important. The controls around 311 00:17:42,760 --> 00:17:51,609 Matt Fehon: any financial transactions and dealings, having independent oversight around contractual 312 00:17:51,609 --> 00:17:56,930 Matt Fehon: arrangements, large contracts that are being sought, all one, declarations 313 00:17:56,930 --> 00:18:01,760 Matt Fehon: of independence and doing that annually. And then, it's down to probably 314 00:18:01,760 --> 00:18:04,810 Matt Fehon: just a simple training and training of what are the 315 00:18:04,810 --> 00:18:07,209 Matt Fehon: values of the organization, but what are the standards and 316 00:18:07,210 --> 00:18:11,439 Matt Fehon: what are the expectations of employees, and the communication and 317 00:18:11,440 --> 00:18:14,480 Matt Fehon: strong tone from the top are really the basics. But 318 00:18:14,910 --> 00:18:18,310 Matt Fehon: when it comes down to the matters that we get 319 00:18:18,310 --> 00:18:21,710 Matt Fehon: involved in and the investigations, often it's looking back and 320 00:18:21,710 --> 00:18:26,169 Matt Fehon: seeing that the exception reports or the alerts and the 321 00:18:26,170 --> 00:18:30,450 Matt Fehon: red flags as Sara's referred to, just have not been 322 00:18:30,520 --> 00:18:34,859 Matt Fehon: looked at and there's been the oversight. And unfortunately, what 323 00:18:34,859 --> 00:18:38,100 Matt Fehon: I will say is, the victim organization and the people 324 00:18:38,440 --> 00:18:41,170 Matt Fehon: who have worked in that group or that business with 325 00:18:41,240 --> 00:18:46,340 Matt Fehon: the fraudster, often themselves feel an element of guilt, because 326 00:18:46,660 --> 00:18:49,369 Matt Fehon: there's been a breach of trust, but often when they 327 00:18:49,369 --> 00:18:52,460 Matt Fehon: look back, the red flags were there, it was obvious. What 328 00:18:52,460 --> 00:18:55,119 Matt Fehon: we do see a lot, someone's got this hidden lie, and 329 00:18:55,119 --> 00:18:57,350 Matt Fehon: Sara might talk to that actually, but the number of 330 00:18:57,350 --> 00:19:00,760 Matt Fehon: extramarital affairs, if I say, that's been prevalent when there's 331 00:19:00,760 --> 00:19:03,619 Matt Fehon: been a fraud where someone's compromised their own position. 332 00:19:03,730 --> 00:19:04,251 Sean Aylmer: Wow. Yeah. 333 00:19:04,251 --> 00:19:07,810 Matt Fehon: The way I put it, if someone is lying at home 334 00:19:07,940 --> 00:19:11,629 Matt Fehon: about something, how easy is for that person to lie 335 00:19:11,630 --> 00:19:16,359 Matt Fehon: in the workplace? That's certainly what I'd be looking at as the typical red 336 00:19:16,359 --> 00:19:20,090 Matt Fehon: flags outline, as Sara's referred to, but changes in an 337 00:19:20,090 --> 00:19:21,109 Matt Fehon: individual's lifestyle. 338 00:19:21,200 --> 00:19:23,920 Sean Aylmer: You'd agree with that, Sara, as a red flag, just changes 339 00:19:23,920 --> 00:19:24,939 Sean Aylmer: in people's lifestyles? 340 00:19:24,950 --> 00:19:28,070 Sara Deady: Oh definitely. That's how it plays out, as Matt said, 341 00:19:28,910 --> 00:19:30,260 Sara Deady: if you're willing to lie at home and you're willing 342 00:19:30,260 --> 00:19:32,550 Sara Deady: to lie to your friends and family, it's not a 343 00:19:32,550 --> 00:19:35,010 Sara Deady: great leap to be lying to your colleagues. That's definitely 344 00:19:35,010 --> 00:19:36,900 Sara Deady: the case. And I think also what's come about is, 345 00:19:37,380 --> 00:19:40,340 Sara Deady: we talk about red flags a lot when we do 346 00:19:40,340 --> 00:19:42,879 Sara Deady: our fraud awareness training, and it's things, people living beyond 347 00:19:42,880 --> 00:19:47,899 Sara Deady: their means. It's people working late, not going on holidays 348 00:19:47,900 --> 00:19:50,869 Sara Deady: or taking extravagant holidays, it's driving a fancy car into 349 00:19:50,869 --> 00:19:53,889 Sara Deady: the office. We've lost visibility of every single one of those 350 00:19:54,310 --> 00:19:56,970 Sara Deady: over the last couple of years. So as Matt said, 351 00:19:56,970 --> 00:20:00,090 Sara Deady: it's that back to basics and understanding your employees and making 352 00:20:00,090 --> 00:20:02,969 Sara Deady: sure that your controls are in place and that you 353 00:20:02,970 --> 00:20:05,000 Sara Deady: know where they sit within a process and within a 354 00:20:05,000 --> 00:20:07,960 Sara Deady: function, because yeah, you've got to trust your employees. Ultimately, 355 00:20:10,109 --> 00:20:12,140 Sara Deady: that's what you have to do, but you've got to make sure you've got the systems in place to control things. 356 00:20:12,460 --> 00:20:14,560 Sean Aylmer: Matt, Sara, thank you both for talking to Fear and 357 00:20:14,560 --> 00:20:14,690 Sean Aylmer: Greed. Thanks 358 00:20:15,260 --> 00:20:15,880 Sara Deady: Thanks, Sean. 359 00:20:16,000 --> 00:20:16,231 Matt Fehon: Thanks, Sean. 360 00:20:16,231 --> 00:20:21,020 Sean Aylmer: That was a McGrawNicol partner, Matt Fohen and Director Sara Deady. This is the Fear 361 00:20:21,490 --> 00:20:23,659 Sean Aylmer: and Greed Daily Interview. Join us every morning for the 362 00:20:23,660 --> 00:20:27,010 Sean Aylmer: full episode of Fear and Greed Australia's most popular business 363 00:20:27,010 --> 00:20:29,379 Sean Aylmer: podcast. I'm Sean Aylmer, enjoy your day.