This week in fintech: All is flux

Published on the 20/07/2017 | Written by Newsdesk


Fintec disruptions_bitcoin

Bitcoin instability, under reporting of dodgy activity and ongoing malware mayhem are the order of the day in global fintech...

Reports that those shiny new bitcoins may disappear out of your bank account – thanks to a problematic piece of code – serve to highlight emerging uncertainties as Australia and the rest of the globe march into the brave new fin-tech world.

Sources at Bitcoin.org have suggested that a “potential network disruption” – potentially vanishing Bitcoins from users’ accounts, that is – may be on the immediate horizon.

And what does that mean?

“This means that any Bitcoins you receive after that time may later disappear from your wallet or be a type of Bitcoin that other people will not accept as payment,” Bitcoin.org said earlier this month. It’s speculated that coins may be rejected as invalid when a transaction is attempted or disappear entirely due to  Bitcoin Improvement Proposal 148, a code revision to help separate signature data from transaction identifier data in a Bitcoin transaction.

And just when Bitcoin investors were beginning to feel so smug.

But they’re not the only ones feeling unsure about the immediate future. For every step towards a clever fintech future, there’s a new problem waiting to arrive.

Case in point: The rash of ransomware cyberattacks that took so many by surprise earlier this month are still having effects on firms and investors alike.

FedEx Corp, victim to the Petya malware, has warned investors to expect real-McCoy material financial impacts as a result of the attacks.

“We do not have cyber or other insurance in place that covers this attack,” said FedEx in a statement on Monday.

“Although we cannot currently quantify the amounts, we have experienced loss of revenue due to decreased volumes at TNT [a FedEx-owed facility] and incremental costs associated with the implementation of contingency plans and the remediation of affected systems” the company said.

Shares of FedEx fell 2.4 percent following the announcement.

Though it seems like FedEx is feeling it worst, big names like Nissan, Hitachi, the Russian Central Bank, the UK’s National health Service and the US Department of Homeland Security have all been embarrassed by in recent months by similar attacks.

And by all accounts, Australasian-based companies are no-less vulnerable to exploitation by malicious parties.

A recent report, AUSTRAC’s Securities & derivatives sector: money laundering and terrorism financing risk assessment said that Australia is being used by organised crime groups for fraud, money laundering and market manipulation.

Undertaken by the government’s financial intelligence agency, the study said that fraud – including the hacking of customer email and trading accounts leading to the theft of money – was by far the highest reported threat to the sector (sitting at an alarming 51 percent). Money laundering, insider trading and market manipulation were second equal (sitting at a 21 percent), with tax evasion and terrorism financing the least reported (sitting at 2 percent and less than 1 percent respectively).

“But we know criminal gangs will seek to exploit any weaknesses in our financial systems, putting our economy, national security, and international reputation at risk,” said Federal Minister for Justice, Michael Keenan in a statement.

“This report sends a clear message to Australia’s [and, by extension, New Zealand’s] financial sector: no individual or company is immune from the threat of serious and organised crime, but they can mitigate it.”

Most troubling though, is the apparent lack of transparency from traders, putting the blame squarely on client-facing staff.

The report expressed concern that over half of Australia’s trading and settling organisations failed to report a single instance of suspicious activities between April 2014 and March 2016.

“Front office staff, such as traders and advisers, can represent a vulnerability,” said the report.

“Some reporting entities observed that client-facing front office staff can sometimes be complacent about (anti-money-laundering/counter-terror financing reporting) due to their greater focus on retaining client business.”

“There is considerable scope for entities operating in these markets to improve their anti-money-laundering/counter-terrorism financing systems and controls to be able to identify and submit suspicious matter reports”.

Access AUSTRAC’s Securities & Derivatives Sector report.

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