Risk In:Review #6 - 05 Mar 2023
Anthony Hope
Risk & Compliance Executive | Fintech Founder & Innovator | Strategic Leader | Expert Speaker
Welcome to Risk In:Review, your weekly newsletter curating the best of the week’s news stories from the crossroads between risk management and technology in Asia Pacific.
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This Week In:Review
Australia
China
Hong Kong
India
Singapore
Best of the Rest
Australia In:Review
The Australian government will appoint a coordinator to head up the newly created National Office for Cyber Security within the Department of Home Affairs, as part of a drive to improve the country's cybersecurity. The move follows two recent high-profile data breaches, including a ransomware attack on health insurer Medibank, and a data breach affecting around 10 million people at telecoms firm Optus. The cybersecurity coordinator will direct the government's cybersecurity spending and help manage cyber incidents. The government has pledged to make Australia the "world's most cyber-secure country by 2030". Clare O'Neil, minister for home affairs and cybersecurity, said the appointment was part of a "whole-of-nation approach" to cybersecurity. She added that legislation governing private sector engagement needed revision.
Australia's Office of the Information Commissioner (OAIC) has noted a 26% increase in data breaches in the second half of 2022 compared to the first half. Of the 40 breaches affecting over 5,000 Australians, 33 were the result of cyber security incidents. High-profile breaches included Optus, which impacted over 10 million customers, and Medibank, where 9.7 million people had their personal data accessed. The government has reacted by increasing penalties under the Privacy Act and granting enhanced enforcement powers to the OAIC. One of the review's recommendations is the removal of the small business exemption from the Privacy Act. Despite the high-profile breaches, 62% of reported breaches affected no more than 100 people. Over 70% of data breaches were caused by malicious or criminal attacks, while 25% were due to human error. Organisations have been advised to minimise the collection of personal data and delete it when no longer required, as well as to have robust controls in place to minimise risk.
Australian Prime Minister Anthony Albanese has announced plans to create a national digital ID card that would utilise facial recognition technology to tackle issues around identity theft and fraud in the tax, welfare and health systems. Albanese hopes to create the card without the controversy that surrounded the Hawke government’s plans for an “Australia Card” in the 1980s. The ID card would eliminate the need to collect and store large amounts of personal data, thereby reducing risk. The government aims to expand on the opt-in digital ID arrangements introduced last year for the myGov government services portal, introducing credentials voluntarily and eventually allowing people to attach other personal documents, such as Medicare cards, vaccination status and university transcripts. Within government, the card is seen as the solution to a range of problems. A spokesperson for Finance Minister Katy Gallagher said that 10.3 million Australians had already created a myGovID and 3.6 million of those had been biometrically verified.
The Reserve Bank of Australia (RBA) has announced the industry participants selected to demonstrate potential use cases and economic benefits of a central bank digital currency (CBDC) in Australia. The project involves the use of a limited-scale pilot CBDC that is a real digital claim on the RBA. The use case providers, which range from fintechs to large financial institutions such as ANZ and CBA, were selected based on criteria such as potential benefits of a CBDC. The pilot will take place over the coming months and will provide hands-on learning for industry participants while also contributing to policymakers' understanding of how a CBDC could benefit the Australian financial system and economy. The research project is being conducted in collaboration with the Digital Finance Cooperative Research Centre (DFCRC), which is a 10-year, $180m research program funded by industry partners, universities, and the Australian government. A report on the project is expected to be published around the middle of the year.
China In:Review
Shenzhen, China has launched a campaign to promote the use of its digital yuan among Hong Kong tourists. The campaign involves providing physical cards and discounts, but the response has been lackluster. The goal was to issue 50,000 digital yuan hard wallets until 31 March, but fewer than 1,000 Hong Kong residents have so far used the option. As part of the promotional efforts, users can get a 20% discount when spending at designated merchants in Luohu District. Tourists can obtain the "Greater Bay Area" physical card within minutes at dedicated machines at the border crossing. Meanwhile, China's wider digital yuan adoption drive is also focusing on transport networks, and drivers have been green-lighted to use the token to pay tolls on some of the nation's busiest highways.
领英推荐
Conflux has emerged as one of the best-performing cryptocurrencies of 2023, riding on the wave of new-found enthusiasm for crypto within China as Beijing shows signs of softening its stance towards the emerging sector. Conflux's associated cryptocurrency CFX has seen an almost parabolic price rally, skyrocketing 1,300% throughout January and February. Conflux claims to be the only crypto company with approval to operate in China after the government banned all crypto products in 2021. Conflux has also recently benefited from a partnership with China Telecom to release blockchain-enabled SIM cards in Hong Kong. Healthy PMI data coming out of China and stimulus injections by the nation's central bank have encouraged an appetite for higher-risk investments, and the crypto-market has lapped up some of the increased liquidity, sparking a recent crypto rally. Conflux has led the charge with the recent inflow of capital coming from China. Other cryptocurrencies with strong links to China, such as NEO, VeChain, and Phoenix Chain, are also rising in lockstep with Chinese equities.
Hong Kong In:Review
Hong Kong has been taking several initiatives to create a favourable environment for cryptocurrency and blockchain businesses, including launching a blockchain-based trade finance platform and developing a central bank digital currency. The country recently implemented new regulations for cryptocurrency trading and services, requiring all virtual asset service providers (VASPs) operating in Hong Kong to obtain a license from the Securities and Futures Commission (SFC) and adhere to anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. The licensing process involves a rigorous “fit and proper” test, and licensed VASPs must maintain proper records, conduct regular audits, and report suspicious activities to the relevant authorities. The new regulations are expected to attract more institutional investors to the Hong Kong cryptocurrency market, as they will have greater confidence in the safety and legitimacy of the industry. The move also brings Hong Kong’s cryptocurrency regulations in line with global standards and best practices.
Cryptocurrency exchange Binance has partnered with law enforcement agencies to launch a campaign to prevent scams by issuing targeted alerts to potential victims. The initiative, called the “Joint Anti-Scam Campaign,” was first rolled out in Hong Kong, in partnership with the city’s police force’s Cyber Security and Technology Crime Bureau. During the pilot project, users attempting to make withdrawals were issued warning messages about common scams and given tips on how to avoid them. Binance investigated customers’ responses over a four-week period and found that approximately 20.4% of users either did not make the withdrawal or conducted further investigations to determine if it was a scam. The exchange plans to work with police in other jurisdictions to create tailor-made warning messages for customers outside Hong Kong. Social engineering and phishing scams have been recurring problems for crypto users, and Binance's campaign aims to prevent more people from falling victim.
India In:Review
The Goods and Services Tax Network (GSTN) in India has developed an artificial intelligence (AI) system called Business Intelligence and Fraud Analysis (BIFA) to detect tax evasion fraud across the country. Over the past three years, GSTN has accumulated a large volume of data on taxpayer demographics, invoices, e-way bills, tax payments, and tax returns filed, which BIFA uses to identify mismatches between taxpayer returns and to identify anomalous and potentially fraudulent transactions using machine learning. Graph algorithms are used to identify communities of taxpayers involved in fraud, fraud propensity analysis of individual taxpayers, and to identify entities not covered by GST. CEO of GSTN, Prakash Kumar, stated that "Within three months of launching the BIFA tools, tax officers across the country have been able to uncover $50m of fraud and have initiated the due process for recovery for the same." The AI system's learning capability means it will continue to get better at detecting anomalous patterns in data, which will help tax authorities predict and prevent future fraud.
The Reserve Bank of India has imposed a fine of over $373,300 on Amazon Pay's India unit for non-compliance with local guidelines surrounding know your customer (KYC) and prepaid payment instruments. The central bank issued a notice to the unit to show cause for non-compliance, and after considering the entity's response, RBI concluded that the charge of non-compliance with its directions was substantiated and warranted imposition of monetary penalty. The fine comes as the Indian central bank toughens its compliance requirements for fintech and big tech firms in the country.
India, the current holder of the G20 presidency, is pushing for a coordinated global effort to regulate the digital asset industry and reduce potential risks. During the recent G20 meeting, India's finance minister held a seminar for member states to share their concerns regarding the risks of cryptocurrencies while discussing a common framework. The United States supported India's efforts, stating that it is critical to put a strong regulatory framework in place but has not suggested any outright bans. However, the IMF, which also attended the meeting, argued that banning cryptocurrencies should be an option. India's central bank has long held a hard stance towards digital assets, warning against crypto citing volatility as well as the risk of fraud and scams. The Indian government has debated drafting a law to regulate cryptocurrencies despite calls by the central bank to ban them. India's controversial crypto tax plans, which include a 30% tax on income from cryptocurrencies as well as a 1% tax deduction at source (TDS), have adversely impacted trading volumes on local cryptocurrency exchanges.
Singapore In:Review
Binance's custody unit, Ceffu, plans to apply for a permit to offer payment services in Singapore, according to a statement from its Vice President Athena Yu. The move is another attempt by Binance to operate in the crypto-friendly city-state, after its affiliate Binance Asia Services withdrew a local license application last year without explanation. Ceffu said it would make an official application with Singapore's central bank, the Monetary Authority of Singapore, once relevant amendments to the Payment Services Act go live and the application for a custody license opens. In Singapore, US exchange Coinbase, DBS Vickers, and Crypto.com have received similar approval to offer payment services.
Best of the Rest In:Review
South Korea's Financial Services Commission (FSC) plans to expand the current law on voice phishing to include phone scams related to cryptocurrencies and the authority to recover losses incurred by victims. The FSC will propose amendments to the local voice phishing law in April to allow authorities to freeze the crypto accounts of alleged offenders on exchanges when a voice phishing scam is reported. Currently, local authorities are not able to seize suspected accounts on crypto exchanges due to legal restrictions. The amendments will also allow financial institutions and crypto service providers to share account information and suspend all suspected accounts across different platforms. The FSC has said that voice phishing losses involving cryptocurrencies reached about KRW 20 billion last year, more than double the amount reported in 2020.
Digital technology and cybersecurity experts have said that a banking "kill switch" function alone is not enough to prevent all online scams, even though it is a good initiative in online fraud protection. The "kill switch" feature was recently mandated by Bank Negara and will allow account holders to freeze their accounts when suspicious activity is detected. Experts believe that banks should do security audits on their apps and systems to continuously monitor vulnerable security loopholes, and users' transaction limits should be scrutinised for red flags. Experts have also called for a stronger role by the National Scam Response Centre (NSRC) to help Malaysians combat online fraud or scams. The NSRC was allocated RM10m under Budget 2023 to help Malaysians combat online fraud.
Ten Japanese companies, including Mitsubishi and Fujitsu, have signed an agreement to create a metaverse economic zone named "Ryugukoku," five months after Japan's Prime Minister Fumio Kishida announced plans to expand investments in the metaverse and NFTs. The infrastructure will support various services, including payments, identity authentication, and insurance. Japan has been making efforts to increase adoption and safety in Web3, including tightening KYC rules for crypto exchanges, lifting the ban on foreign-issued stablecoins, and launching a CBDC pilot program. Japan's most vital lobbying groups have been urging lawmakers to lower tax rates for crypto companies since early 2022.
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1 年Good information on risk trend. I like how you covered different countries. ??