Digitalisation of banking sector offering new opportunities for criminals, warns Central Bank
Sinn Féin TD Pearse Doherty said that while some cryptocurrencies on offer are well known, like Bitcoin or Ethereum, there remained many others that have recorded price drops of up 80-95%.
The increasing digitalisation of Ireland’s banking sector has brought a wave of new opportunities for criminals to exploit and has blurred the boundaries between new banks and cryptocurrency, an Oireachtas Joint Committee has heard.
At a meeting discussing the regulatory oversight of neobanks, deputy governor of the Central Bank of Ireland Colm Kincaid said that while digital financial services have brought in added convenience and lower costs for consumers, the benefits “will only be realised if the risks are appropriately addressed.”
“[Digitalisation] has brought new opportunities for criminals to exploit," Mr Kincaid told the committee.
“And, it has resulted in gaps in the nature and quality of service consumers receive, in particular when things go wrong.”
Sinn Féin TD Pearse Doherty raised concerns with the regulator about the availability of various cryptocurrencies across popular fintech apps such as Revolut.
“Revolut’s posted profits of £1bn last year and an increasing share of that is coming from crypto. Revenue from crypto increased fourfold last year,” Mr Doherty said.
The TD added that while some cryptocurrencies on offer are well known, like Bitcoin or Ethereum, there remained many others that have recorded price drops of up 80-95%.
Mr Kincaid said the Central Bank has been “very clear from the get-go” that cryptocurrencies carry a very particular risk, adding that classifying cryptocurrencies as an “investment” was not a term the Central Bank would use due to their nature and associated risks.
He added that many people who buy cryptocurrency do so “out of curiosity,” which he said the Central Bank had “quite significant concerns about.”
The deputy governor also noted fraud and scams as key risks of digitalisation, noting that the bank was working with other law enforcement agencies to combat financial crime.
“These risks must be tackled if we are to avoid actions outside financial services damaging people’s trust in financial services, while also making sure, of course, that financial service firms are responsible in how they use technology,” Mr Kincaid said.
“Digitalisation and access to an EU-regulated market bring great benefits for us as consumers. Digitalisation also brings new risks and the threat posed by criminals is significant and system-wide work is required.”
Also speaking at the Oireachtas Joint Committee hearing was chief executive of the Banking and Payments Federation Ireland (BPFI), Brian Hayes, who emphasised that financial fraud is not a victimless crime.
“It causes real damage to customers and has grown significantly in recent years. Just last week we launched a cross-sector campaign on human trafficking focused on highlighting the exploitation of people who are trafficked into this country by criminal gangs.
The CEO said fraud is no longer characterised by criminals attempting to directly compromise bank systems. He said perpetrators increasingly manipulate consumers into authorising payments themselves. This is commonly referred to as Authorised Push Payment (APP) fraud, Mr Hayes said.
“Criminals deliberately impersonate trusted entities and create false urgency. Victims genuinely believe they are making a legitimate payment, and as a result, the payment is authorised by the customer. APP fraud takes many forms, including investment scams, romance scams, accommodation fraud, and, for businesses, invoice redirection and CEO impersonation,” Mr Hayes added.
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