Crypto crackdowns, investment scams and greenwashing targets at ASIC’s Annual Forum

The Australian Securities and Investments Commission revealed its priorities for the next year at its Annual Forum in Sydney this week, with suspicious crypto companies, investment scams and greenwashing all at the top of the hit list.

ASIC deputy chair Sarah Court said this was the first time the regulator has identified enforcement areas at the Annual Forums, but it will now do so on an annual basis.

“These priorities communicate our intent to industry and our stakeholders, and give a clear indication of where we will direct our resources and expertise,” Court said.

Crackdowns on suspicious crypto companies

In its crypto session on Thursday, ASIC revealed there has been a 600% rise in complaints against suspicious companies operating in the space.

According to the regulator, crypto companies that leave investors high and dry will be at the top of its hit list.

Unfortunately, this is still tough in Australia. There is very little regulation around crypto, which was originally designed to be decentralised.

But as its grown in popularity and become somewhat more mainstream over the past five years, the need for consumer protection has increased dramatically.

And Australia is still very much in the fledgling stages of doing this. It was only back in August that the Labor government announced its move towards crypto regulation.

Treasurer Jim Chalmers said the government will be opting for a token mapping exercise to “identify how crypto assets and related services should be regulated.”

“As it stands, the crypto sector is largely unregulated, and we need to do some work to get the balance right so we can embrace new and innovative technologies.”

It’s still unclear what that will look like, but the token mapping exercise is supposed to be concluded by the end of the year.

“We will do our best to use the existing framework to go after people, especially those taking advantage of the regulatory arbitrage opportunities,” ASIC chairman Joe Longo said on the panel on Thursday.

This has already started. In October, ASIC handed out its first court action to BPS Financial, the owner-operator of Block Trade Exchange. It’s also the issuer of the digital currency Qoin.

“We allege that, despite what BPS represented in its marketing, Qoin merchant numbers have been declining, and that there have been periods of time where it was not possible to exchange Qoin tokens through independent exchanges,” ASIC deputy chair Sarah Court said in a statement.

“ASIC is particularly concerned about the alleged misrepresentation that the Qoin Facility is regulated in Australia, as we believe the more than 79,000 individuals and entities who have been issued with the Qoin Facility may have believed that it was compliant with financial services laws, when ASIC considers it was not.”

The regulator also imposed interim stop orders on Holon Investments Australia due to alleged non-compliance.

Longo said during the Forum panel that while there is opportunity for blockchain technology in the future, people shouldn’t be putting money into things they don’t understand.

The deputy CEO of AUSTRAC, Dr John Moss, was also part of the panel and said 1,200 suspicious reports regarding crypto businesses were lodged in 2019. That number rose exponentially to 8,000 over the past financial year.

According to Moss, this reflects increased sophistication of technology within digital currency exchanges, allowing for detection of criminal activity.

“All this is growing increasingly important as criminals see it not only as a way of transferring value or the proceeds of crime but a way of growing the proceeds of crime,” Moss said.

ASIC goes after greenwashing

Greenwashing has been a hot topic of conversation in the Australian business community over the past year in particular. And it hasn’t escaped ASIC’s gaze.

The regulator reiterated its commitment to enforcement when Australian companies misrepresent their environmental sustainability through their products and investment strategies.

ASIC took its first action against greenwashing at the end of October. Tlou Energy Limited paid a $53,280 fine to comply with four infringement notices handed down by the regulator.
According to ASIC, the company had provided alleged “false or misleading sustainability-related statements made to the Australian Securities Exchange (ASX)” back in October 2021.

“ASIC is currently investigating a number of listed entities, super funds and managed funds in relation to their green credentials claims,” Court said in a statement.

“Companies are on notice that ASIC is actively monitoring the market for potential greenwashing and will take enforcement action, including court action, for serious breaches.”

Stephen Jones says investment scams are on the rise

Scams of the fiat variety are also rising — to the tune of $2 billion a year, according to Assistant Treasurer and Financial Services Minister, Stephen Jones, who revealed the figure during a panel at the ASIC Forum.

According to Jones, the current economic market is seeing a greater number of people “attracted to seemingly impossible to believe invest returns on novel investment products”.

While experienced investors have fallen prey to these scams, the vast majority of victims are said to be from vulnerable demographics, such as people with a disability or aged over 65.

While Jones said there needs to be a “high bar” to protect Australians, the Labor government wouldn’t be making financial institutions responsible for all scams.

“[It] would become a honey-pot for fraudsters, scammers and criminals the world over,” Jones said.

Instead, Jones cited a need for collaboration between businesses, government and regulators to help stamp out scams in Australia and protect consumers. He also called for more communication between these entities, as well as rapid response when data breaches and scams appear.

This link between data breaches and scams was also discussed at ASIC’s Annual Forum by the head of the Australian Cyber Security Centre (ASCS), Abigail Bradshaw.

According to Bradshaw, cyber crime has increased by nearly 13% in the last financial year. The uptick has gotten so bad that there is the equivalent of one cyber crime report happening every seven minutes.

The ACSC’s 2022 Annual Cyber Threat Report also revealed that 27% of cyber threat reports relate to fraud.

Considering the cornucopia of data breaches we have seen in the last month alone, this isn’t particularly surprising. Companies hit by these breaches also made a particular point of warning customers about potential scams as a result.

Global conflicts such as the war in Ukraine have also been pointed to as a vector for cyber crime.

“The heightened strategic threat environment is being shaped by global conflict and competition. That is playing out in the cyber vector and through cyber threats, which are presenting here in Australia,” the ACSC’s report reads.

“In the last year, we’ve seen state and non-state actors indiscriminately target Australian organisations. Of particular concern is the rapid and prolific exploitation of critical vulnerabilities.”