Combating the weaponisation of financial products: A pathway forward

Current outlook at a glance

In Australia, new financial regulations introduced over the past decade have forced a significant shift in the approach taken by financial institutions to develop and market financial products and services. For example, the design and distribution obligations introduced by ASIC in October 2021,⁴ require financial institutions to design and distribute financial products with a consumer-centric approach in an effort to prevent consumer harm.

From a global perspective, a raft of complex financial regulations and standards have required financial institutions to prioritise consumer protection and the prevention of exploitation. For example, ISO 22458:2022 (Consumer vulnerability — Requirements and guidelines for the design and delivery of inclusive service) requires organisations to take a proactive, rather than a reactive, approach when dealing with vulnerable customers. In light of the evolving regulatory pressures faced by the finance industry globally, there is no better time than now to adopt and incorporate the Safety by Design principles.⁵

A Systemic Problem

The CWES paper outlines key examples of how financial abuse perpetrators have ‘weaponised’ financial products and services to inflict harm on vulnerable people. This ‘weaponisation’ includes instances where perpetrators use a range of financial products and services to inflict harm, such as opening credit cards in victim-survivor’s names, withdrawing cash from joint bank accounts without the other party’s consent or awareness for the purpose of abuse or coercive control, and using payment descriptions to send threatening messages.⁶ According to research from the United Kingdom,⁷ perpetrators hiding identification documents of victim-survivors to prevent access to their financial products is another common example of how the design of financial products can enable abuse.

Moreover, the long-term impacts of financial abuse can range from permanently damaging credit ratings, leaving victim-survivors with multiple and compounding financial debts that they are unable to repay, to adverse mental health consequences.⁸ The finance sector has started to monitor and minimise features of products that enable financial abuse to occur, for example, by disrupting abuse in payment descriptions. However, the sector globally has been working to determine more effective ways to support customers who are vulnerable to financial abuse and, importantly, to prevent the initiation of abuse in the first place.

A Solution: Financial Safety by Design

Regulators around the world are likely to expect banks and financial institutions to make increased efforts to protect all vulnerable customers, including by adopting proactive product design initiatives. For example, tailoring Safety by Design principles to redesign financial products can make it harder for financially abusive customers to inflict harm on others.⁹

The Safety by Design Principles developed by the Australian e-Safety Commissioner with the technology sector can be broken down into 3 pillars:

1. Service provider responsibility, the central tenant of which is that the burden of safety should never fall solely upon the user.
2. User empowerment and autonomy, which recognises and supports the dignity of users as being of central importance.
3. Transparency and accountability, which are hallmarks of a robust approach to safety.

These principles are intended to have global applicability and aim to shift the focus away from what victim-survivors can do to stay safe, to what product and service providers must do to end abuse and hold perpetrators accountable.¹⁰

The CWES paper sets out a practical starting point for banks and other financial institutions to adapt and implement a new Financial Safety by Design framework, urging every provider to commit to terms and conditions (T&Cs) in their products that make it clear that:

• a bank account is no place for abuse;
• financial abuse has serious impacts on victim-survivors;
• customers who misuse products and services will be warned or exited from the bank; and
• in some circumstances, perpetrator tactics will be reported to law enforcement.¹¹

We have already seen two of the leading financial institutions in Australia commit to updating their T&Cs and incorporating other Financial Safety by Design Principles in their products. However, there are other mechanisms for improving financial safety, such as:

• training customer-facing staff to gain an awareness of what coercive control may look like in a banking setting;¹²
• providing not only a safe environment for victim-survivors to disclose abuse but also ensuring these environments are conducive to dealing with the customers’ circumstances and their vulnerability sensitively;¹³ and
• improving general messaging and promoting healthy financial relationships between couples at the distribution point of a product, such as when taking out joint debts or opening joint accounts.¹⁴

Looking ahead

Ultimately, banks and financial institutions rely on customer disclosure to identify financial abuse and need to keep in mind different socio-cultural arrangements and customs when determining their appropriate response. This is an incredibly difficult ask. However, with greater awareness of these issues and upfront efforts to mitigate financial control and abuse in the design-stage, financial institutions can better understand where to dedicate resources to combat financial abuse and evaluate current approaches to determine the most effective deterrents and interventions. Incorporating Financial Safety by Design principles, in conjunction with a deeper global understanding of prevention and an increased commitment to supporting victim-survivors, is key to addressing the systemic issue of financial abuse.