Fraud continues to pose the risk of serious financial losses for banking customers. All indicators point to the fact that there are new scams and an increasing number of the victims, warns Reana Steyn, the Ombudsman for Banking Services.
The basic modus operandi of these scams is not new. However, over the years, there is a constant change in the execution techniques that fraudsters have applied. “The success of these scams, and their evolution, is heavily guided by how the consumer will react in each situation,” says Steyn.
Phishing scam
Steyn highlighted a recent matter investigated by her office where two private banking customers fell victim to the same scam under exactly the same circumstances. The story behind convincing the victims to disclose their confidential banking information was new. However, the basic scam remained the same, as did the results.
Mr M said he received emails supposedly from the South African Post Office. The emails informed him that he had unclaimed packages waiting for him at the Post Office head office. He advised the representative in the email that he in fact had a package at the Post Office which he was aware of and had not collected yet. Mr M then received an SMS from the Post Office advising him to pay a fee of R42.50 for the package to be released and sent to his nearest Post Office.
Mr M followed the instructions on the link he received, and the link opened to a payment option on an official-looking Post Office payment page. He then inserted his card details and received an “Approve It “message on his cell phone. He accordingly approved the transaction. Immediately thereafter, he received another “Approve It” message from his bank. He noticed the word “Singapore” and realised that he was being defrauded. He immediately reported the fraud to his bank and instructed the bank not to release the pending transaction of R16 061. However, since the transaction was authorised with the use of the card details and the “Approve It” message, the bank had already released the transaction and refused any liability for the loss that was suffered. Mr M then reported the incident to the ombudsman and asked for assistance with his complaint against the bank.
The ombudsman determined that Mr M had, in fact, made the payment himself and approved the transaction through his banking app. The ombudsman further found that although Mr M said that he thought he was making a payment for R42.50, the message he received from the bank for the authentication of the payment read: “You are about to make an online purchase of CHF 1, 000.00 at BIGO Live”. Since it was clear from the message that the payment was not to the Post Office and that the purchase amount was not R42.50, the ombudsman found against Mr M and concluded that he was unfortunately a victim of a phishing scam where he willingly compromised his confidential banking details.
Losses claimed exceeded R295 million in 2021
Steyn warned that banking fraud has become a very lucrative business for online scammers. The banking fraud matters investigated by her office in 2021 alone (the amounts claimed as losses by the victims of banking scams) exceeded R295 million. “This is an extremely worrying trend, especially when considering that these funds are mostly lost by individuals and small businesses who, in the majority of cases, are not in a financial position to suffer any kind of financial setback,” says Steyn.
She confirmed that it was unfortunate that, in most of these matters, the amounts claimed were not recovered as they had already been withdrawn by the fraudsters. In fact, Steyn reiterated that the losses were largely due to the victims falling hook, line and sinker to typical and well-publicised scams.
The latest wave of scams to look out for in 2022
According to the its 2021 records, the ombudsman received and investigated over 2 880 banking fraud related cases. This was a significant increase of 7.5% from the fraud cases investigated in 2020. Most of these matters were bank customers falling victim to internet banking fraud, credit card fraud, current account fraud, and ATM card swap scams.
Steyn says these scams are avoidable and called on bank customers to be extra vigilant in 2022 to ensure that they (individuals and businesses) do not suffer losses over scams that can be avoided. Never provide confidential banking details to a stranger over the phone or enter these details on a link received via email or SMS. Finally, never accept assistance from a stranger at an ATM, Steyn cautions.
Steyn emphasises that no legitimate caller or email from a bank will ever ask a bank customer to provide their card number, passwords, and especially an OTP over the call or via a link. She says consumers should also refrain from using any links received to make payments. "You should be extra vigilant when it comes to a link where you are instructed to enter your banking account details that can be used to access the funds from your account,“ she says.
The ombudsman called on all banking customers, banking institutions and other stakeholders to partner with each other in 2022 to educate the public and raise awareness about the various scams that target banking customers (consumers and small businesses).
While there has been some consumer awareness and education regarding the scams that are currently being used and how they are committed, Steyn says that over the years, the number of fraud victims has not decreased. This is an indication that more vigorous action must be taken by institutions like the ombudsman, the banks, and (very importantly) the media, to assist, warn and educate South African consumers.
Banks’ fraud detection systems
To combat the scourge of fraud, Banks have, over the years, created and introduced various fraud detection systems. The aim of these systems is to monitor and detect unusual transactions and prevent them where possible. This will hopefully minimise the number of fraud losses that are suffered by consumers. However, while these systems have proven to be valuable in preventing fraud in most instances, Steyn warns these measures do not guarantee that all fraudulent transactions can or will be detected. Therefore, if it is found that you as a customer provided your confidential banking details to the fraudster (and as a result, funds were withdrawn from your account) you will suffer the loss should the transaction not be detected and stopped by the bank.
“The only time the bank will be held liable by the ombudsman is when the losses suffered by the customer were because of the bank’s negligence or wrongdoing,” warns Steyn.
PERSONAL FINANCE