December 2013 Issue

The 'Newsletter on Financial Fraud' from CustomerXPs is your monthly insight into the various new fraud types and methods used by fraudsters globally in the banking space. 

In this issue, CustomerXPs brings to light the effect of banking fraud creeping in and making banks lose millions to this plauging menace.

Banking industry takes bigger knock from credit-card fraud


The banking industry’s losses due to fraud related to South African-issued credit cards rose 22% year on year in the first nine months of this year, to R366.8m, the South African Banking Risk Information Centre (Sabric) said on Monday.

This comes as global cyber-security firm Norton’s 2012 Cybercrime Report finds that South Africa is the third favourite cyber-crime hotspot, after China and Russia.

About 61% of counterfeit credit card losses affecting South Africans occurred outside the country, mainly in the US, UK, Italy, Spain and Brazil. This was up from 45% in 2012.

Susan Potgieter, GM of Sabric’s commercial crime office, said card skimming was still prevalent in South Africa, making a significant contribution to fraud losses.

But criminals are also returning to "more basic frauds" such as stealing cards and PINs through "shoulder surfing" — watching the input of PINs over clients’ shoulders — and card swapping at automated teller machines.

This has led to a 102% increase in lost or stolen card fraud, from R15.6m in 2012 to R31.7m in 2013.

Most credit card fraud losses — 86% — took place in Gauteng, the Western Cape and KwaZulu-Natal. The remaining provinces accounted for 14% of the fraud losses for credit cards.

Courtesy: Business Day Live

Bank frauds rising: Double to Rs 6,212 Cr in 2012-13


Bank loan frauds almost doubled in 2012-13 adding up to Rs 6,212 crore against Rs 3,183 crore in the previous year. Public sector banks accounted for a chunk of these frauds. In terms of numbers, 349 cases of fraud of over Rs 1 crore were reported in 2012-13 up 28 per cent over the previous year’s 273 cases.

In a recent presentation, RBI Deputy Governor K. C. Chakrabarty said poor credit appraisal and low level of promoter equity have led to a jump in the number of loan related frauds, especially diversion of funds. Loan related frauds accounted for 64 per cent of the money misappropriated followed by technology related and know-your-customer (mainly in deposit accounts) frauds.

There has been a 15-fold rise in large value fraud cases involving amounts of Rs 50 crore and above, from three cases in 2009-10 (involving an amount of Rs 404 crore) to 45 cases in 2012-13 (Rs 5,335 crore).

Chakrabarty observed that loan appraisal standards are lax for bigger loans both at the time of sanction and restructuring even as the assessing standards are stringent for smaller borrowers.

Loan appraisal must focus on the quantum of equity brought in by the promoters, the source of the equity, and the contingency planning in respect of infrastructure projects.

He pointed out that the RBI has come across cases where there is a lag of 12-15 months in declaration of the same case as fraud by different banks. This not only enables the borrower to defraud the banking system more, but also gives him time to erase the money trail and queer the pitch for the investigating agencies.

Courtesy: The Hindu

Nigerian banks lose N159bn to e-fraud


Nigerian banks are facing tough times in the cashless economy as they have lost a total of N159 billion to electronic fraud between 2000 and first quarter of 2013. This was disclosed by the Executive Director, Business Development, Nigerian Inter-bank Settlements Systems, Mrs Christabel Onyejekwe.

Analysing the annual e-fraud trend in the banking industry since 2000 till date, the figure stood at N1.65 billion in 2000 and in 2004 the stats spiralled up to N89.43 billion. While in 2007 the figure spiralled to N8.51 billion, the year 2008, marked a watershed in the trend of e-fraud, as Nigerian banks recorded the highest losses to the tune of N34.50 billion.

The successful switch from magnetic stripe the of Automated Teller Machines, ATM, cards in 2009 to a more secure Chip and PIN cards led to a drastic reduction in e-fraud to the tune of N21.72 billion with a further decline to N14.96 billion in 2010.

In 2011, the numbers increased again to N24.43 billion and declined again to N10.06 billion at the end of 2012 while, in first quarter of 2013 alone, cases of bank e-frauds were valued at N7.5 billion.

According to Mrs Onyejekwe, in the past three years, 62 per cent have experienced cases of Card Not Present fraud type, 48 per cent have experienced Card Skimming fraud, 33 per cent have witnessed physical attacks on their ATM machines, 10 per cent have recorded card trapping while not less than 20 per cent of the banks have recorded other forms of e-fraud on their systems.

Courtesy: National Mirror

'Inventive' fraud on the rise in Oman


The Central Bank of Oman (CBO) has drawn the attention of the public to a number of suspicious financial activities and attempts of fraud. Such attempts are being made in different ways, employing subtle means. 

Fake Lottery Wins

Fictitious and suspicious companies outside Oman are connecting with Omani citizens claiming that they have been rewarded with a lottery/draw win; offering them some profitable transactions with a trade of getting access to banking and financial facilities in the Sultanate

Speculative dealing in Foreign Currency

Such dealings are prohibited in the Sultanate under law. These fake brokers offer such services dubbed as Trade Representation/Agency Activity based abroad are not licensed by the Central Bank.

Use of fake/stolen cheques

These stolen products are subsequently sold to the unsuspecting public at a discount with the promise that the new holder (alleged payee) would be able to encash these at local banks realizing full value thereby, earning a good profit margin

Fraudulent Loans

Such loans are promised in advance being made available against the surety of bank securities and /or fixed deposits

Foreign fraudulent deposits

Promise to deposit credible transfers from fictitious foreign accounts to the credit of their (Omani/expatriate) bank accounts or to the credit of companies in local bank. The account holders are promised on huge commissions/earnings on such transfers

Unauthorized personnel

Dealings with the local banks indirectly, through unauthorised persons. Such personnel claim to conduct normal banking transactions but in reality, include the issue of fraudulent securities and the offer of fictitious investments abroad

Unauthorised Money Remitters

These individuals/establishments offer money transactions via some channels like institutions/individuals under numerous names like “portfolio” ad so on

Fraudulent money collections

Collections are made from Omani citizens for the purpose of investment in different financial instruments (stocks and bonds), speculation in foreign currencies against predetermined interest rates paid monthly or according to the agreement

CBO finds it timely to repeat its advice that members of the public should, in their own interests, be cautious and not to deal with strangers and unauthorised entities/persons.


Courtesy: Albawaba Business

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