September 2014 Issue

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

In this issue, we bring to light the effect of banking fraud creeping in and making banks lose millions to this plaguing menace.

RBI to Step up Vigilance on Banking Sector to Prevent Frauds


Reserve Bank of India (RBI) Deputy Governor R Gandhi said on Tuesday that "continuous vigilance and intelligence gathering" would be the apex bank's key focus areas to prevent recurrence of frauds.

While speaking on the sidelines of an industry event in Mumbai, Mr. Gandhi emphasized the need to go "deeper", and hence, the apex bank may also carry out forensic audits of banks.

"One has to go behind the fraud and their modus operandi to find out what are the loopholes which need to be corrected. For that, forensic audits may be done," he said.

He also said the RBI has already instructed lenders stressing the importance of information sharing, especially in face of rising bad assets, which touched a high of 4.1 per cent in March 2014, rising from 3.7 per cent during the previous 12-month period.

"The database of reporting mechanism is already in place on high loan items. They also have to report stressed assets to this database. That is the first step to increase information flow for all the lenders," he said.

Asked about shadow banking, Mr. Gandhi said the domestic situation was a bit different from the rest of the world.

The problem in India revolves largely around consumer protection, and not around complex products which is the case elsewhere in the world, he said.

"Here, it is more of customer protection and there are institutions that take deposits or that type of monies, which are under the law. Sometimes, there are institutions like unincorporated bodies accepting deposits, about which we have concerns."

Source: NDTV Profit

Banks lament as e-fraud in Nigeria rises to N2 Billion


The rising incidence of electronic fraud in the banking industry has remained a source of concern to operators in the industry. Data gathered by the Financial Institutions Training Centre (FITC) showed that electronic fraud has been on an upward trend since 2010. Specifically, the total amount lost to fraudsters by banks in the first quarter of 2014 has been put at N2 billion. This is even more worrisome because the increase has been both in terms of number, volume and sophistication, as the fraudsters have adopted high powered technology.

Managing Director/Chief Executive Officer of Enterprise Bank Limited, Mallam Ahmed Kuru, revealed this in a presentation at the Nigerian Electronic Fraud Forum (NeFF) held in Lagos. Kuru who was represented by the bank's Head, Strategy and Corporate Transformation, Mr. Chuks Ekpunobi, urged banks to collaborate in order to eradicate e-fraud, which he described as a "common enemy."

Furthermore, he expressed concern that bankers, auditors and internal control officials of financial institutions may not be as knowledgeable as the fraudsters themselves. The Enterprise Bank boss stressed the need for every financial institution to take the issue seriously.

"The industry has lost about N2 billion to electronic fraud from the first and second quarter. Should this trend continue, about N5 billion would be the estimated loss by the end of 2014. If this is not checked, the trend will lead to unbearable levels of capital erosion in the system.

"The establishment of anti-fraud units will provide continuous improvement initiatives in fraud control and present a platform for the implementation of viable fraud management solution to highlight deviations of fraudulent transactions from normal transactions.”

"It will ensure compliance to Payment Card Industry Data Security Standard (PCIDSS) initiatives of the Central Bank of Nigeria (CBN) as well as guarantee the implementation of other fraud control measures and security initiatives both on the network, and applications of the bank," Kuru added.

Also speaking at the event, the Chairman of NeFF, Mr. Dipo Fatokun noted that fraudsters were always deploying strategies, saying that members of NeFF would continue to collaborate and discuss on how to bring the ensure that the activities of fraudsters are drastically reduced.

Source: allAfrica

UAE Central Bank asks banks to block cards on suspicion of data theft


The Central Bank of the UAE on Tuesday asked a few banks operating in the country to block the usage of a significant number of debit cards on suspicion of potential data compromise.

From information available from the banking industry sources, the potential data compromise was limited to single automated teller machine (ATM) and all cards suspected of data compromise have been notified to be replaced by the issuing banks.

In response to Gulf News’ queries based on information received from customers, a prominent bank’s spokesperson confirmed that on 26 August 2014, the bank was directed by the Central Bank of the UAE to block the usage of 69 debit cards, which were at potential risk of fraudulent misuse as they were used on an ATM of another bank which was suspected of being compromised.

As a result, the identified customers were contacted by the bank and informed of the need to replace their cards.

A number of banks including two regional banks suffered losses in 2012 when a global cyber-crime syndicate stole $45 million by hacking into credit card processing firms and withdrawing money from ATMs in 27 countries.

The level of reported economic crimes in the Middle East declined last year according to a recent Global Economic Crime Survey by PwC earlier this year. The survey showed that only by 21 per cent of organizations in the Middle East reported economic or financial fraud, compared to 37 per cent globally.

The study also showed the future trend is alarming as more than 38 per cent of the respondents in the Middle East indicated that they expect their organizations to suffer from economic crime over the next 24 months.

The UAE is one of the most proactive countries in the Middle East region in countering money laundering and financial crimes, according to KPMG. KPMG’s Global Anti-Money Laundering (AML) Survey 2014 showed that the Middle East region needs to be more vigilant against financial crimes.

Source: Gulf News

Financial Frauds in Australia


Financial fraud is pervasive. Not only developing but developed countries grapple with fraud. With new channels of financial transactions opening up for consumers, it is becoming even more difficult to monitor fraudulent events in real-time. For instance, online banking & payment cards have become so ubiquitous that we cannot imagine transacting without them in our day-to-day life. On the other hand, banks are threatened by high levels of fraud that are associated with electronic transactions. In Australia, the total amount of money spent on payment cards was AUD 624 Billion in 2013. At the same time, an estimated AUD 1.4 Billion was lost to personal fraud that has emerged as the largest form of financial fraud in Australia.

This infographic below delves deeper into the fraud scenario in Australia and highlights ways to combat fraud in real-time.

Financial Frauds in Australia


Source: CustomerXPs

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