Significant increase in fraud in a risk-heavy environment

Issue 3 2022 News & Events, Security Services & Risk Management

Over the past year, South Africans have faced increased risk when it comes to becoming a victim of fraud. These trends are reflected in the latest statistics which were recently released by the Southern African Fraud Prevention Service (SAFPS). The statistics compare the first five months of 2022 to the same period in 2021.

“This is particularly concerning given the economic climate that we are currently facing,” says Manie van Schalkwyk, CEO of the SAFPS. “Consumers are facing a significant cycle of high inflation and are looking for ways to make ends meet. This makes them increasingly vulnerable to scams and schemes which are being carried out by highly motivated, highly skilled fraud syndicates.”

Money mule

South Africans are known for their spirit of ubuntu. Whether a fellow South African or a foreigner asks for help, South Africans will try their best to go out their way to try and help the person in need.

One of the crimes that the SAFPS has noticed is an increase in is what is called a ‘money mule’. This is when a person approaches someone else and asks them if they can use their account to send money to a relative in another country. “While this should immediately be a red flag, you will be surprised at how many people willingly comply in the hope that they can be of assistance,” says Van Schalkwyk. Unfortunately, this then opens the door for fraudsters to take significant advantage of their victim.

When it comes to the misuse of accounts through fraudulent conduct, the risk of money muling has increased by 97% over instances recorded in 2021.

“This is a significant problem and not limited only to South Africa. Money muling is a considerable global risk. Reports from Cifas in the UK point out that money muling funds illegal activity such as money laundering, terrorism and human trafficking. Obviously, this is concerning, particularly within the South African content,” says Van Schalkwyk.

To prevent this, he urges the public to remain as vigilant as ever and to be very protective of their banking details. “The person in front of you may be a person who is in genuine need. However, they may also be fraudster.”

He added that biometrics is adding an extra sophisticated layer of security to try and prevent financial crime from taking place. However, this makes fraudsters more insistent and increases the level of involvement from the public as they want to lend a helping hand.

Impersonation

Impersonation has always been a significant crime is South Africa as fraudsters prey on their victims through phishing, smishing and vishing.

“Impersonation increased by 264% for the first five months of the year compared to 2021 and could be linked to recent major data breaches. The various data breaches have all highlighted the vulnerability of personal information and how easily accessible they are to the motivated criminal,” says Van Schalkwyk.

Forged documentation

South Africa has one of the highest reported unemployment rates in the world. Current statistics from Stats SA report that the official unemployment rate is 34,5%. “In an effort to increase employability, we are seeing an increase in false qualifications which has increased by 158% over the cases reported in 2021.”

Statistics by province

Gauteng is the economic hub of the country and is the province which has the highest fraud stats. The SAFPS points out that the province makes up 62% of the country’s total fraud incidents and that the number of fraud incidents that were recorded in 2022 increased by 117% over the number of incidents reported in 2021. KwaZulu-Natal contributed 18% of the fraud incidents in 2022, an increase of 106% over those recorded in 2021.

“The interesting statistic for the SAFPS is the increase in the Western Cape,” says Van Schalkwyk, who points out that there are visible signs of an increase of fraudulent activity in this province. The Western Cape made up 8% of the country’s total fraud incidents and this was a 133% increase over the number of incidents reported in 2021.

Protective registration

One of the most important services, and the core of SAFPS’ service offering, is Protective Registration.

Protective Registration is a free service protecting individuals against future fraud. Consumers apply for this service and the SAFPS alerts its members to take additional care when dealing with that individual’s details. Protective Registration provides an added layer of protection and peace of mind regardless of whether the identity of the applicant has been compromised.

“If a member of the public wants to become proactive in the fight against fraud, the SAFPS is there to serve them. Visit our website on www.safps.org.za. Click on the fraud prevention tab and protect yourself against identity theft with Protective Registration. For best results, use your smart phone to go to our website. Once you have uploaded key pieces of information, you will add another layer of protection against potential ID fraud, for best results use your smart phone,” says Van Schalkwyk.

Victim Fraud Registration

Through Fraud Victim Registration, the SAFPS will assist applicants in preventing fraud that is a result of identity theft and impersonation. This will protect applicants from associated financial implications. The SAFPS will issue applicants with a Victim of Impersonation Letter which they can share with future credit providers to assist in any verification processes.

Secure Citizen

One of the key services SAFPS offers is Secure Citizen. From a consumer perspective, a digital identity solution must be based an individual’s unique attributes, it must be easy to use, in real time, and it has to enable trust. The solution must not discriminate against income, gender, geographical location, or even your choice in mobile phone.

For companies, the solution must be interoperable; it cannot discriminate against legacy or future systems, or the maturity of a company’s digital transformation journey. It must be affordable; available to any business regardless of size, whether your business is classified as an SMME or enterprise. Every business in our country has to be able to verify the identity of their existing and potential customers, employees and even directors of their partners.

From a business perspective, banks and other financial institutions can verify the identity of the person by accessing the Secure Citizen database. This is a major step forward when it comes to Know Your Customer.

Encouraging signs

Despite the fact that there are significant increases in fraud instances, there is room for optimism. “More people are becoming aware of fraud and how they can protect themselves. The growth in our Protective Registration service is testament to this and Secure Citizen will be a game changer in the future. As of 31 May, the SAFPS has saved its members just over R2 billion. This is a 48% increase over the savings recorded for the same period in 2021. This is an encouraging sign,” says Van Schalkwyk.




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