/ 23 November 2009

Card fraud continues to hit banking industry

Credit card fraud continues to hit South Africa’s banking industry, the South African Banking Risk Information Centre (Sabric) said on Monday.

In a statement, it said the industry’s financial losses resulting from credit card fraud for 2009 had increased by 5%,

This represented a significant downward trend in the growth rate of industry card fraud losses compared with the 30% increase last year, said Sabric CEO Kalyani Pillay.

She said banks remained committed to raising the public’s awareness of its role in supporting industry initiatives to mitigate bank card fraud.

Most bank fraud losses involving South African-issued credit cards in 2009 occurred inside the country, Pillay said.

Gauteng, KwaZulu-Natal and the Western Cape accounted for 89% of the losses, she said.

Overall, card fraud losses inside South Africa this year decreased by 6%.

”Sabric attributes the decline in card fraud inside our borders to the decrease in certain card fraud types as a result of robust industry crime-prevention measures, including public awareness.

”The impact of the reach of chip and PIN technology on the abuse of lost and stolen cards is beginning to be noticed,” she said.

This was further supported by the industry’s real-time crime risk management, which facilitated the immediate detection of, and response to, incidents of fraud at merchant level.

Pillay said counterfeit card fraud was the primary fraud loss category this year, having increased by 22% to R144-million.

”Most of the banking industry’s financial losses resulting from counterfeit card fraud occur within the borders of South Africa.

”Skimming of cards via hand-held skimming devices still remains the main modus operandi to obtain information needed to manufacture counterfeit cards.”

Pillay urged the public to adhere to safe banking messages from their banks, such as not to let their cards out of sight when transacting or accepting assistance with their ATM transactions.

”That over 80% of fraudulent spend with counterfeit cards occurs inside the country is an indicator that the fraudsters are operating in our midst.”

Pillay said the banking industry continued to work closely with the retail community to raise awareness of ways in which they could prevent over-the-counter purchases with counterfeit cards.

”The partnership that the banking industry has forged with government, especially the South African Police Service and other law enforcement agencies, has been one of the key factors in the progress the banks are making to reduce bank-related crime.”

Pillay said the police and South African Revenue Service customs officials had played a huge role in the retrieval of skimming devices, particularly at the ports of entry.

”Sabric will continue to work closely with these stakeholders to ensure that the public enjoys a crime-free banking environment”.

Banking industry financial losses resulting from lost and stolen card fraud decreased by 34% this year.

”This is while the abuse of lost and stolen cards had been the primary card fraud loss category for last year,” said Pillay.

”Sabric advises bank clients to have their banks’ lost and stolen card hotline number handy to be able to report incidents in good time,” Pillay said.

She said false application fraud and account takeover fraud decreased by 54% and 42% respectively, maintaining the downward trend experienced last year.

”The continued decrease in these fraud types shows that the internal security systems of the banks are a real deterrent to criminals.

”This drives perpetrators to focus on crimes that can be perpetrated by taking advantage of the vulnerabilities of bank clients.”

For this reason, Pillay said, the empowerment of bank clients on crime-prevention strategies and practices was vital.

Meanwhile, fraud losses through credit card transactions performed through phone, mail order or online were up by 45%, alongside fraud committed with genuinely issued cards that did not reach their recipients (up by 35%).

”While the decrease in the growth rate of card fraud year on year, and the significant downward trend in certain card fraud types, is welcome news for the industry, the banks will not become complacent as it is not uncommon for fraudsters to seek new and alternatives avenues to commit their crimes,” Pillay said.

The banking industry would continue to engage all stakeholders to promote safe banking for all South Africans, she said. — Sapa