The banking sector, probably more than any other industry, feels the greatest impact of crime. Banks are, after all, the custodians of the money that the criminals are after. Bank robberies take an unquantifiable toll on staff morale and productivity. The costs of maintaining integrity in the banking system in the face of card and online fraud costs the industry hundreds of millions of rands.
Armed robberies remain the biggest issue for banks. Although relatively low in terms of financial losses, the impact on people is immeasurable. According to Eddie Blight, head of group forensics at First National Bank (FNB), branch robberies have been on the increase. In January and February last year, FNB experienced four branch robberies; this year the figure jumped to 12. While the actual monetary losses have been decreasing because of sophisticated anti-crime mea-sures, the impact on staff and productivity has increased.
Over the past three years, FNB has lost R20-million in 95 armed robberies at branches and 13Â 200 hours of productivity. But Blight says these numbers are understated. The lost hours are based on the amount of time a branch is closed after a robbery and does not take into account long-term effects on staff and customers. Often staff members will resign as they are unable to overcome their fear. Blight has experienced this himself, resigning from a branch after being involved in two armed robberies. “I literally could see the groove of the barrel; it is imprinted in my mind,” says Blight, who refuses to allow his children into a bank branch for fear of their safety.
FNB provides trauma counselling to its 824 staff who have been victims of armed robberies since November 2006 and has spent R35million upgrading security around the branches. Last year, the bank spent R80million on crime risk management, employing people such as Blight who assess the risks to branches, carry out investigations, implement preventive measures and educate staff and customers.
Blight says what is particularly worrying is the increase in vandalism. Over the past three years, damage to bank property has increased from R600Â 000 to R1,4million. Blight believes this is a breeding ground for future criminals as they display a complete lack of respect for the law.
Advocate Nick Jacobs, general manager of group risk services at Nedbank, says the bank makes a substantial investment in protecting staff, clients and bank assets against crimes ranging from electronic or cyber fraud and identity theft or takeovers to physical robberies. Although the banks are hesitant to divulge exactly how much crime prevention measures are costing them, Jacobs says a large proportion of this investment, which runs into hundreds of millions of rands, is in crime-related infrastructure. This includes the cost of running Nedbank’s various anti-fraud departments, guarding, alarm monitoring, armed response units and other physical and logistical security measures.
“For example, we have an alarm monitoring and surveillance facility that monitors our outlets (branches, ATMs, buildings) from a joint operations centre. The centre, which is backed by state-of-the-art surveillance equipment and technology, allows us to gather critical data that is often used to assist the police in the apprehension of criminals,” says Jacobs. Like Blight, Jacobs says while cash losses from bank robberies and burglaries are quantifiable, it is the trauma that staff and clients experience during a robbery that carries the greatest price.
Card and internet fraud are the more modern crimes banks have to deal with, and while these do not take human lives, they can shake the foundations of trust in the banking sector. For this reason, banks spend enormous amounts of money on ensuring the security of their customers’ accounts. Financially, the amounts spent on security are greater than the potential losses they have thwarted, but faith in a banking system is invaluable.
Pat Pather, head of e-crime at Standard Bank, says that although sophisticated software such as Malware, Trojan and Spyware is being used by syndicates to capture customers’ details, especially on public PCs such as those in internet cafés, over the past four months no customer has suffered any financial loss through internet banking. “There have been incidences where customers have been compromised, but there have been no financial losses,” says Pather.
This is thanks to the preventive measures the bank has put in place, such as a mandatory one-time password via SMS for sensitive transactions. It also has a dedicated team, working from a high-tech laboratory, which analyses every incident in order to establish how the criminals accessed the customer’s information. In this way, the bank can stay a step ahead. “We know their patterns and how they work,” says Pather.
Standard Bank recently managed to access a server which hosted attacks on bank accounts. It was able to monitor the server and know which customers had been compromised. It also provided the information to the other banks so that their customers could be alerted.
Pather says, even at its peak, internet crime has been less than a percent of the total transactions that take place online, but one incident is one too many in terms of maintaining the integrity of the system. Apart from the costs of running a specialised unit with sophisticated technology, the bank also employs a company which monitors the internet 24 hours a day looking for spoofed sites. This is where criminals create websites to mimic the bank’s online page, entrapping unsuspecting customers. Pather says they are able to close down a spoof site in half an hour.
Although the banks seem to be winning the war on internet crime, card crime remains an expensive business. Card fraud losses are estimated to be in the region of R100million a year. For this reason, the industry is spending hundreds of millions of rands to introduce chip technology that will make it impossible to create counterfeit cards.
Walter Volker, head of group payment systems at Absa, says that although South Africa has not yet reached the level of card fraud seen in the United Kingdom before the introduction of chip technology, he believes that, as Europe tightens the net on the syndicates, they will move to greener pastures, which include South Africa. Chip technology will keep the banks one step ahead.
Absa will be issuing the first chip-enabled debit cards around the middle of the month and estimates that, over 10 years, the project and rolling it out will have cost between R140million and R200million.
Absa already has sophisticated measures in place that drastically cut credit card fraud. For example, it has an artificial intelligence system which monitors card usage. If the card is used at a shop in Sandton and half an hour later at an ATM in Pretoria, the system will be able to work out that it was impossible for the customer to have been at both places within the time frame. This creates an alert and the customer is contacted.
Volker says the bank pays Bankserve, which hosts the system, a certain amount per card transÂaction. Although he could not provide the exact amount the system costs each year, he says it is more than the losses it prevents. In other words, the bank would be better off not monitoring. Yet, like Pather, Volker says the value lies in maintaining the integrity of the banking system.
For the banks, combating crime is about delivering a service. Customers and staff should be able to feel safe in a branch and secure that their bank accounts are not compromised. The entire banking industry depends on it.