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SA loses R366m to credit card fraud

Johannesburg, 18 Nov 2013

The banking industry's gross fraud losses, due to South African-issued credit card fraud, increased by 22% ? from R300.6 million in 2012 to R366.8 million in 2013.

This is according to statistics presented by the South African Banking Risk Information Centre (Sabric) this morning, in Midrand.

The report utilises credit and debit card fraud information, as provided by Barclays Africa Group, First National Bank, Standard Bank of SA, Nedbank, Investec, Virgin, Amex, Diners Club, Capitec Bank, Mercantile Bank, Bidvest, Ubank, Bank of Athens, Albaraka Bank, Postbank and African Bank. It covers the period 1 January 2013 to 30 September 2013.

Sabric says counterfeit credit card fraud losses increased by 27% in 2013 and contributed to 39% of the overall credit card gross fraud loss. It adds that 61% of all counterfeit credit card losses occurred outside of SA.

"Criminals are progressively utilising counterfeit SA-issued credit cards in neighbouring countries such as Namibia, Botswana and Mozambique, and these transactions are mostly related to fraudulent cash withdrawals at ATMs," said Susan Potgieter, Sabric's GM for commercial crime, when presenting the findings.

"During 2013, the use of counterfeit cards in non-African countries was noticeable, especially in non-EMV compliant countries such as the US and Brazil."

However, Potgieter noted that although credit card fraud increased, debit card fraud, on the other hand, decreased. Debit card gross fraud losses amounted to R117.7 million in 2013 compared to the R204.0 million in 2012 (42% decrease).

"The majority of the fraudulent debit card transactions for 2013 occurred in Gauteng (42.8%), followed by KwaZulu-Natal (16.7%) and Eastern Cape (8.5%)," said Potgieter.

Shoulder surfing

She also pointed out that although lost and/or stolen credit card fraud losses increased by 102.4%, from R15.6 million in 2012 to R31.7 million in 2013, the fraud losses account for only 8.6% of the total gross fraud losses on credit cards.

"Changes in business processes linked to chip and PIN cards necessitated criminals to revert back to older modus operandi, such as shoulder surfing and card jamming or swopping. This has led to the visible increase in lost and/or stolen card fraud, similar to the card fraud trends noted in the UK. Lost and/or stolen card fraud reverted to levels last seen in 2010,"said Potgieter.

According to Sabric, card not present (CNP) fraud losses increased by 16%, from R154.7 million in 2012 to R178.7 million in 2013, and contributed 48.7% of the total credit card gross fraud losses in 2013. Gauteng, the Western Cape and KwaZulu-Natal account for 86.1% of the CNP credit card fraud losses in SA.

Sabric defines CNP fraud as a fraudulent transaction where neither the card nor the cardholder is present while conducting the transactions.

Potgieter also noted that losses related to account takeover card fraud increased by 100.5% (from R1.1 million in 2012 to R2.2 million in 2013). Credit card fraud losses associated with account takeover fraud accounted for 0.5% of the overall credit card losses. Although the percentage increase is high, the associated loss is still relatively low, she said.

She believes continuous consumer education and awareness among bank clients of the need to protect personal information like ID books, bank account details, payslips, and rates and taxes may have contributed to the decrease. The banking industry is also constantly improving its internal systems to ensure early detection of this type of fraud.

Skimming danger

Sabric says handheld skimming remains a threat in the card fraud environment and is one of the major contributors to counterfeit card fraud.

Card skimming involves the illegal copying of encoded information from the magnetic strip of a legitimate card, by means of a card reader, with the intention to use the data for encoding counterfeit, lost, or stolen cards to transact fraudulently, Potgieter noted.

She revealed that from 2005 to September 2013, a total of 1 281 handheld skimming devices were recovered by investigators, with 129 of these being seized between January to September 2013. During 2013, she added, the majority of handheld skimming devices were recovered in Gauteng (57), Mpumalanga (21) and the Western Cape (12). There was an increase in the number of devices recovered in Limpopo (11 compared to three in 2012), she noted.

"Cards can be skimmed at ATMs or at points of sale and, therefore, bank clients are urged not to accept assistance from anybody at ATMs and not to let their cards out of sight when transacting," Potgieter urged.

Also speaking at the event, Hawks spokesperson Captain Paul Ramaloko said the majority of the skimming devices recovered are locally made. He also noted that criminals typically target isolated ATMs and there has been evidence of some rogue bank employees colluding with the criminals.

Ramaloko said while the figures were worrying, banks need to do more in educating their clients about securing their transactions.

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