Credit card fraud increased by just over half this year, and illicit transactions perpetrated without cards being present are gaining momentum.
The South African Banking Risk Information Centre (Sabric) says the banking sector's loss from credit card fraud was 53% higher for the year to end-September 2011. Total losses to the sector amounted to R403.15 million, an increase from last year's R263.8 million.
Sabric CEO Kalyani Pillay notes that the increase this year must be seen in the context of the sector's aggressive efforts to increase market share as the market matures. “The higher volumes of cards in the market provide more opportunities for credit card fraudsters to carry out scams.”
Card not present fraud, which is committed online or through telephonic purchases, increased 77% and is now the second most prevalent form of fraud in SA after counterfeited cards. The banking sector lost R142.8 million this year, up from 2009/10's R80.9 million.
Sabric GM of commercial crime, Susan Potgieter, says card-not-present fraud is growing, although this is off a low base. She explains that, as shoppers move online, criminals are following them.
In the 2007/8 year, card not present fraud cost the banking industry R84 million, a figure that remained fairly stable until this year, when it shot up to R142.8 million.
Sabric says in its report that, according to the Financial Fraud Action UK, fraud losses on UK cards decreased 9% from January to June 2011, compared to the same period in 2010. Card not present fraud is the highest loss category, responsible for 64.3% of the total losses in the UK.
Not alone
Potgieter notes “data is a sought-after commodity by criminals”. Credit card fraud is an “international” scourge, she adds.
Counterfeit card fraud increased 63% to R176 million from R89 million and accounts for 57.2% of overall losses to the banking sector this year, says Sabric. The association this morning released its annual card fraud statistics.
In the 2007/8 year, credit card fraud cost the sector R462 million, which declined to R409.4 million a year later.
Counterfeit card fraud usually happens when the cards are illegally manufactured using information stolen from a genuine card, which is typically perpetrated through skimming, says the association.
Potgieter notes that 159 handheld skimming devices were retrieved this year, up from 190 last year. In addition, 38 ATM-mounted skimming units were removed this year, slightly up from 36 in the 2009/10 year.
Pillay adds that banks have seen an increase in the number of cash withdrawals at ATMs through the use of counterfeit cards.
Account take-overs, which happens when criminals “step into [consumers'] shoes and ride the wave of their credit worthiness” is increasing, although off a low base. Potgieter explains that it is easier to take over a person's credit history than it is to fabricate one.
This year, account take-overs accounted for R800 000 in losses compared with R200 000 last year, she says. Gauteng accounted for the bulk of this activity.
Potgieter adds that fraud is expected to increase during the festive season as commercial activity picks up.
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