Digitisation, social media fuelling rampant fraud in SA

Digitalisation and social media have exposed South Africa to more risk, with a significant rise in fraud – specifically money muling and impersonation, says the Southern African Fraud Prevention Services (SAFPS), an NGO focused on fraud prevention and financial crime.

The organisation released its 2023 Fraud Statistics, which details fraud incidents from April 2022 until the end of April 2023.

According to the statistics, fraud is on the increase, with money muling and impersonation fraud dominating the landscape.

Manie van Schalkwyk, CEO of the SAFPS, says: "It is concerning that fraudsters are getting more brazen and that the level of certain fraudulent activities is increasing rapidly.”

According to the SAFPS, money muling incidents increased by 62% compared to the year before.

The NGO explains that one of the most common forms of money muling is when a victim is approached by someone claiming that they need to send money to a family member in another country and they need a bank account to perform this transaction. Wanting to help, many people willingly let these fraudsters use their bank accounts.

The SAFPS says while this may seem an innocent crime, research from Cifas in the UK points out that money muling funds activities such as drug and human trafficking and terrorist activities.

Van Schalkwyk continues: “The repercussions of being a money mule are significant. The guilty party will be listed with the SAFPS and the result is that the individual could struggle to get access to finance for a period of 10 years. It is one of the biggest issues that the SAFPS is currently facing and it is important for the public to know about the seriousness of this crime.”

According to the SAFPS, in 2021, money muling only comprised 22% of the fraud incidents reported to the SAFPS. This increased to 35% in 2022 and 43% in the first four months of 2023.

Statistics indicate that impersonation fraud has increased by 356% over the past year. This can be attributed to data leaks and compromised personal data, which has shown a significant recent increase in South Africa.

"South Africa is investing heavily in digitisation to catch up with the rest of the world. However, while digitisation will revolutionise the South African economy in the future, it has risks. According to a 2021 Interpol report, South Africa tops Africa in cyber threats and is third in the world, with 230 million threats detected in 2021. Of these, 219 million threats were related to e-mails," says Van Schalkwyk.

He adds that scams whereby fraudsters assume the identity of a victim are also a significant challenge and showed a 236% increase over the same period in 2022.

"There has been a marked increase in the use of forged documentation, which has increased by 62% over the same period in 2022. Other forged documentation instances include fake driver's licences, which can be used as a form of identification when applying for credit. This is a risk that the SAFPS is keeping an eye on in the future," says Van Schalkwyk.

SAFPS research shows that Gauteng is the country's biggest hotbed of fraud, where 66% of the fraud incidents reported to the SAFPS came from SA's economic heartland. This was followed by KwaZulu-Natal, which made up 17% of the incidents reported to the SAFPS, and the Western Cape, which made up 8% of the incidents reported.

"As you can see, there is a significant increase in the fraud landscape," says Van Schalkwyk, "we cannot stand by and continue to take a reactive stance when it comes to combating fraud. The SAFPS has recently launched two platforms, which will significantly change the narrative when shifting the pressure from consumers to fraudsters."

The first platform is Yima, a website that consumers can use to report scams. Additionally, users can use Yima to determine whether a website they want to visit is a genuine website or a proxy website. Finally, users can tell their stories and read about the stories of other victims.

The growth of social media has also become a major hotbed of fraud, with many issuing serious warnings when conducting retail business with third-party sellers (as is the case with platforms such as Facebook Marketplace).

While this is a challenge, it cannot be ignored in the future as these platforms will generate US$1 trillion of income over the next five years.

The second platform is also an SAFPS subsidiary company, Secure Citizen, which developed the functionality for individuals to validate other sellers when performing a transaction.

Arthur Goldstuck, CEO of World Wide Worx, says six years ago his company warned that the growth in the number of South Africans with internet access (fuelled by mobile internet becoming more affordable and available), would result in a spike in cyber crime targeting individuals.

“The reason is that novice uses of the internet are ignorant of the dangers and risks associated with both the sites that they visit and the e-mails they receive. When one has not been exposed to e-mail spam and phishing campaigns, one is unlikely to recognise these for what they are. The same applies to fake job offers or get-rich-quick schemes that pop up via social media in particular.

He adds: “We talk about the digital participation curve, which shows that the longer someone is online and therefore the more experienced, the greater is their ability to participate in the digital economy through the likes of online banking and online shopping. The flip side of this equation is that the less time someone has been online, the more likely they are to fall victim to scams. With that participation curve rising rapidly over the past five years, it has brought with it an ever increasing pool of potential victims. Ironically, increasing access has also resulted in increasing cyber crime.”