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South African Credit Card Fraud Increases

The South African Banking Risk Information Centre (SABRIC) is concerned over the increase in card fraud. The banking industry’s gross fraud losses due to South African issued credit card fraud increased by 23% from R366m in 2013 to R453.9m during the period January to September 2014, writes Kalyani Pillay.

The biggest contributor to the increase has been False Application fraud which saw a very significant increase from R6.2m in 2013 to R78.3m in 2014.

Of all fraud perpetrated on cards acquired through false applications, 88% of the transactions occurred in South Africa. SABRIC found that criminals misuse the online application channels provided by Banks, by using false details to open multiple credit card accounts. Consequently, they then obtain legitimate cards and PINs.

SABRIC was pleased to announce that counterfeit credit card fraud losses inside South Africa decreased by 12% from R55.1m in 2013 to R48.4m in 2014. To the contrary though, Card Not Present fraud committed within South Africa increased by 21% from R56.7m in 2013 to R68.9m in 2014.

The losses associated with debit card fraud also showed an increase of five percent from R117.7m to R123.5m in 2014. The majority of the debit card losses are related to counterfeit card fraud and most of the transactions occurred within South Africa. When debit cards are used outside of the borders of South Africa a high percentage of the cards are used in neighbouring countries such as Lesotho, Namibia, Zimbabwe, Mozambique and Botswana.

Credit card fraud is most prevalent in the Provinces of Gauteng, the Western Cape and KwaZulu-Natal as they collectively accounted for 88% of all credit card fraud losses in South Africa. These provinces also recorded the highest number of skimming devices retrieved. From 2005 to September 2014 a total of 1 377 handheld skimming devices were recovered by either SAPS or bank investigators, with 74 of these seized between January and September 2014.
The majority of handheld skimming devices were recovered in Gauteng (38), KwaZulu-Natal (13) and the Western Cape (9).

Card skimming involves the illegal copying of encoded information from the magnetic strip of a legitimate card by means of a card reader, and this could occur either at ATMs or points of sales. SABRIC urges all bank customers to adhere to ATM safety tips such as not accepting assistance from anybody at the ATM and not letting their cards out of their sight when transacting.

Card Not Present (CNP) fraud is still a major contributor to the overall losses on South African issued cards, according to the current fraud trends. CNP fraud continues to experience an increase and the majority of the card fraud transaction take place at foreign merchants.

Whilst counterfeit card fraud still remains problematic, the banking industry is pleased that current information shows a downward trend. This could be attributed to the roll-out of Chip & PIN. The banking industry is however concerned with the increasing threat of stolen card fraud. Cards are swopped in the vicinity of the ATM and cash withdrawals are done fraudulently soon thereafter but before the card holder notices that the card has been stolen and takes action to stop the card. The industry is happy to report that false applications for credit cards have dramatically decreased.

Tips to avoid falling victim to card fraud:

Be cautious of strangers offering help as they could be trying to distract you in order to get your card or PIN.

Keep your transaction slips and check them against your statement to spot any suspicious transactions which must be queried with your bank immediately.

If your card is retained, do not leave the ATM before you have cancelled your card by calling your Bank’s call centre using your own mobile phone.

Never let the card out of your sight when making payments and if possible insert the card into the POS device yourself.

Do not ask anyone to assist you at the ATM, not even the security guard or a bank official. Rather go inside the bank for help.

• If you are disturbed or interfered with whilst transacting at the ATM, your card could be skimmed by being removed and replaced back into the ATM without your knowledge. Cancel the transaction and immediately report the incident using your Bank’s Stop Card Toll free number which is displayed on the ATM or on the back of your bank card.

Download the 2014 Card Fraud statistics here.

About the author: Kalyani Pillay is the CEO of the South African Banking Risk Information Centre (SABRIC).

About SABRIC: SABRIC is a NPF company formed by South African banks to support the banking industry in the combating of crime. Its principle business is to detect, prevent and reduce organised crime in the banking industry through effective public private partnerships. SABRIC co-ordinates inter-bank activities aimed at addressing organised bank related commercial and violent crime and acts as a nodal point between the banking industry and others, in respect of issues relating to crime.

For more on SABRIC visit www.sabric.co.za