April 2015 Issue

Our 'Newsletter on Financial Fraud' is your monthly insight into the various new fraud types and methods used by fraudsters globally in the banking space. 

In this issue, we bring to light the effect of banking fraud creeping in and making banks lose millions to this plaguing menace.

Credit card of the future could stop fraud


As banks seek to reduce fraud, one credit card maker has a prototype with a constantly-changing code on the back. Recently, an early model was received from the French company Oberthur Technologies and it is expected to be widely used by 2017 if it catches on with major banks.

The mini ink screen is powered by a lithium-ion battery (like a phone) the size of a postage stamp that's designed to last three years. A computer chip randomizes the number every 40 or 60 minutes.

Engineers have managed to squeeze it all into a regular, 0.76 millimeter-thick card.

The changing code renders the card useless to anyone who has written down your credit card number, expiration date and the code on the back.

And it would be a more complete solution than the one currently being implemented by the industry.

The American credit card system is already undergoing a huge, $33 billion upgrade to computer chip-based smart cards. But the way U.S. banks are upgrading credit cards won't actually stop fraud. It'll just move online, where anyone can use stolen card data for purchases that only require static credit card numbers.

Hence, the value in a dynamic CVV code (that number on the back of your card). This approach makes it a temporary password verified by your bank with every transaction, so stolen data is useless after the first few minutes. "The hope here is that the dynamic CVV will severely cut down on fraud," said Martin Ferenczi, Oberthur's top executive in North America.

One major barrier, though, is that each card is 50 times more expensive than the magnetic stripe cards still being issued by banks in the United States. And it's 10 times more expensive than the latest chip-based cards. Oberthur will be trying to convince banks to upgrade their cards -- just two years after the current upgrade.

Ferenczi said the reduced fraud costs and minimized headache to customers is worth it. And the added features help. The card can be swiped, dipped or even tapped at checkout.

Source: CNN Money

Online Banking Fraud up by 48%


Losses from online banking fraud rose by 48% in 2014 compared with 2013 as consumers increasingly conducted their financial affairs on the internet. The rise is due to increased use of computer malware and con-artists tricking consumers out of personal details, Financial Fraud Action said.

In addition, fraudsters are targeting firms in order to steal bigger amounts. Overall losses on UK cards from fraud totaled £479m in 2014, up 6% on 2013, according to Financial Fraud Action.

Anyone who is the victim of fraud on their cards is refunded unless it is proved they have been negligent. The action group said that banks and card providers had tightened up their security features. Fraudsters have now shifted their attention to tricking people out of their personal details with scams and tall stories on the phone.

It is calling for a nationwide campaign to raise awareness of deception crimes. It has also encouraged people banking online to ensure they have the latest anti-virus software installed - which may be available free of charge from their bank.

The figures also showed that losses caused by criminals using UK cards fraudulently abroad, where they can circumvent some security features, were up sharply. Losses increased to £150.3m in 2014, up 23% from the previous year.

Source: BBC

Banks’ losses to fraud hit N203 billion in 14 years


Total losses by Nigeria’s Deposit Money Banks due to fraud related cases have been put at about N203 billion in the last 14 years.

The development, which still persists in the industry, with sophistication and some unreported cases by some financial institutions however, is not peculiar to the country, but globally.

But the stakeholders- the Nigeria Electronic Fraud Forum (NeFF), Nigeria Interbank Settlement System (NIBSS) and DMBs, appear more worried as the fraudsters become more ingenious in an effort to undermine every security measures put in place, duping unsuspecting customers of banks and corporate organizations of billions of naira.

Citing NIBSS reports on the loss of revenue to fraudsters, Executive Director of Operations, First City Monument Bank, Nath Ude noted that between 2000 to the first quarter of 2013, banks had already lost N159 billion, and subsequently lost N40billion for the rest of the year, while from January to September 2014, they also lost N4 billion.

According to him, fraudulent activities are on the increase, which amount to severe consequences for the financial industry in Nigeria, even as most electronic fraud is from insiders- including dedicated employees. He said banks could curb insider abuse by watching out for warning signs like employees living above their means, frequent manipulation of data by employees and continuous, excessive use and abuse of privileged and systems account.

According to him, in 2014 there was a record of 1,461 fraud cases, with attempted value of N7.8 billion and actual loss value of N6.216 billion. Therefore fraudulent cases help to emphasize the need for more security measures in handling payment cards as individuals, and improved security practices as corporate bodies to help minimize fraud rates.

Source: The Guardian

Types of Fraud in Banking


Fraud is an escalating threat for banks. Technological advancements and changing customer preferences have opened up new avenues of banking for modern consumers. But these channels of convenience have also attracted massive threat from fraudsters.  For instance, 41% of customers globally who have been victims of financial cyber fraud have failed to get even a single cent back. Fraudsters have not only perpetrated direct channels but have also gained entry within the banking system as insiders.

The following infographic throws light on the different kinds of frauds prevalent in banks and how use of innovative real-time anti-fraud technology mitigates & prevents bank frauds from taking place.

Types of Fraud in Banking


Source: CustomerXPs

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