SA mobile banking fraud on the rise

The Ombudsman for Banking Services (OBS) has noted an increase in complaints as mobile and internet banking fraud increased, according to its 2012 annual report on banking services.

In the report, advocate John Myburgh, chairman of the board of the Ombudsman for Banking Services (OBS), said that the growing mobile customer base has spurred banks to launch ever-more innovative mobile payment options.

With an estimated 13-million unbanked South Africans, the potential for such products is immense, he said.

The downside of the trend is that more citizens will be susceptible to cybercrime, which itself is a hotbed of innovation as the fertile imaginations of fraudsters constantly devise inventive and more devious ways of preying on unsuspecting consumers.

The OBS is urging banks not to compromise on security, particularly in the light of an increase last year of 3% in internet banking fraud cases crossing the desk of the Ombudsman’s adjudicators.

Cellphone banking fraud cases rose by 8%.

“There has never been a greater need for security and control in the banking environment, specifically on the digital highway,” Myburgh said.

“This is not only because of the rise in internet banking fraud, but because the banks have a duty to commit to the Code of Banking Practice, which calls for safe, secure and reliable banking and payment systems.”

Changes on the way

According to Myburgh, banks now have to take the Protection of Personal Information Act into consideration, which, when enacted, will oblige banks to ensure that their dealings with customers on the need for disclosure of personal information are transparent and that the information is handled extremely sensitively.

The Financial Services Board (FSB) initiative, Treating Customers Fairly (TCF) requires banks to step up safeguards and controls to protect the consumer.

“Security means more than identifying the risks and sanctioning the fraudsters. Solutions must be tailored to specific sectors and operations, and they must keep pace with the growing sophistication of attacks on banking systems,” Myburgh said.

Increase in complaints

In 2012, the OBS saw an increase in cases opened. There were 4,450 complaints filed, an increase of more than 800 over 2011.

Of these, 2,387 cases were found in favour of the bank, reducing the number of cases in favour of complainants from 47%, in the previous year, to 42% for the year in review.

This was attributed to an increase in the number of cases judged to result from debt-stressed consumers requesting relief from their banks in the form of extended repayment terms or reduced interest rates, rather than instances of bank maladministration.

In keeping with previous years, ATM-related complaints were the most predominant, with more than 2,000 being investigated. Second were internet banking complaints, with a total of 1,160 files opened.

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SA mobile banking fraud on the rise