A surprising number of South Africans think it’s okay to commit fraud

 ·16 Nov 2022

A global data analytics company Fair Isaac Corporation (FICO) survey found that 42% of South Africans find it acceptable to commit first-party fraud – with FICO’s head of operations in Africa, Michelle Beetar, pointing to the rising cost of living as the reason behind the findings.

The respondents who find it acceptable to commit first-party fraud believe that behaviours such as exaggerating income on applications for credit or inflating insurance claims are either okay in some circumstances or normal behaviour, said FICO.

According to the report, the types of first-party fraud South Africans find acceptable include:

  • Exaggerating one’s income when applying for loans, cell phone contracts, vehicle finance or a mortgage;
  • Exaggerating the value of property in an insurance claim; and
  • Adding items to a claim that weren’t even lost, stolen, or damaged in the first place.

The top three most common cases of fraud seen as normal among the respondents were lying about their income when applying for a cellophane contract, bank account and vehicle finance – all of which exceeded 40%.

By contrast, South Africans surveyed were circumspect about attaching items to an insurance claim that weren’t lost, stolen, or damaged – with less than 25% saying they would commit this type of fraud.

However, almost 40% of respondents said they saw no problem inflating the property value in an insurance claim.

“While most think that people should never take these fraudulent actions, it is worrying that as many as 42% find it acceptable in at least some circumstances,” said Beetar.

He noted that the likely reason behind this sentiment among the survey participants is that many South Africans are experiencing a rise in the cost of living and might consider that they can ease their circumstances by falsifying information in credit applications.

However, he said this misrepresentation of information is outright fraud and warns consumers against such actions.

Beetar added that financial institutions need to be vigilant in this regard to protect not only themselves but also the consumer.

“Financial institutions that can spot anomalies suggesting that information is being exaggerated or misstated can take positive action to protect themselves from losses which would occur when the customer cannot afford the repayments, and the customer can be prevented from going down a path they will end up regretting,” he said.

Rise in cases

The FICO findings align with fraud data from the South African Banking Risk Information Centre Annual Crime Statistics (Sabric).

The latest Sabric report shows a drastic increase in the number of fraudulent Vehicles Asset Finance (VAF) applications as well a slight – but felt – increase in home loan fraud.

Sabric looked at fraud-related information provided by major financial institutions such as Capitec, Bidvest, Absa, Discovery Bank, FNB, Standard Bank and others and found that criminals are taking it upon themselves to try their luck in getting their hands on large sums of money.

Vehicle financing company Wesbank reported that the average value of cars financed in August of this year was R337,252.

According to Sabric, 2021 saw a 53% increase in the number of VAF cases, up from 13,095 occurrences in 2020. The potential value of loss from these criminal activities is valued at around R7.3 billion in total.

Over 2021, Gauteng and KwaZulu-Natal at 38% and at 24% respectively, accounted for more than half of reported fraudulent applications nationally.

Home loans, on the other hand, can end up being upwards of millions as the national average purchase price of a home, according to Ooba, is R1,389,715.

Mortgage loan fraud applications saw a 1.6% increase in 2021, compared to the year before, with 2,700 cases being reported. Sabric added that this meant that potential losses increased to a total of R3.4 billion.

Read: Criminals have a new target in South Africa

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