Facts on Fraud: Application Fraud

Compuscan has decided to bring training to our many, many valued clients in the form of monthly information pieces in our newsletter. These pieces can be used a “quick reference guides” and will prove to be insightful and promise to increase your knowledge and understanding of various aspects within the credit arena.

In previous newsletters we provided information on the importance of creditworthiness and affordability and during the months to come, we would like to provide you with some facts on fraud. Last month we highlighted money laundering fraud. This month’s article continues with common banking fraud. But firstly what is the definition of fraud actually?

Dictionary.com has the following explanation:

1. Deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
2. A particular instance of such deceit or trickery: mail fraud; election frauds.
3. Any deception, trickery, or humbug: That diet book is a fraud and a waste of time.
4. A person who makes deceitful pretences; sham; poseur.

This month we will be dealing with application fraud. This is considered to be one of the more common types of fraud in South Africa.

Perpetrators may use identity documents, payslips, bank statements and other source documents when a credit provider is approached. Some or all of these documents may be forged, whilst some of it may have been stolen/illegally obtained and some of the details changed.

This constitutes Application Fraud.

Any person conversant with a credit application will know that apart from providing proof of identification, a credit provider will also call for proof of income and will scrutinise other documents before paying out a loan.

We will now discuss preventative measures for application fraud.

Preventative Measures – Identity document:

A typical example of identity fraud would be if a person uses the identity document of a third party to open a bank account and later apply for credit or using false employment details to qualify for credit. Parts of the identity document may be altered.

If you are a credit provider employees may follow certain guidelines to verify identity documents to ascertain if the document is real:

• The surname and initials on page 1 and 4 should correspond.
• The surname and identity number should correspond on pages 1 and 4.
• The fonts on page 1 and 4 should correspond.
• The person's gender should correspond with the numbering according to the identity document.
  
  • The first six digits contain the date of birth in year-month-day format.
  • The next four digits represent the gender of the person and the number of people born on that day. A number between 0001 and 4999 shows a female whilst a male will have the number between 5000 and 9999. The 8th, 9th and 10th number shows the number of people born on that day.
  • The next two digits indicate citizenship. A South African citizen will have the number 08; 18 that of a non-South African citizen and 26 if the holder has been granted refugee status or political asylum.
  • The last number is a Home Affairs computer generated checksum.
    
• The holder's citizen status should correspond with the identity number.
• There should be no lettering visible next to the actual photograph.
• Check for signs of glue holding the picture in place on page 1.
• Check the alignment of the letters and words (horizontally & vertically).
• Compare the photograph on the document with the actual person.
• Check the watermarks on the pages in the ID document

Make sure any personal information in your home is locked up so that anyone working at your house can't find it. Also ensure that you keep your personal belongings at work locked in a safe place. Look after your ID book and always keep a certified copy at home of the entire book. Apply for one as soon as possible at Home Affairs.

What do you do when your Identity book is stolen or you suspect that you are a victim of ID theft?

• Notify the police and your bank that your book has been stolen
• Notify the South African Fraud Prevention Services
• Notify credit bureaus for fraud alert so that creditors are required to call you before it is granted
• Monitor your credit report; you may obtain your credit report from Compuscan. This report is available for free in their birthday month at other times there is a nominal fee.

Section 73 (1) (b) of the NCA states that for the first 12 months from the 1st September 2006, the right of every person to inspect any credit bureau or national credit register file or information free of charge as per section 72 (1) (b) (i) (aa) may only be exercised during or after the month in which the person was born.

Preventative measures – Payslip:

The first item that may be forged apart from the identity documentation may be the proof of income i.e. the payslip or salary advice. In many cases the perpetrator may even obtain this from a syndicate who specialises in forged payslips and even provide a verification service in case anyone contacts the fictitious employer.

As a first defence, it should be noted whether the following appears on the payslip:

• Employer’'s details.
• Employee’s name and occupation.
• The period for which the salary was received.
• The total salary.
• Deductions.
• Verify that no additions were made to the document.
• Verify names and identity numbers.
• Calculate whether summary data on the pay slip makes sense in terms of deductions and/or salary.
• Look for the type of deductions made and whether it corresponds with the income profile.
• The name and other details of the employer should be credible.

In order to verify the legitimacy of the applicant's income, the credit provider needs to ask the consumer about more details regarding the employer and the type of work the applicant does. Note should be taken if anything suspicious appears at this stage. The consumer may be asked to provide the following information:

• How long he/she has been in the employment of that specific organisation.
• The current position filled and the job title.
• The name of the manager/supervisor of the consumer.

The employer may be contacted and the same questions asked to verify the details. Many credit providers will only allow applications from employer organisations appearing on an approved list.

Preventative measures – Bank Statement:

In order to accompany a falsified payslip, the perpetrator will also require a matching bank statement. With computer technology it is obviously easy to forge such a document and even authentic looking bank stamps may be forged. In light of this the credit provider and its employees need to be doubly careful.

Certain safeguards may be employed toprotect the credit provider against fraudulent attempts involving bank statements. These include:

• The name of the account holder should appear on the statement.
• The identity of the account holder and the applicant should correspond without any doubt.
• Check balances carried over from one page to the next.
• Verify that the payment into the account corresponds with amounts on the payslip.
• The bank's logo should be the correct size, pattern and colour.
• Amounts should add up correctly.
• The spelling of the customer's name should correspond with all other details.
• Transaction fees on the statement should be correct.
• No transaction should be duplicated and needs to conform to the expenses and income of the customer.
• Letter fonts should be typical to the ones used by the particular bank.
• When the statement uses summary balances per page, the total of the transactions on the page should balance with the summary.

A credit provider may also choose to contact the bank in question. The following should be carried out:

• Verify the bank's branch code.
• Obtain the name of the official spoken to.
• Obtain all other details.

When procedures are followed in terms of the organisation's response to the National Credit Act, the credit provider will most probably consult external sources such ascredit bureaux and will further be able to verify the authenticity of the person and the transaction that is in the process.

It should then be apparent that sticking to the rules in terms of credit applications will also provide the real benefit of avoiding the risk of fraudulent applications.

Should any of the above appear suspicious, you can contact the South African Police Services (SAPS) and the South African Fraud Prevention Services (SAFPS).

Their contact numbers are:

SAPS Help-Line: 10111

SAFPS (South African Fraud Prevention Services)Help-Line: 0860 101 248
Tel: +27(0)118696460
E-mail: [email protected]

Compuscan Academy has a Fraud Prevention and Monitoring course based on the following Unit Standards - 13442: Manage and prevent fraud in a micro-finance institution and 110026: Describe and assist in the control of fraud in an office environment.