Category Fraud/Crime

Being vigilant is key

03 October 2018 Jonathan Faurie

Cyber crime has changed the nature of fraud in the financial services industry. This complicates investigations, particularly when it comes to the issue of identity theft.

There has been a lot of identity theft in the past, but it has never been this easy to commit these crimes as it is now. This was a focus at the recently held Fiduciary Institute of Southern Africa (FISA) Conference. 

Steven Powell, Head of ENSafrica’s Forensics Department, said that there has never been a time when criminals are so opportunistic. He added that there has also never been a time for companies and individuals to be more vigilant than now.  

Top of the pops

In the past, the theft of a person’s ID Book was one of the most popular crimes in the country. 

Powell pointed out that this is still a popular crime as syndicates are on the lookout for high value targets who would give them access to significant wealth. 

“Fraudulent ID factories create authentic looking documents that they will use to open new retail or credit card accounts, submit false claims against investment policies, insurance policies and medical schemes. Further, these syndicates will impersonate you and use your bank account to perform transactions,” said Powell. 

He added that these syndicates will also transact on store accounts and open companies in a person’s name at the Companies and Intellectual Property Commission (CIPC). They can also change bank accounts and receive tax refunds. 

Making headway

The impact that fraud, and other forms of white-collar crime, has had on the financial services industry has traditionally been hard to quantify. Previously, insurers were reluctant to release statistics on how fraud affects their business. 

This has changed, insurers are collaborating more on this issue in the hope that a collective effort will result in better strategies to combat these effects. 

At the 2018 Insurance Fraud Conference, it was pointed out that fraud could have cost the long term insurance industry R1,03 billion in 2016. In the same year, fraud could have cost the short term industry between R3 billion and R4 billion. 

There has also been a steep increase in the number of life insurance claims and the Association of Savings and Investments South Africa (ASISA) pointed out that if fraudulent claims went undetected in 2014, the industry could have lost as much as R755,2 million to 8 306 cases. 

Criminal profiling

It was also pointed out at the Insurance Fraud Conference that it is hard to profile cyber criminals as they are hidden and can commit crimes without being within the vicinity of the target. 

However, at the FISA Conference, Powell pointed out that when it comes to identity theft and white-collar crime, we may possibly know more about these criminals than previously thought. 

“White collar crime statistics reveal that more than 80% of fraud involves internal employees, most of whom have more than five years of service at the company. Many companies who fall victim to fraud rely on trust rather than controls; the fraudster could be your most capable, most reliable and most trusted employee,” Powell added. 

He added that, generally, the profile of the typical fraudster is a person who is older than  30 who has a stable family situation, an above average education, and is a first time offender. 

“The fraudster is often the last person who anyone would suspect and the red flags are often ignored due to high levels of trust that the employee holds within the company,” said Powell. 

Steps towards crime

What motivates these employees to commit fraud/other forms of white-collar crime? 

“Fraud takes place when employees are under pressure to identify opportunities to

commit fraud. This is coupled with the perceived low risk of detection,” said Powell, “the employee will justify committing acts of dishonesty by rationalizing their behaviour. Rationalization takes the form of finding justification for the behaviour by trying to remove the moral stigma associated with fraud.” 

He adds that some of these rationalisations include statements like:

  • the company makes huge profits but does not pay us enough;
  • the company has retrenched a lot of staff and I was scared I was next; and
  • I should have been promoted long ago. 

Fraud pressures

If the management of a company are vigilant, it is possible for them to raise some red flags before fraud is committed. 

“Often, formally honest employees commit fraud because of pressure which presents itself in a variety of ways. This includes living beyond their means, insecurity regarding their job position, retrenchments, and trigger events such as divorce and extra marital affairs. Medical emergencies are often also significant trigger events,” said Powell. 

He added that the opportunity to commit fraud presents itself in a variety of forms. These include a weak control environment, shared passwords, the limited segregation of duties, a limited independent review of the person or their duties, and poor management oversight. 

Editor’s Thoughts:
Being forewarned is forearmed. Companies can use technology to their benefit when fighting against fraud. How is it benefiting your business? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Added by Gerhard Joubert, 03 Oct 2018
Surely they key concern is that the POPI Act has still not been promulgated and the Regulations finalised - yet we have had an Information Regulator in place for some time..... (doing what?).

The Direct Marketing Information (DMASA) pretends to regulate aspects of the this industry, but has not taken action against any of the 25+ members of the association that Clique Marketing has reported to them.

This is making a hacking target of all South Africans, most other developed or developing economies have 2nd or 3rd generation data privacy regulations in place.

Be very very careful to whom you give your mobile phone, address or credit card details!
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