They don't ram-raid ATMs in South Africa, they pack them with commercial explosives and bomb the front off them. They don't ask drivers to get out of their cars before stealing from them either. They just shoot them. South Africa is a beautiful country with much to recommend it, but there are challenges in keeping hundreds of thousands of fans, their money and their cards safe.
Organized crime
Nigerian crime gangs for example are well embedded in South Africa, and can't wait for the FIFA World Cup to bring its bounty. Organized criminals generally will be treating the event as a party. They will be looking to steal cards, identities, cash and tickets. Their networks are sophisticated and fast, using insiders in banks, hotels and stores to copy personal information and card details, so that transactions can be carried out swiftly, before the cardholder is even aware of a problem.
Relaxed football tourists may have been told that it is foolhardy to walk far in Johannesburg, or to stop at red traffic lights, but after a few beers and a team win, will they remember to take care at an ATM, to keep their passport safe and to stay with crowds?
Jim Oakes (pictured below), consultant with fraud and risk consultancy Financial Fraud Risk, who is also VP of the Association of Certified Fraud Examiners UK Chapter, is very clear about the challenges the world's payment business face when their customers set out for the World Cup. Having previously worked as Financial Crime Director at Barclaycard, which has strong associations with South Africa through ABSA bank, he knows what he is talking about.
"South Africans have an inherent sense of security. They instinctively stay aware of what is happening around them; they wouldn't dream of going to an ATM after dark; they don't stop in the car, not even at a red light, and they keep their belongings hidden away. Football fans will get easily dehydrated, especially in Johannesburg (which is at 7,000 feet above sea level) so a few beers will have a significant effect. Then they won't be as careful as they should be."
For the banks and card issuers, the World Cup, as with any major sporting event, means that they must adapt their systems to allow for the fact that thousands of their customers will be behaving out of normal. Some will have systems that allow cardholders to call in to report they are traveling. Others will text to mobile phones so transactions can be confirmed. For all banks, whatever the level the sophistication of their systems, there will be the need for higher levels of staffing to deal with additional alerts, especially when outsourced centers are working in a different time zone to South Africa, and especially at weekends.
Said Oakes: "Fraud on cards will be greatest just before during and after a match, but the risk will carry on long after the trip. Some frauds won't come to light until a cardholder returns home."
The type of fraud that should trigger an alert for a card issuer are high value goods, including jewellery, electronics and white goods and other items not associated with a holiday.
Oakes said that using insiders, fraudsters will use stolen cards also for multiple small value transactions to reload prepaid cards, hoping the small value amounts stay under card issuers' alert criteria.
Red flags
Because banks have varying levels of risk appetite, some will red flag transactions or even stop cards when other issuers who are more customer focused will accept a higher risk, to avoid the customer being inconvenienced.
"There are a lot of transaction types that the banks should be scrutinizing," said Oakes. "Fraudsters will be trying to stay under the radar, and they are very skilled at this. Prior to the World Cup, banks should be setting up additional activity rooms to deal with the raised incidences of fraud, so they can track suspicious businesses. Countless businesses will have been set up purely to handle fraudulent payments."
Oakes says that online companies will be the hardest to crack.
"Some websites are as good as, if not better than the originals," he said. It is very difficult for the consumer to be sure they are not being rooked. And they won't know until the transfer taxi doesn't arrive or the hotel room doesn't exist. On their return, they may find that their card has been compromised and is continuing to be compromised after the event.
South Africa's card system has been in the state of migration to EMV for some years, but while acceptance is quite good, there are some big gaps. Additionally, even EMV cards can be used in non-EMV markets outside of South Africa, especially in North America.
Oakes added: "There is also the propensity for cards stolen in South Africa to be used in New Zealand, Australia and the Asia Pacific region. This is practice that is unusual for UK cards at least, and so should trigger an alert.
Concern
Oakes says he is concerned at how little discussion is going on about how the UK banking industry should collectively handle payments fraud during the World Cup. He said: "I am sure a great deal of activity is taking place, but there has been no collective discussion as to the potential and unique risks in South Africa."
A lot of media attention is being given to the danger of stolen cards and identity theft, but Oakes says this in itself may cause problems if people elect instead to take cash. "There is a 5,000 Rand (approximately £445) limit on cash being taken into South Africa for a start, so they may have their money confiscated at the airport, but more important is the threat that there may be more violent crimes if criminals believe people are carrying large amounts of cash on them. That could be very dangerous indeed in South Africa."
Article from Pretoria News, May 24
A series of ATM bombings in and around Pretoria the past two weeks has worried police who have intensified their investigations into the crime.
Since Friday, five ATMs have been blown up with commercial explosives.
At the beginning of the month police made a breakthrough with the seizure of two and a half tons of explosives at a home in South Hills, southern Joburg. The haul, which came after a tip-off to Primedia's Crime Line, was described as one of the biggest finds of commercial explosives in South Africa.
Police said the explosives were stolen from a container at City Deep. They believe it was the work of a syndicate involved in the bombing of ATMs across the country.
Police spokesperson Lieutenant- Colonel Lungelo Dlamini said the first in the spate of bombings was in Atteridgeville last Wednesday.
An Absa ATM was bombed by an unknown number of suspects. "Only one suspect wearing a balaclava was seen," he said.
On Friday, another Absa machine was bombed in Pretoria West, again by an unknown number of suspects. "An undisclosed amount of money was taken. No arrests have been made yet," he said.
On Thursday morning in Rayton, three ATMs - Absa, Nedbank and FNB - were bombed by a group of about 10 men travelling in separate vehicles.
"Commercial explosives were used and an undisclosed amount of money was taken.
"One of the vehicles suspected to have been used, an Audi, was later found abandoned in Mamelodi. The vehicle was stolen in Pretoria West in March," Dlamini said.
Police suspected that the ATM bombings in Rayton were committed by the same group, but other incidents have not yet been linked to the group, although that possibility has not been ruled out.
A forensic investigation is being done on the vehicle recovered in Mamelodi. Clues found on it may lead police to the identity of the suspects. "Police are concerned about the number of ATMs bombed in such a short time. Task teams are investigating.
Banks ill-prepared for World Cup
Actimize, part of NICE Systems, has issued a warning to the banking sector that it may have insufficient protection against fraud related to this year's World Cup.
A spike in fraudulent activity occurred when the FIFA World Cup final fixtures were announced, echoing a pattern that was followed at the Olympics and the previous World Cup.
Banks often face difficulties in identifying fraud during such occasions because legitimate transactions also increase in frequency, helping to mask the criminal activity.
Jackie Barwell, Actimize manager for financial crime products, warned of the highly credible phishing e-mails appearing, coupled with professional yet fraudulent websites designed to trick customers into divulging their personal details.
Barwell went on to say that the only way to combat such fraud was with a sophisticated approach involving behavioural profiling of card, customer and merchant.
Phishing remains a growing problem for the global banking sector, with solutions such as Rapport being adopted by HSBC in the UK and Standard Bank in South Africa, the host nation of this year's World Cup.
SABRIC says card fraud rising
South African credit card fraud losses increased by 5% to R443m, for the period July 2008 to June 2009 (compared with the same period in 2007/08) according to SABRIC, the South African Banking Risk Information Center.
- Fraud losses with South African issued cards inside the country have decreased by 6%, while cross border fraud increased by 23%
- Counterfeit card fraud losses have increased by 22%
- Lost and stolen card fraud losses have decreased for the first time by 34% to R100.2m
SABRIC CEO, Kalyani Pillay, comments: "The industry has experienced a steady increase of losses resulting from credit card fraud over the years. However, the positive development about the 5% increase in losses this year, while still undesirable, is that it represents a significant downward trend in the growth rate of industry card fraud losses when compared with the 30 percent increase experienced last year. The banks remain committed to raising the awareness of the public on the role it can play to support industry initiatives to mitigate bank card fraud".
Most of bank fraud losses with South African issued credit cards in 2009 occurred inside the country, and Gauteng, Kwazulu Natal and Western Cape provinces account for 89% of the losses. However, overall card fraud losses inside South Africa this year have decreased by 6%.
SABRIC attributes the decline in card fraud inside the country to the decrease in certain card fraud types as a result of robust industry crime prevention measures, including public awareness. Pillay explains: "The impact of the reach of Chip & PIN technology on the abuse of lost and stolen cards is beginning to be noticed. This is further supported by the industry's Real Time Crime Risk Management which facilitates the immediate detection of, and response to, incidents of fraud at merchant level".
Counterfeit card fraud is the primary fraud loss category this year, having increased by 22% to R144m. Most of the banking industry's financial losses resulting from counterfeit card fraud occur within the borders of South Africa. Pillay says: "Skimming of cards via hand held skimming devices still remains the main modus operandi to obtain information to manufacture counterfeit cards."
The partnership that the banking industry has forged with government, especially the South African Police Service and other law enforcement agencies, has been one of the key factors in the progress made to reduce bank related crime especially with the retrieval of skimming devices, particularly at the ports of entry.
Category figures
Banking industry financial losses resulting from lost and stolen card fraud have decreased by 34% this year. This is while the abuse of lost and stolen cards had been the primary card fraud loss category for last year.
False Application Fraud and Account Takeover Fraud decreased by 54% and 42% respectively, maintaining the downward trend experienced last year. Meanwhile, Card Not Present fraud increased by 45% this year, alongside fraud committed with genuinely issued cards that did not reach their recipients (up by 35%).
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