Relentless in the fight against fraud, 2020 and beyond


Sydney Maluleka | Head | Internal Audit | Iemas Financial Services | mail me

Bank hackers, email phishing scams and identity theft are synonymous with fraud in the financial sector. According to a statement by the South African Banking Risk Information Centre (SABRIC), more than R800 million were lost over the last couple of years in South Africa due to fraud.

We are no stranger to the business and reputational risks of fraud. I share some insights on fraud in the financial sector and in the context of a financial co-operative.

The main contributors of fraud

From our perspective, we found that most cases of fraud involves some kind of identity theft. This type of fraud can take on many forms, from the involvement with a syndicate to cyber hacking to gain access to an individual’s personal information to using a person’s identity to obtain funds unlawfully.

New trends or activity from fraudsters 

The latest trick up the criminal’s sleeve is the use of a money mule. These are individuals with a clean credit record that serves as intermediaries for syndicates.

Willingly or unwillingly, these individuals are used to transfer money unlawfully to fraudsters. In essence, their identity is used to obtain the funds fraudulently, although the funds will ultimately be transferred to the syndicate.

The industry’s biggest challenge

Fraudsters are getting more intelligent and technologically advanced by the minute. So one of our biggest challenges is to continuously develop and utilise the latest technology and prevention methods to counter the onslaughts and to stop fraud.

However, these systems are extremely costly and have to be tested and updated on an ongoing basis. Fraud has a massive impact on our business; not only financial damage (as in most cases stolen funds cannot be recovered), but also reputational damage.

Consumers have to feel safe when it comes to placing their money in the hands of a bank or any other accredited financial institution. We need to do everything we can to make sure they can do so.

Are we more at risk when it comes to fraud?

Consumers who take up our products are referred to as members as they automatically join our business. They have a say in how we run our business and receive annual profits.

So, if we lose funds due to fraud it directly affects our members and employees financially as it will have an impact on our profits and benefits and ultimately the share that they receive.

Systems in place to fight and prevent fraud

We have a number of mechanisms in place that works both individually and in combination with one another creating an overall internal control environment.

For example, we have a very effective fraud hotline that relies on the eyes and ears of our members, employees and the general public.

We also work very closely with external parties who share this risk, such as the banks, TransUnion, Home Affairs and the police to fight fraud. Our close relationships with these institutions assist us with fraud alerts, verifying personal details and prosecuting fraudsters.

Future plans in the pipeline to increase fraud prevention

As I mentioned previously fraud prevention is an ongoing and ever evolving process. We are investigating opportunities with the South African Fraud Prevention Service to enhance our current fraud systems including the introduction of random polygraph testing for employees on an ongoing basis, as well as using big data analytics and Artificial Intelligence.

A lot of financial institutions already include mandatory random polygraph testing as part of their employment contract with their employees. In addition, we may evaluate annual credit score checks and lifestyle audits on employees.

This way we can start ‘at home’ making sure that our employees do not fall victim to participating in fraud or being exposed to victimisation by fraudsters. As an organisation, we will continue to follow the principle of zero tolerance and we will ensure that – where applicable – both internal (disciplinary processes) and external sanction (criminal prosecution) will be pursued.

Furthermore, we continuously improve and intensify the verification process as part of the standard operating procedures to ensure we are contracting with the correct member at all times.

What individuals need to do and not become a victim of fraud

We all know this and have heard it a million times but a lot of people still fall into this trap; do not share your personal and banking details with anyone over the phone, email or text message – and especially not any pin or password! An accredited financial institution will not ask you to do this.

If you apply for a product or need to change your details you will have to be authenticated by your financial institution and you will have to provide identity verification such as FICA documents if you apply for a product.

If you see any strange activity in your bank accounts, phone the bank immediately. If it relates to another financial institution, make sure that you speak to their legal department for assistance.

Our aim is to ensure that collectively we protect the benefits of our members and that those who don’t will face the consequences of their actions.



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