Fraud flies in Q1 2008

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 18 Apr 2008

Business lost R276 million to identity theft-related fraud in the first three months of this year and indications are the amount will climb steeply this year.

SA Fraud Prevention Services (SAFPS) CE Pat Cunningham says subscribing businesses reported 2 388 incidents of identity theft-related frauds, worth R72 million, in the first three months of 2007.

For the same period this year, they reported 2 833 incidents amounting to R276 million - virtually a fourfold increase in value.

Cunningham says much of this activity can be ascribed to organised crime syndicates, both local and foreign. With everyone a neighbour on the Internet, it is easy for East European gangs to operate in the South African market, he says. Cunningham warns these "gangs are going for broke. We are seeing a big increase in syndicate activities."

But local criminals have also cottoned on and now manage to operate within the information cycle of many businesses - meaning they can defraud them faster than the business can detect. Cunningham says one Kimberley micro-lender was hit by 22 fraudsters in a space of about four hours in one day, just before Christmas.

Each came equipped with a false ID book and a fake payslip and applied for a maximum R5 000 micro loan. By the time anyone realised what was happening, they were long gone.

Cunningham, speaking at a Symantec roundtable earlier this week, said the SAFPS had tracked the activities of four fraud syndicates just that morning.

The SAFPS CEO is also concerned about the emphasis business puts on fraud. "They are spending huge amounts of money on detection and investigation when they should be spending that on prevention.

"Few organisations do proper risk assessment before launching a new product on the market. That, combined with a proper fraud prevention programme, would address the problem."

Cunningham says identity theft is aided by the ease with which the current ID book can be faked or altered. Corruption at the Department of Home Affairs is an additional worry and he is not sure whether the government's move to replace the paper-based document with a smart card will address the crisis.

He frets that the roll-out will take too long - he estimates at least five years - and wonders how secure the cards will be. "I have grave concerns about the technology."

The SAFPS is a non-governmental, non-profit organisation that assists business in combating fraud and also helps people who have fallen victim to identity theft. It has a register of 54 000 names linked to confirmed or attempted fraud since 2004, involving R1.1 billion.