Fraudsters capitalise on festive season to steal millions

By Frankline Sunday

How often do you visit an automated teller machine (ATM)? How vigilant are you when using an ATM card? Did you know that this festive season could prove not-so-festive after all, after a report emerged that millions of shillings have been lost through ATM fraud?

Several customers across various banks have reportedly fallen victim to card fraud, where ATM withdrawals have been made from their bank accounts without their knowledge or authorisation.

Most of the complains have surfaced on social media over the past one week, spurring banks to advise their users to change their ATM PINs. “You can still use our ATMs in Kenya. Your accounts are safe, but please change your pin as a precaution. Call 3293900 for more info,” read an assurance tweet from Standard Chartered Bank to its clients on Twitter.

The festive season is usually characterized by an increase in the spending patterns and many businesses record brisk sales over the period. It is also in this time of year that fraudsters get busy trying to take advantage of unsuspecting shoppers and cash in.

The actual number of customers and banks that have been affected is hard to quantify, as commercial banks are reluctant to reveal the information at the risk of damaging to their reputation.

Much Higher

In June this year, a study by audit firm Deloitte revealed that commercial banks in East Africa had lost over sh4.06 billion through fraud in the preceding 18 months. But analysts say that figure could be much higher, as many fraud cases go unreported.

The rise in cyber crime has been attributed to technological advancements in the country, as fraudsters race ahead of financial providers and adopt innovative ways to breach security systems.

Skimming, one of the ways commonly used by card fraudsters, is where the consumer’s card is stolen from them briefly like at a restaurant then passed through a reading device, which captures the data off the card. This data can then be used to make a duplicate card that can then be used fraudulently at the expense of the consumer.

Commercial banks in the country system are in the process of migrating from magnetic strip cards that are considered to be more vulnerable to new chip and PIN cards. Chip and pin cards sport a microprocessor installed in a chip that is embedded on the smartcard, instead of the black magnetic strip at the back of the card to store the data.

The microprocessor contains encrypted financial data of the consumer necessary for each transaction and users are required to input a personal identification number (PIN) to decrypt the information and authorise each transaction.

 The migration from magnetic strip cards is expected to reduce the vulnerability of ATM users to card fraud, and reduce the loses that commercial banks suffer in having to pay billions in refunds to fraud victims.