Banking fraud expected ahead of December festivities

Kenyans are being warned of an increasing trend in which fraudsters are using your personal data to fleece you of your hard-earned money.

In fact, experts predict fraud attacks involving social engineering, where criminals attempt to deceive individuals by performing confidence tricks, could surge as holiday season kicks in with fraudsters now upping their trickeries in lying to innocent customers in order to manipulate them into divulging their personally identifiable information.

“I expect to see this in the area of digital lending space and mobile lending platforms but not so much with conventional banks,” says Peter Macharia Kamau, a financial expert who also runs a deposit-taking firm, Jijenge Credit Limited.

Available data shows that banking fraud remains one of the biggest threat not only in Kenya but also in Africa, according to a recent Kaspersky survey, which revealed that about 47 per cent of users in the META region (Middle East, Turkey and Africa) faced banking fraud at least once in the first half of 2020 – with banking apps in particular being a real challenge.

In February this year, a group of researchers published a comprehensive study of 693 banking apps across 83 countries, including 49 apps from banks in Africa, Kenya included and found that over 2,100 of those applications that were tested had numerous financial leaks and posed huge risks to customers’ monies.

About a third of those apps, 222 relied on invalid authentication implementations, while more than half, 324 apps displayed weaknesses in data transmission.

As a result this is feared to propel bank frauds especially during the pandemic period both in terms of numbers and volume if banks and financial institutions especially those operating digitally, do not invest in innovative strategies to control such vices.

At a time when growth numbers are expected to surge, banks and their banking system are being urged to urgently fix to tackle the impact of coronavirus and economic inactivity due to subsequent lockdowns even as the country heads to festivities – a period that is synonymous with such scams.

A commonly practiced scam is where fraudsters call unsuspecting account holders and trick them to divulge information that can be used to withdraw money from their bank accounts, sign them up for banking services or replace their SIM cards that are tied to mobile banking.
But such fraudulent activities are usually covered up by local banks who ordinarily circumvent the Central Bank of Kenya (CBK) regulations that require lenders to report fraudulent activities within two hours.

These are concerns that were first raised by British financial inclusion lobby group Financial Sector Deepening (FSD) Kenya last year and dubbed Inclusive Finance, which drew its observations from the FinAccess 2019 Household Survey jointly authored by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS) and which FSD intimated that banks were aware of fraudulent activities within their ranks that put their depositors’ funds at risk but still chose to remain tight-lipped.

The report states that 220,000 bank account holders who account for 3 percent of bank users in Kenya have reported losing their money from their accounts this year.

“The fact that three quarters were able to recover their funds suggests that loss of money within the banking system is not just a self-reporting accuracy, but a well recognised issue for the banks concerned,” reads in part the report.