Crime Goes Hi-tech

Published on 13th September 2005

The recent spate of security threats and violations leaves the banking industry feeling the pain of security breaches.  According to Myron, preventive security measures are the best way to minimize vulnerabilities.  That is just one side of the coin. The worry is what happens when hackers succeed and the customer is victimized.

Issues that have been of concern in the banking industry range from credit card crimes, prompt payment requests in business deals, online transfers and the popular Nigerian (419) scam which stretches far and wide. In this scam, the target is asked to provide funds to cover legal or establishment fee so that the cache accounts can be liberated and exported from the country.  The scam mostly involves bogus businessmen seeking assistance to transfer funds from specific countries.  This is so common that it can be exposed to anyone who is on e-mail but the deal is always too good to be true. 

According to The Central Bank of Kenya (CBK), commercial banks lose over US$600,000 annually through criminal activities.  Mr. P.K. Muhindi, the financial institutions supervisor stresses that money was being lost through credit cards, cheques and Electronic Funds Transfer (EFT’s).  This is nowhere close to Australia where 3-5 billion Australian Dollars are lost every year to fraud.  Among the main targets were the credit card users.  According to the latest statistics in Kenya, the rate of fraud cases is on the increase as more and more Africans are rushing for the prestigious plastic device.   

It seemed that the age of high technology had partly done away with the risk of carrying cash as cards were being introduced.  One didn’t have to carry cash to buy a gift for a loved one, the large monthly shopping or service payment.  With time, the edge was outwitted by criminals who figured out how to best benefit from the weaknesses of the credit card bubble. 

The problem is not so much with the banks.  A major cause of the problem is failure by customers to comply with the issuer’s requirements.  In a brief published by the Daily Nation on September 6, 2005, a writer argued that people should learn to treat their cards like liquid cash.  This entails concealing pin numbers and always being careful with the electronic signatures.  A writer from Australia even stresses that one should not leave receipts from transactions or signed bills as this may be used by fraudsters. Based on details from genuine cards, fraudsters develop a plastic card and swap with the genuine one, only to realize much later that the card cannot serve you at all.  That is why analysts argue that one should never leave a card unattended to and should always make sure that the card, if taken, is returned immediately.  Of importance is also the signature which one should append in its appropriate place at all times.

With the growth in counterfeits, businesses are getting wittier.  Even with a debit card, it may be very hard to make any payment without producing some recognized identification. Notices have been posted in many retail outlets requesting for card ownership evidence. 

Another popular center for information access is the Internet.  Although this is unlikely to be found in African nations except the more technologically advanced ones like South Africa, the recent technology bubble may bring along with it its nightmares.  Hackers through trial and error method are able to access customer information for their own good. A trend that may not have picked up in Kenya is the use of a tracking device that monitors any abrupt change in the usage of the card.  With this software, the card’s usage pattern change is ‘flagged’ to the bank staff.  The staff being aware of a possible fraud attempt, probe for further investigation.

Card customers should take several measures to protect themselves.  One of the major ones is to sign all cards as soon as they receive them and carry their cards separate from the wallet.  In addition, all card information should be kept safely.  Have you ever imagined losing your card only to realize much later that you cannot reach the card issuer to bar the card from usage?  One should also save receipts to compare with the billing statements.  Bills should be opened promptly and accounts reconciled monthly, just as one would for a cheque account.  However, one should never sign a blank receipt and if one does, he/she should draw a line through any blank space above the total.

More common also is taking advantage of flawed registration of companies’ procedure.  One can under the existing system register a company under the same name as an existing one.  After applying, these companies can source for a loan from any reputable lending organization and later default.  They can also ask for prompt payment only at sole discretion of the genuinely registered company.  The case would even be worse for a country like Kenya where the registration is usually manual and characterized by officers who accept bribes even for name search, a procedure that should have been computerized long time ago.

Undoubtedly, fraud costs nations an insurmountable amount of money.  There is need for greater interaction between representatives of the banking industry and the enforcement bodies.  Increased communication can only enhance the relationship between all parties.  In Kenya, this is the best time that The Kenya Bankers Association (KBA) and The Central Bank of Kenya ought to be more involved before the situation peaks. 

The global Information Technology (IT) trends are completely changing the way we execute business deals.  With each new system, the weaknesses are always worse than the previous.  The question is not whether we can stop it but whether we are able to adapt to changes. 



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