Who protects consumers against cellphone banking fraud?

With the advancement in technology where payments can be made to cellphone numbers and withdrawn via an ATM, fraudsters now have the option to transfer money not into accounts, but simply withdraw the funds scammed from you using a telephone number.

Various banks now offer payment options where you as an account holder can transfer funds to another person by simply using his or her cellphone number. FNB, for example, offers eWallet, while Absa offers CashSend, Nedbank m-pesa and Standard Bank Instant Money (which works through purchasing an Instant Money Voucher).

The technology and the stats

Moneyweb was contacted by a reader who complained that his money, paid as a deposit for an item advertised, disappeared without any hope of identifying the payee as an eWallet was used.

He argued that the new technology makes it easier for scammers to disappear with your money, because they cannot be as easily identified as someone with a bank account into which the money was transferred.

Jim Mason said that a car trailer was advertised at an attractive price. In a telephonic conversation with the advertiser the person stated that there was a great deal of interest and that if Mason was interested he should put down a deposit.

Mason offered to do an electronic fund transfer (EFT), but the advertiser said he had an FNB eWallet and that the payment could be made to the cell number Mason had called him on.

Mason could only transfer R200, although he agreed to transfer R1000. When the advertiser became persistent that the rest of the money be paid, Mason contacted FNB to find out about the eWallet function and was told that the R200 was already withdrawn. He said the call centre then informed him that it could not close down the eWallet facility and that he had to take the matter to the South African Police service (SAPS).

Yolande van Wyk, CEO of eWallet at FNB, disputed that this information could have been given by the call centre and told Moneyweb that the standard business process for all fraud related queries at the call centre is to immediate block the eWallet and reverse the amount sent should the money still be available in the eWallet.

She indicated that if Mason wanted information on the recipient, FNB would not have been able to provide it as was prohibited to do so by the rules prescribed by the Payments Association of South Africa (PASA). This information can only be released when a subpoena is received that is issued by a legal body than sanctions the party with the information to do so, thus the advice to go to the SAPS.

“The risks associated with payment via an eWallet are no greater than those of other payment mechanisms,” she said and added that it is up to the sender of funds to an eWallet to determine the authenticity of the recipient and the transaction.

The banking services Ombud (OBSSA) told Moneyweb while the number of reported cases involving eWallet was low, it was growing quickly.

According to the OBSSA cases involving eWallet were totalled four in 2011, rising by 500% to 24 in 2012.

Van Wyk indicated that in all 24 cases the Ombudsman found in favour of FNB.

The OBSSA could not provide specific numbers for CashSend, but stated that there have been cases where CashSend was used to accept funds.

Is RICA helping?

RICA, or Regulation of Interception of Communications and Provision of Communication-related information Act of 2003, is a law passed by the government that requires all cellphone users to register their numbers.

The aim was to help law enforcement agencies to identify cellphone users and track criminals using cellphones for illegal activities. When registering your SIM card you should provide a green barcoded ID book and proof of address.

Not everyone believes that RICA has succeeded in clamping down on fraudulent activity utilising cellphones as recent SIM swap fraud cases have shown.

Colin Hill, senior solution manager for risk management and financial crime at the SAS Institute, told Moneyweb that FICA is clearly more effective than RICA.

“FICA (does mean something), RICA doesn’t,” he said, adding that it was probably because of the implementation of the legislation.

But regardless of whether or not RICA is efficient, does payment technology allowing payments to cellphones put you at more risk?

FNB’s Van Wyk said that in the case of eWallet, where fraud is identified, the Sender of funds is entitled to request a block to be placed on the cellphone number and provided the funds are still available in the eWallet, the transaction can be reversed back.

The same applies to money fraudulently acquired and paid into another bank account.

In an interview with Moneyweb on the safety of online banking, Absa’s Adrian Vermooten indicated that when Absa notices a pattern of suspicious events that lead it believe fraud is being attempted, it contacts the customer or the other banks to shut down the accounts and try and retrieve the money.

FNB uses similar technology on its electronic channels based on customer behaviour. Van Wyk indicated that this was why Mason could only transfer R200 “as he had never done an eWallet transaction before”.

Van Wyk told Moneyweb that FNB is very aware that the iMpact of fraud is everyone’s concern. “We always ask our customers never to share any information for Cellphone Banking, Online Banking or eWallet,” she said.

Vermooten told Moneyweb that it is important to remember that the CashSend service must be regarded as an immediate cash payment. “If you would not feel comfortable handing over cash to someone who you do not know for goods that have not yet been seen, then rather insist on an alternative payment method,” he said.

Where do you go for help?

Banking clients can report cases where they feel the bank has been negligent and should be held partly or fully liable for the losses incurred to the Ombudsman for Banking Services of South Africa (OBSSA).

However, it is unclear what avenue for recourse is available for clients of cellphone service providers where they believe the provider did not make sure that RICA was fully complied with.

The Ombudsman’s offices have told Moneyweb that it used to refer complainants to ICASA, but that ICASA has since confirmed that “they do not deal with it”.

Source: Moneyweb

More on mobile phone based banking fraud

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