Fraud Insights, as part of Comcorp’s business we gain valuable insights into the way financial crime is committed and how the consumer is often placed at risk of having their data compromised and used by fraudsters to commit financial crime.

So what is financial crime?

Financial crime occurs when fraud syndicates devise sophisticated methodologies to defraud consumers and financial institutions and manage to evade legal scrutiny whilst committing offences.

This occurs where fraudsters find gaps and weaknesses in South Africa’s financial systems to launder funds and obtain finance with the intent to defraud. Fraudsters operate what is termed “Mule” accounts where they launder funds through known individuals’ bank accounts for the purposes of laundering the proceeds of crime and use these accounts to move funds between banks and financial institutions.

What are the main types of fraud?

Fraud occurs within the financial services industry where the consumer’s credit or debit card details are compromised and end up in the hands of fraudsters. Banks have developed very strong methods to mitigate against these forms of card fraud where fraudsters are now turning to other forms of fraud. An emerging and concerning fraud trend occurs in the area of “Application Fraud”. This is where fraudsters either impersonate individuals by pretending to be certain individuals and apply for loans on their behalf and without their knowledge.

The other form of application fraud occurs where individuals themselves collaborate with fraud syndicates and together follow various procedures to defraud banks and credit providers. This form of fraud is known as “Credit Profiling” or “First-party” or “Synthetic Fraud”.

A further form of fraud which mainly affects businesses and corporates termed “Business Email Compromise”, occurs when fraudsters intercept emails to businesses where requests for payments of goods and services are sent to those businesses where the fraudsters have intercepted and changed the banking details of the payee of a legitimate creditor of that business. 

More about Application Fraud.

This form of fraud is growing at extremely high levels and now causing significant concern within the financial services industry. This is because fraudsters devise sophisticated methods to obtain finance without being detected in the application process. These loans are then extracted from credit providers which are only properly discovered, if at all, once the individual consumer disappears and doesn’t honour their scheduled loan repayments.

How can Comcorp assist credit providers to mitigate against application fraud?

Comcorp has three solutions that are aimed at mitigating against various forms of application fraud:

1. Curata – our biometric facial recognition solution which prevents identify impersonation and reduces the risks of the consumer’s personal details being used to obtain finance fraudulently;
2. IDX (Integrated Data Exchange) – provides authentic bank statements directly from the banks to each other and credit providers which reduce the risk of bank statement fraud;
3. SPX (Secure Payslip Exchange) – Comcorp are in the process of developing a payslip exchange solution that reduces the risk of individuals’ employment details being used to obtain finance without their knowledge.  

Comcorp works closely with the financial services industry to identify how to prevent and detect the various fraud methods devised by fraud syndicates. We aim to continue this series “Our View”, where we intend to share our insights into how fraud syndicates operate and how we can help South Africa’s financial institutions reduce financial crime.

By Jan Kleynhans – Comcorp’s Chief Growth Officer