Social engineering now the most preferred way to perpetrate fraud
A recent report by the Nigeria Inter-Bank Settlement System Plc (NIBSS) titled ‘NIBSS Industry Fraud Report’ has shown that social engineering is now the most preferred technique used to perpetrate fraud in Nigeria as a total of 11,589 cases were reported to have been carried out using various social engineering techniques which resulted in N2.755billion fraud loss value for Q3,2020.
Social engineering fraud, according to Epic Brokers, most commonly occurs when hackers manipulate employees into disclosing private information which leads to them voluntarily parting with company or client funds or products.
According to the report, the COVID-19 pandemic brought in its wake numerous fraudulent schemes in addition to the negative impact on individual lives, business, government and the global economy.
The report showed that social engineering accounted for 68% of the entire fraud volume and value for Q3,2020.
In comparison to Q3, 2019, fraud volume across fraud techniques such as lack of 2FA, robbery and lost cards decreased in volume while social engineering increased by 144% within the period under review.
Social engineering is still a preferred and successful technique employed by fraudsters, the report noted.
NIBSS reported that year on year, the attempted fraud value for Q3, 2020 increased by 44 percent from Q3, 2019 while the actual loss value for Q3, 2020 increased by 500 percent from Q3, 2019.
In terms of volume, the fraud volume for Q3 rose to 16,988 compared to 10,692 fraud volume recorded in Q3, 2019.
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The analysis showed that the total losses (Bank and customer) increased from N552 million in Q3, 2019 to N3.5 billion in Q3, 2020. This indicates a 9 percent decrease from Q2, 2020 and a 58.9 percent increase compared to Q3, 2019.
On a quarter-on-quarter basis, attempted value for Q3, 2020 increased by 289 percent from Q2, 2020 while the actual loss value for Q3, 2020 increased by 290 percent from Q2, 2020 with a volume of 10,939 signifying an increase from N861 million in Q2, 2020 to N3.5 billion in Q3, 2020.
July recorded the highest volume and value in fraud events within the third quarter of 2020. Subsequently, fraud volume and value declined for both August and September.
Unexpectedly, September 2020 recorded a significant decline of 29 percent in fraud volume in comparison with last year’s volume despite being inclusive in the “Ember”month.
As with the first half of the year, the highest losses to fraud were recorded on the web channel in Q3, 2020 percentage fraud volume of 35.5 percent from the total fraud volume recorded.
The mobile channel with the loss of N410 million made up to 11.7 percent of the entire fraud loss values in Q3, 2020.
Trend from start of the year till date shows that the web and mobile channels are viable mediums for exponential fraudulent gains.
On a quarter on quarter, fraud volume reported on mobile in Q3, 2020 decreased by 5 percent when compared to Q2, 2020.
Overall, fraud volume and value decreased across all channels in Q3, 2020.
Fraud volume reported on mobile in Q3, 2020 decreased by 5 percent when compared to Q2, 2020. Overall, fraud volume and value decreased across all channel in Q3, 2020.
A total of 11,589 cases were reported to have been carried out using various social engineering techniques which resulted in a N2.755 billion fraud loss value for Q3, 2020. This makes up for 68 percent of the entire fraud volume and value for Q3, 2020.
Despite this fraud increase, the mobile channel requires that more stringent measures are put in place at respective institutions to curb fraud as trends have shown this is viable for fraudsters’ use.
Unique Customer Analysis
A total number of 48,767 unique customers that were defrauded were reported within the quarter with 63 percent predominantly male. For Q3, 2020, the most affected age range of unique customers defrauded are over 40 making up a percentage volume of 33.97 percent.
In Q3, 2020, online gambling and betting have grown to be preferred means of fraud proceed utilization. Reasons for growing preference by fraudsters are the minimal customers KYC requirements for onboarding, authentication, and the option for immediate cash-outs which can be difficult to trace. This medium has become lucrative for fraudsters to cart away stolen funds.
Solutions
NIBSS recommended that some measures such as relevant stakeholders should ensure compliance with KYC requirements for opening wallet contents. Online gaining operators carrying out additional KYC on their customers to ensure adequate details captured traceable to the gamer, Restrictions on cash-outs.
Fraud cases recorded in Nigeria for Q3, 2020 were 95 percent higher than that of Q3, 2019.
Also, fraud losses in Q3, 2020 on cases reported to have been carried out by Nigerians in the United States were equal to the same losses in Q3 of the previous year. Overall, the highest fraud volume and value for both Q3, 2020 and Q3, 2019 were recorded in Nigeria.
The Fraud Sources in Nigeria showed a marginal increase of 1.5 percent was reported for Lagos between Q2, 2020 and Q3, 2020 with fraud counts of 9,192 and 9,332 respectively.
Rivers and Ogun remained among the top five states with a percentage volume of 3.4 percent and 3.3 percent respectively. Abuja and Oyo reported a fraud count of 512 and 437 each
NIBSS said the drive for financial inclusion via agency banking has enriched the lives of many and made some banking services more convenient and easily obtainable.
However, as this means of providing services grow and become more dominant in the payment space, it can be expected to be targeted and exploited by fraudulent individuals/criminals.
One recent trend is with the alteration of transaction amount on agent’s POS terminal. What basically occurs is that an agent initiates a transaction amount as requested by customer on his/her POS terminal and hands over the terminal to the customer to input PIN. Unknown to the agent, the customer deceptively re-initiates the transaction but alters the initial transaction amount to one of the lesser value. The agent unaware if the customer’s subterfuge, proceeds to hand over cash before the amount is confirmed.
