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ATM Fraud Takes Root Amid Lax Laws And Outdated Technology [analysis]Jul 07, 2011 (Business Daily/All Africa Global Media via COMTEX) -- There are three things Kenya is famous for. The first is its wildlife, which since time immemorial has attracted international visitors on the basis of variety and allure of undulating savanna. On the second rung are our politicians, who are paid higher than their counterparts in foreign lands yet still do not see the need to pay tax. The third is a new entrant to the list, but it is already said to be attracting visitors from foreign lands in droves. Soon, Kenya may become more popular for tourism based on its insecure money system than anything else. How else would you explain the increasing number of foreigners captured red-handed in banking halls with hundreds of false ATM cards? Reports indicate that in May alone, Kenyan banks reported to the police losses of Sh62 million, out of which just Sh1.4 million was recovered. The cash was lost mainly through computer fraud and electronic fund transfer. Banking sources say the colossal figure is under-reported. Growing indicators point to security becoming a new worry for banks, who over the last few years have spent billions transforming their businesses to become more card-dependent. Noble gesture This is a noble gesture informed by the fact that their consumers want to access their money in a hassle-free and convenient manner; but like any other technology, it opens up the institution to the possibility of increased fraud opportunities. Fortunately, this is not just a local problem, as the growing number of ATMs around the world means that securing them will become an even bigger challenge. There are over 2.2 million ATMs worldwide, and by 2015 there will be around three million. ATM skimming -- a popular scam where thieves access your information by placing a copying device over the card reader and then use the information to create their own version of your card -- is said to account for as much as 30 per cent of all data theft, creating a billion dollar a year industry. Debit card fraud -- of relevance to the Kenyan market as the majority of card-use is debit accounts -- is on the rise, significantly up from 27 per cent of all card fraud in 2009 to 36 per cent in 2010, according to Javelin Strategy and Research's 2011 Identity Fraud Survey report. In fact, Javelin says that 1.4 per cent of consumers get hit by debit card fraud every year, essentially identical to credit card fraud. In many ways, debit card fraud is more troubling because it involves the loss of money from the consumer's own current account instead of money on a credit card tab that has yet to be paid. Secure in fallacy The difference between our local banks and their international counterparts is that our guys appear to be content in their belief that Kenya is not as advanced technologically as their foreign equals, which is where things begin to go south. Some banks are so secure in this fallacy that they continue to roll out large ATM networks without due regard to the latest technologies in the market. A few even run outdated software on their ATMs, oblivious to the fact that a very high level of sophistication exists among both local and international hackers. Also to blame are the lax penalties that Kenyan law metes out to electronic fraudsters. Two suspects currently in jail for electronic fraud are looking at doing as little as nine months if they are convicted for stealing millions from local banks. These developments leave it to the consumer to empower themselves to the level where they can catch possible fraud at the ATM and alert their bank of the risks. |