Public warned about scams as holiday shopping begins

Steve Umidha @UmidhaSteve

Kenyans have been told to brace for increased cases of fraudsters using personal data to fleece them of hard-earned money as holiday festivities begin.

Experts warned of, especially fraud schemes involving social engineering, where criminals attempt to deceive individuals by performing confidence tricks.

As holiday season kicks in, they warn, fraudsters are upping their trickeries in order to manipulate people into divulging their personal data also known as personal information or personally identifiable information.

Macharia Kamau, a banker and a financial expert said he expects to see this scheme in the area of digital lending space and mobile lending platforms but not so much with conventional banks. 

Available data shows that banking fraud remains one of the biggest threat not only in Kenya but also in Africa.

A recent Kaspersky survey revealed that about 47 per cent of users in the Middle East, Turkey and Africa region faced banking fraud at least once in the first half of 2020 – with banking apps in particular being a real challenge.

Banking apps

In February, this year, a group of researchers published a comprehensive study of 693 banking apps across 83 countries, including 49 apps from banks in Africa, Kenya included and found that over 2,100 of those, applications that were tested had numerous financial leaks and posed huge risks to customers’ monies.

About a third of those apps, 222 relied on invalid authentication implementations, while more than half, 324 apps displayed weaknesses in data transmission.

As a result, this is feared to propel bank frauds, especially during the Covid-19 pandemic period, both in terms of numbers and volume.

This is if banks and financial institutions, especially those operating digitally, do not invest in innovative strategies to control such vices.

A technology expert at Cellulant George Murage said constantly innovating around digital banking and payments to improve safety and security should be a key priority to such entities.

Cellulant is a technology company and payment platform that hosts 120 of the largest banks in Africa, 40 mobile money operators, 600 local and international merchants.

A commonly practiced scam is where fraudsters call unsuspecting account holders and trick them to divulge information that can be used to withdraw money from their bank accounts, sign them up for banking services or replace their SIM cards that are tied to mobile banking.

Peter Macharia, who runs a digital lending firm, Jijenge Credit said: “December festivities always offer the perfect opportunity for fraudsters to execute their plan.”

“This is for the simple reason that demand for cash is exceptionally high, and do not forget, schools are also reopening in January so fraudsters will be keen to take advantage of the desperation during this period,” he added. 

Industry insiders, however, say such fraudulent activities are usually covered up by banks which ordinarily circumvent Central Bank of Kenya (CBK) regulations that require lenders to report fraudulent activities within two hours.

These are concerns that were first raised by the Financial Sector Deepening Trust (FSD Kenya) last year in its Inclusive Finance report which intimated that banks were aware of fraudulent activities within their ranks that put their depositors’ funds at risk but still chose to remain tight-lipped.

Account holders

The report states that 220,000 bank account holders who account for three per cent of bank users in Kenya have reported losing their money from their accounts this year.

It adds: “The fact that three quarters were able to recover their funds suggests that loss of money within the banking system is not just a self-reporting accuracy, but a well recognised issue for the banks concerned.”