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Bank fraud dips

THE VALUE of bank fraud dipped to roughly $700 million in 2022, the lowest in five years, according to the Bank of Jamaica, BOJ, in its recent Financial Stability Report 2022.

Local banks detected about $715 million in fraud losses in 2021, $800 million in 2020, $1.3 billion in 2019, and $1.2 billion in 2018. The five-year average from 2018 to 2022 dipped to $900 million, down from $1 billion a year earlier.

The figure confirms preliminary data of declines discussed earlier this year. What’s emerging, however, relates to the number of attacks or occurrences of fraud, which jumped by two-thirds from 15,000 to over 25,000 in 2022 — the highest level seen in at least five years.

Credit card fraud continues to dominate, but internet banking fraud gained ground, the report noted. The fraudsters found ways to bypass the two-factor authentication using SIM-swap fraud. That refers to the use of fraudulent SIM cards to receive phone calls or text messages to gain the secondary step in accessing someone else’s online banking account.

That said, the bulk of fraud losses, or 70 per cent, still involve situations in which criminals snatch credit cards, or their numbers, and conduct transactions.

The report noted that women are the victims of bank fraud at slightly higher rates than men, or 51.6 per cent. The data did not capture the gender of the accused fraudsters. The report added that persons in the prime working age, between 35 and 50, are the key victims.

“Deposit-taking institutions observed a general downward trend in annual bank fraud-related losses, concurrent with improved combative measures implemented by licensees. Additionally, overall bank fraud money-laundering risk exposures remained in the medium-low category throughout the review period,” stated the report.

The BOJ noted that the introduction of chip encryption in cards was attributed to the decline in losses.

“Notably, while remaining more prevalent, card fraud losses displayed notable declines,” stated the BOJ.

The fraud figure relates to commercial banks and does not extend to financial securities dealers which invest funds on behalf of clients. These firms are now entering into the supervision of the BOJ, following revelations of a multimillion-dollar fraud at the firm Stocks & Securities Limited.

Even though the dollar value dipped in 2022, the number of occurrences of documented fraud jumped by two-thirds to 25,000, the highest level in at least five years.

The occurrences of fraud rocketed since the onset of the pandemic in 2020.

Specifically in 2019, less than 5,000 fraud instances occurred, then over 15,000 in 2020. It dipped slightly in 2021, and then rocketed to over 25,000 in 2022, according to tables from the BOJ Stability report. During the year, credit card fraud occurrences more than doubled.

The BOJ defined bank fraud as the use of unlawful means to obtain funds or other property owned by a financial institution or a depositor of a financial institution. Bank fraud can also be viewed as a predicate offence for money laundering.

The report listed six specific types of fraud relating to fraudulent cheques, credit and debit cards, wire transfers, loans, the internet, and internal or occupational fraud.

However, the report made no reference to any ongoing bank fraud cases before the courts.

“Additionally, though maintaining a strong media presence, internal or occupational fraud remained relatively low, on average, accounting for 4.0 per cent of total fraud losses per annum,” added the report.

The rise in fraud isn’t unique to the local banking sector. International Organisation of Securities Commissions, the umbrella body, noted that 66 per cent of its global members reported a rise in fraud since the pandemic, as persons grappled with changes to their health and wealth.

The BOJ revealed other data in its Financial Stability Report 2022. It stated, for instance, that the financial and tourism sectors can survive stress tests related to a USA recession. In such a scenario, the USA would contract and reduce its financial outflows to Jamaica. In the BOJ’s view, the principal risks to the financial system in 2023 relates to further inflationary pressures, associated increases in interest rates, and weakening global growth.

“Stress tests were carried out on the various financial sub-sectors in order to evaluate their resilience to adverse scenarios involving further increases in interest rates and the spillover effects of an external recession on the Jamaican economy. The results showed that the financial system remained broadly resilient to these shocks,” it noted.

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