Explosion in e-fraud – The most common forms

By Leonidas Stergiou

The increase of card transactions by 6% and 3% in money transfers recorded since the beginning of the pandemic has sparked the frauds that by the first half of the year have cost more than 12 million euros.

As large as this size may seem, it still remains quite low in relation to the value of transactions carried out electronically, which exceeds 750 billion euros. The good news is that direct debits continue to be the safest means of payment as, to date, no fraud has been reported by payment service providers.

In any case, the amount of fraud is not small for every consumer, if we take into account that 1,179 cases of fraud were detected in money transfers via mobile and internet banking in 2020, with an average loss of about 5,000 euros.

In card transactions, the total value of the fraud is about the same, ie 6.2 million euros, but the cases are much more, with the result that the average loss is smaller. Besides, the average value of the card transaction is lower and ranges around 40-50 euros.

The data of the Bank of Greece show that 50% of the loss in case of card fraud is borne by the service provider who accepts the transaction, while the remaining amount is shared by the consumer and the bank. Regarding the highest amounts per fraud, ie money transfers, the information states that most of the time, the amount is charged to the bank’s customer, as negligence or misuse of consumer protection occurs. Speaking to executives with many years of experience, they said that until a few years ago, banks were bear the cost, with a few exceptions where there was serious negligence on the part of the customer. This was because the cost to the bank’s reputation was greater than the cost of fraud. Today and, especially in 2020, the total cost of all forms of fraud that from the beginning of the pandemic until today can reach 20 million euros or more, the banks do not bear it. Because no fraud came from a “hole” in the system, all the scams were well-designed to deceive the consumer, who did not follow basic rules, such as not giving personal information and codes to third parties.

Card frauds

Card fraud cases have increased by 50% this year compared to last year, with one fraud per 3,600 transactions. However, based on the value of the transactions, the percentage remained stable, ie for every 6,000 euros 1 euro was the result of fraud. The analysis of fraud cases by payment card transaction channel shows that the highest fraud rate concerns distance transactions. Specifically, in the first half of 2021, the number of fraud cases recorded per transaction channel amounted to:
1) 995 ATM transactions, with a total value of 324,000 euros,

2) 11,600 payments in POS worth 323,000 euros and

3) 197,000 distance transactions, worth 5.4 million euros.

Examining the distance transactions via internet or mail and telephone, it is found that most cases of fraud are related to transactions via internet, while at the same time there is a large reduction in cases of fraud in transactions via mail and telephone. In the current semester, the fraud cases mainly concern online shopping transactions with foreign merchants with cards issued in Greece, as was the case in the previous semesters. The higher rates of fraud in cross-border transactions via the Internet are mostly due to the more extensive use of the international technical standard of secure transactions 3D Secure by payment service providers in Greece in relation to service providers from abroad.

Loss sharing

Regarding the financial losses resulting from fraudulent transactions, which are shared among the parties to the transaction according to their fault, the BoG finds that most of the damage is borne by payment service providers who accept card transactions and the who, in the first half of 2021, shouldered 47% of the total loss. Respectively, the payment card issuers were charged at a rate of 24%. Cardholders were charged 29%.

Money transfers

With the onset of the pandemic in 2020, there was a significant increase of 298% in cases of fraud in credit transfers and by 313% in their corresponding value. Specifically, 1,179 cases of fraud were recorded with a total value of 6.2 million euros compared to 2019 where 296 cases of fraud with a total value of 1.5 million euros were recorded. That is, 1 euro value of fraud per 92,000 euros value of transactions.

The analysis of the data shows that the majority of fraud techniques involve the methods:

1) Issuance of a payment order by the fraudster, who issues a fake payment order after obtaining the sensitive payment data of the payer or the beneficiary by fraudulent means.

2) Manipulation of the payer by the fraudster, where the victim provides good faith his consent to the execution of a payment order on behalf of a third party, considering that he belongs to a legal beneficiary.

Read also:

* Ways to protect against scams that empty accounts

* The two e-scams that empty bank accounts

* DIAS: 150% increase in online money transfers between individuals