Rise in telco fraud threatens digital trust in South Africa

With International Fraud Week taking place this week, telecommunications fraud is on the rise in South Africa, with the sector seeing one of the highest suspected digital fraud attempt rates globally, according to credit bureau TransUnion.

Transunion’s 2024 State of Omnichannel Fraud Report revealed that in 2023 alone, 15.5% of all suspected digital fraud attempts in South Africa targeted the telecom industry, marking a staggering 78% increase year-over-year.

Bolstering defences

This trend, according to the report, highlights the magnitude of the issue and emphasises the critical necessity for the industry to bolster its defences.

Amritha Reddy, senior director for solutions at TransUnion Africa said the Covid-19 pandemic accelerated the sector’s shift online as customers moved to digital channels for critical transactions, such as new contracts and upgrades, that were once conducted in-store.

Reddy said while convenient, this rapid shift left security gaps, and fraudsters have been quick to exploit them.

“Fraudsters are constantly evolving their tactics to exploit new weaknesses,” says Amritha Reddy, senior director for solutions at TransUnion Africa. “While telecom companies are investing heavily in security and consumer education, the rapid expansion of digital services can make it difficult to stay ahead.”

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ID fraud

Reddy said the methods fraudsters use are becoming increasingly sophisticated.

“Many fraudulent accounts, an estimated 3% of new digital accounts in telecom, are created using stolen or synthetic identities. Criminals use techniques like phishing, smishing, and vishing to trick consumers into divulging sensitive data, which is then used for identity theft, SIM swaps, or even bypassing multi-factor authentication (MFA).”

Earlier this week, The Citizen reported a One Time Pin (OTP) scam syndicate was bust in Eldorado Park and Soweto, south of Johannesburg.

Their modus operandi includes requesting the customer’s security details under the pretence that they were blocking the processing of a fraudulent SIM swap request that was being made on the subscriber’s number without their knowledge or authorisation.

Rebuilding trust

Reddy said to protect consumers and rebuild trust, telecom providers must enhance digital defences and further invest in continuous education campaigns that empower consumers.

“Practical tips, such as avoiding unknown links and regularly updating passwords, are critical in thwarting social engineering attacks.”

“But the solution also demands a coordinated industry response. Companies should consider sharing data on fraud tactics and trends across sectors, as fraudsters tend to move rapidly between similar targets,” Reddy said.

Fraud awareness week

As organisations grapple with increasingly sophisticated fraud schemes, International Fraud Awareness Week serves as a critical reminder of the significant financial and reputational risks posed by fraud.

While AI is revolutionising industries, including insurance, by making them more efficient and productive, this powerful technology is like a double-edged sword, on one end it enables the swift detection of fraudulent claims but it also gives cybercriminals sophisticated tools to use for elaborate scams.

With a key focus on AI and insurance fraud, Zaakir Mohamed, Director and Head of Corporate Investigations and Forensics at CMS South Africa said this year’s Fraud Week shows how the challenge lies in harnessing AI’s potential for good while mitigating its risks.

“With robust cybersecurity systems in place and employees who are informed about the latest AI developments, situations including deep fake scams and insurance fraud can be avoided.

“Going forward, responsible AI adoption, and keeping AI as an asset, not a liability, is key in fighting fraud” said Mohamed.

Lack of insurance and online

Spiros Fatouros, CEO of Marsh McLennan, Africa and South Africa said a lack of insurance can have significant impacts in the long term.

“Even when SMEs survive major cyberattacks, their ability to innovate and take risks might suffer as a result.

Moses Marimira – Director, Compliance & Group MLRO at Onafriq said as the speed and convenience of instant payments become more convenient said security measures must be prioritised to protect customers and their assets.

“Balancing speed with security is essential not only for seamless transactions but for building a resilient financial ecosystem that serves everyone safely and effectively,” Marimira said.

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