South Africans are facing a growing risk of financial fraud through social media and messaging platforms, with scammers increasingly using technology to impersonate legitimate financial services providers and lure consumers into handing over money and personal information.
Association for Savings and Investment South Africa (Asisa) member companies have reported a sharp increase in fraud committed through social media channels, according to Jean van Niekerk, convenor of the Asisa Forensic Standing Committee.
Asisa has consequently warned consumers that legitimate financial services providers will not sell policies or investments through WhatsApp groups, Telegram, social media platforms, email or unsolicited random telephone calls.
The warning comes as fraudsters increasingly exploit digital platforms to make fraudulent offers appear legitimate, particularly when targeting consumers with investment and financial products.
Financial scams among leading online threats
The scale of the problem is reflected in the 2023 Online Scams and Victims in Africa Report by KnowBe4, which surveyed about 800 people across Africa who had fallen victim to an online scam at least once.
According to the report, financial scams affected the largest proportion of respondents, at 48%. Investment scams affected 30%, while 29% reported being affected by cryptocurrency scams.
The figures highlight the extent to which criminals are using financial promises to attract victims, from fraudulent investment opportunities to cryptocurrency schemes.
Anna Collard, senior vice-president of content strategy and evangelist at KnowBe4 Africa, said the nature of these scams is becoming increasingly sophisticated.
“Statistics reveal a more evolved and sophisticated network of scammers who use emerging technology and emotive approaches in well-written emails as well as deep fake-enabled impersonations on WhatsApp and other messaging apps to lure people into making costly mistakes.”
The use of impersonation and increasingly convincing communications makes it harder for consumers to distinguish between legitimate financial services providers and criminals posing as them.
Digital banking fraud is also escalating
The Banking Division of the National Financial Ombud Scheme of South Africa (NFO) has warned that the rapid digitisation of banking, including mobile applications and online payment platforms, has been accompanied by growing risks from fraud and scams.
Nerosha Maseti, Lead Ombud of the NFO Banking Division, said fraudsters are using methods including phishing, smishing, vishing, impersonation scams, remote-access software, SIM-swap fraud and fake investment schemes.
Consumers may not immediately realise that they are dealing with a fraudster rather than a genuine bank employee, particularly when scammers create a sense of urgency.
“Many victims lose not only the money in their current accounts, but also savings, investment funds, unused overdraft facilities and available credit. The financial and emotional impact can be severe and may affect entire families,” Maseti said.
The potential losses therefore extend beyond money held in a bank account. A successful scam can expose savings, investments and available credit, leaving households facing significant financial consequences.
Consumers urged to slow down
The increasing sophistication of scams makes it more important for consumers to stop and verify an offer before transferring money or providing personal information.
A message promising unusually high investment returns, an unexpected call from someone claiming to represent a financial institution, or an invitation to join an investment group on a messaging platform should be treated with caution.
The NFO has similarly highlighted the difficulty consumers can face when trying to determine how their banking credentials were compromised after a fraud incident.
Maseti said that when consumers become victims of fraud, the issue is not simply whether a crime occurred, but also whether the bank contributed to the loss and whether it acted fairly and in accordance with its obligations.
“When consumers fall victim to fraud, the question before the National Financial Ombud is rarely whether a crime occurred. In many cases, once the evidence has been carefully assessed, that fact is no longer disputed. The key issue is whether the bank’s conduct contributed to the loss, and whether the bank acted fairly, reasonably, and in line with its legal and contractual obligations before and after the fraud was reported,” she said.
What consumers should do after a scam
Consumers who suspect that they have been defrauded should report the matter to their financial institution immediately.
The NFO advises consumers to first give their bank an opportunity to resolve the complaint and, where necessary, use the bank's internal dispute-resolution process.
Where criminal conduct such as fraud, theft or a scam is involved, consumers should also report the matter to the South African Police Service. Reporting the incident to SAPS does not prevent a consumer from pursuing a dispute with the bank through the NFO.
The NFO investigates complaints by considering evidence such as account records, transaction data, internet and mobile banking logs, authentication records, device information, one-time password records, audit trails, correspondence, fraud reports and call recordings.
These records can help establish how disputed transactions were initiated, what devices were used,and what authentication processes were involved.
As the festive season is around the corner, here are some of the scams consumers should be aware of:
Investment scams
These scams promise consumers attractive returns on their money, often with little risk. Personal Finance/IOL has warned about fraudulent investment opportunities promoted through social media platforms, WhatsApp and Telegram.
Impersonation scams
Fraudsters pretend to be legitimate financial services companies, banks, investment firms or executives. They may copy company logos, use photographs of genuine executives or create fake profiles to make the opportunity appear legitimate.
WhatsApp and Telegram scams
Criminals use messaging groups to promote fake investments and financial opportunities. Victims may be encouraged to join groups where other supposedly successful investors provide testimonials designed to create confidence in the scheme.
Phishing
Phishing involves fraudulent emails or messages designed to trick consumers into clicking links or providing confidential information. The messages may appear to come from a bank or another trusted organisation.
Vishing
Vishing is carried out over the telephone. A fraudster calls a consumer while pretending to represent a bank or legitimate service provider and attempts to obtain sensitive information or persuade the victim to authorise a transaction.
Ponzi schemes
A Ponzi scheme uses money from new investors to pay earlier investors, creating the appearance of legitimate investment returns. The scheme depends on continually attracting new participants and eventually collapses when the flow of new money stops.
Pyramid schemes
Pyramid schemes rely heavily on recruiting new participants. People are promised financial rewards for bringing others into the scheme, rather than returns being generated through a genuine underlying business or investment.
Get-rich-quick scams
These schemes appeal to consumers with promises of rapid wealth and unusually high returns. A common warning sign is the suggestion that substantial profits can be achieved quickly with little or no risk.
Advance-fee scams
Consumers are asked to pay money upfront before they can supposedly access an investment, loan, prize or other financial benefit. Once the payment has been made, the promised benefit may never materialise, and victims may be asked for additional payments.
Fake financial services companies
Fraudsters may create websites, social-media accounts and other material that makes them appear to be legitimate financial services providers. Consumers may only discover that the company is fraudulent after transferring their money.
THE NATIONAL