Keeping vigilant in an increasingly digital world

THE REVOLUTION in financial and digital technology has created endless opportunities for global economic growth and financial inclusion, yet it has also birthed new risks. With every digital banking platform or e-wallet allowing small business owners new ways to earn and grow, there are scammers and fraudsters looking to take advantage of the same technologies for their latest grift.

According to the Credit Card Association of the Philippines (CCAP), a group consisting of 18 credit card companies, fraudulent credit card activities via remote and other digital payment channels have increased by 21% since early 2020 when the global pandemic started.

The group identified the most common method, dubbed as “Virtual Account Take Overs” and which involves gaining access to One Time Passwords of unwitting customers to perform validated online transactions, as the most dominant scam in the country today.

“The industry has been experiencing high volumes of fraud cases causing financial detriment. These perpetrators have carried out fraud by using the various digital payment platforms to commit crime,” CCAP Executive Director Alex Ilagan said in a statement.

The CCAP report reinforced previous research that found increasing digital fraud attempts against businesses and consumers in the Philippines since the onset of the pandemic. The Global Consumer Pulse study of global information and insights company TransUnion found that 44% of Philippine-based consumers have been targeted by digital fraud in the first three months of 2021.

In terms of digital fraud attempts against enterprises, this was a 31% increase in attacks this year from pre-pandemic level in March 11, 2019 to March 10, 2020 during the COVID-19.

The study was based on intelligence from billions of transactions and over 40,000 websites and apps from TransUnion TruvalidateTM, a flagship identity proofing, risk-based authentication, and fraud analytics solution suite.

“Fraudsters are always looking to take advantage of significant world events. The COVID-19 pandemic and its corresponding rapid digital acceleration brought about by stay-athome orders is a global event unrivaled in the online age,” TransUnion Philippines president and chief executive officer Pia Arellano had said in a statement.

According to the study, there was a significant increase, more than a 10-fold (1,108%), in attempted fraud from the Philippines against telecommunication companies during the pandemic.

“Fraud can have a potentially disastrous impact on a business’ and a consumer’s finances. In our increasingly digital economy, being able to spot fraudulent transactions whilst still providing genuine consumers with a great experience is a balancing act that organizations need to solve. By using the latest solutions, businesses can build trusted relationships and transact with confidence knowing they are safeguarding both themselves and the consumers they serve,” Ms. Arellano said.

The continued growth of digital payment platforms in the country could create an environment where online fraud and other cybercrimes can fester, and the organization urged major telecommunications providers and policymakers in the National Telecommunications Commission (NTC) and in Congress to implement stricter rules and laws in the space.

Particularly, the CCAP is advocating for the tightening of the telcos’ existing Know Your Customer process when onboarding new prepaid and postpaid customers, particularly when it comes to the ID verification process when customers request to change mobile numbers when declaring a lost or stolen mobile unit.

“We respectfully request that this be addressed urgently. Perpetration of a successful unauthorized SIM swap will affect both the telcos’ and the banks’ customers, resulting in financial losses, loss of public trust and confidence, and close scrutiny from the regulators,” said CCAP in separate letters sent to various groups.

CCAP further pushed for the swifter passage of House Bill 5793 or the “Subscriber Identity Module (SIM) Card Registration Act,” and Senate Bill 2395 or the “SIM Card Registration Act,” which were already approved on third and final reading in both Houses of Congress. Both proposed measures are seeking to establish a system of SIM card sale and registration to “help law enforcers track down those who use mobile phones to engage in criminal activities,” said CCAP.

“To date, there are no existing laws which protect the consumers from this mode of attack from the fraudsters. We believe that the passage and implementation of this law will greatly deter the activities of the fraudsters as they will now have accountability from the use of the then registered SIM cards,” CCAP added.

Meanwhile, the CCAP said that the NTC needs to have a stronger recourse mechanism for consumers who fell victim to fraud.

“We believe that this will effectively facilitate a convenient, standard, and reliable reporting platform with a consistent, trustworthy process where consumers report telephone numbers being used by fraudsters or by some random persons offering to click links or awards/prizes or even offer jobs, without these being triggered by consumers. This standardized reporting mechanism is absent in today’s environment which leads hesitancy from the victims to properly report incidents to their respective banks or telecommunication providers,” CCAP told NTC.

Aside from Virtual Account Take Overs, other common methods of scamming are: phishing and vishing, which lures victims into giving sensitive data by offering fake promos or assistance to help with their account that has been hacked; using lost or stolen cards to make unauthorized transactions; and card replacement scams, which lure people into believing credit card is due for replacement or upgrade.