Scams and other fraudulent activities targeting people’s salaries and pensions are growing more sophisticated as criminals become better at masquerading as institutions such as the South African Revenue Service (Sars).
Government institutions such as Sars and the Financial Sector Conduct Authority (FSCA) are not exempt from impersonation by opportunistic criminals trying to get their hands on people’s money.
The FSCA acknowledged that it was investigating a case of its own impersonation and specimens of fraudulent letters with the Sars letterhead have circulated, with demands that money be paid into bank accounts to settle arrears.
Sars said it often sees a rise in scams during tax-season campaigns, and when it is made aware of any new scams alerts are published on its website to keep people updated.
“Sars can only try to keep people updated and advise on how to identify and avoid potential scams. This is a very difficult area to monitor for the reason that some taxpayers may receive fraudulent letters but recognise them for what they are and do not respond to them,” it said.
“These taxpayers may not necessarily report such incidents to Sars. Some taxpayers may get what they perceive to be fraudulent letters when in fact the letters are legitimate letters from Sars. Then there are the taxpayers who are scammed by fraudsters and who do report these.”
The FSCA published 104 public warnings, up 121% compared to on the previous period. These warnings mainly related to unregistered financial services, social media-based scams and impersonations
— FSCA
According to the FSCA's 2023-24 regulatory actions report, the authority saw a sharp increase in activities aimed at protecting the public from scams during the year under review.
“During the reporting period, the FSCA published 104 public warnings, which is a significant increase of 121% over the previous period. These warnings mainly related to unregistered financial services, social media-based scams and impersonations,” the FSCA said.
The authority said there was an increase in investigations in terms of the Financial Sector Regulation Act, due to the fact that criminals were impersonating the FSCA itself as well as its leaders and employees.
“The increase in Financial Sector Regulation Act investigations mainly stems from cases involving people unlawfully impersonating the FSCA, its leadership and staff. Similarly, there has been an increase in the unlawful impersonation of authorised financial services providers by people unlawfully soliciting investments from the public.”
The FSCA said 10 investigations in terms of the Financial Sector Regulation Act were finalised in 2023-24, while three investigations were ongoing and 11 new cases were initiated.
During the reporting period, the FSCA registered 483 new investigation cases, finalised 418 and saw a 20% increase in ongoing cases to 375. The majority of new cases are related to potential misconduct in the financial advisory intermediary services and insurance sectors.
Association for Savings and Investment South Africa (Asisa) standing committee convener Jean van Niekerk warned the public to be vigilant about more fraudulent investment opportunities being punted their way via social media through apps including Telegram and WhatsApp.
“Reputable and regulated financial services providers will never sell policies or investments via a WhatsApp group, Telegram, a social media platform, e-mail or an unsolicited random phone call,” Van Niekerk said.
He said scammers create false marketing material using the logos of well-known regulated companies and often the profiles of their executives. This is distributed via social media, Telegram and WhatsApp groups with promises of never-to-be-repeated investment returns.
“When you are desperate, and you see the CEO of a big financial services company promise huge investment returns, validated by fake testimonials, it is easy to throw caution to the wind and click on a link or make an investment.”
Asisa said account takeover fraud, where a criminal accesses a person's or organisation’s account through stealing log-in credentials, exploiting security vulnerabilities or using social engineering techniques, still persists.
The South African Banking Risk Information Centre (Sabric) said it was working with the banking sector and the Hawks (Directorate for Priority Crime Investigations) and actively responded to account takeover threats targeting wealthy clients.
Van Niekerk said South African life insurers and investment companies detected 8,931 cases of fraud in 2022, and while losses worth R1.1bn were prevented, the industry lost R77m to fraud in 2022.
Ninety-One COO Khadeeja Bassier said conventional wisdom dictates that a crime requires “motive, means and opportunity”, and the increasingly digital world has exponentially increased the opportunity to commit fraud as people transact digitally.
“AI has presented a further challenge in proliferating the means to commit fraud with the ease of deep-fake generation. Essentially, content verification systems are becoming easier to impersonate, and therefore vigilance must be heightened,” Bassier said.
She said the control environment tightening can sometimes be frustrating for end investors whose identities are triple-checked and transactions are slowed in a bid to ensure the legitimacy of the transaction.
“There is therefore a very careful tightrope to be walked between end-investor experience and fraud prevention. In addition, as an industry, we are working with each other to triangulate known modes of operation and working with the regulators to ensure that we educate the public as these schemes are uncovered.”
She added that while the ever-increasing digital world has been largely positive for end-investor experience as the market undergoes the transition to digital, criminals are sharpening their toolkits with new and more sophisticated ways to defraud investors.
