Bank card fraud on the increase in Namibia

By Magreth Nunuhe

WINDHOEK – The Bank of Namibia (BoN) has recorded a loss of approximately R13 million through debit, hybrid and credit cards due to fraud in 2016, while the number of incidents related to card fraud over the past two years increased by 46 percent from 2015 to 2016.

Card fraud includes lost or stolen cards; forged or counterfeit; card-not-present, not received issued card; and card ID theft for all card types. The upsurge in card fraud was predominantly in the category of card not present fraud.

Card Not Present refers to a purchase a consumer makes without physically presenting his or her credit or debit card at the time of purchase.

“Even with the chip and pin cards, it is not guaranteed that the new technology will completely eliminate fraud. Technology is constantly evolving and it is worth noting that the industry is equally working to ensure that possible fraud and cloning risks are at all times mitigated,” said Kazembire Zemburuka, BoN’s Deputy Director: Corporate Communications.

BoN is in constant consultation with bodies such as the Payment Association of Namibia (PAN) and other platforms created through this body, to actively address new forms of fraud, as well as finding effective ways to address common occurrences of fraud.

The central bank also announced that if all goes according to plan, cheques could be phased out by 31 December 2017 in Namibia and be replaced by an electronic payment system.

BoN and the Bankers’ Association of Namibia (BAN) has requested that all relevant cheque processing institutions carry out an impact assessment in order to  review and evaluate the impact this will have and to ensure the efficient phasing out of cheques.

“The banking industry, through the Payment Association of Namibia, and in accordance with the Determination on the Efficiency within the National Payment System, continue in their efforts to embark on an industry wide project. The enhanced EFT (Electronic Funds Transfer) Project aims to improve efficiency in the National Payment System, particularly around EFT payments by enhancing the speed of settlement and security thereof,” said Zemburuka.

He added that project timelines were being closely monitored to ensure that progress is duly managed and any risks and complexities are addressed appropriately.

“It is imperative to note that there are other alternative means of making payments in use at present, which are faster and cheaper and do not carry the same risks as cheques. Other mechanisms, in addition to the EFT payment instrument are the Cards and Mobile channels such as electronic wallets offered by different institutions,” he stressed.

All participants in the National Payment System are currently issuing EMV (Euro MasterCard Visa) compliant cards and simultaneously also engaging their clients to re-call the magstrip cards that are in circulation in the country and replacing them with EMV / Chip and PIN cards. According to Zemburuka, this process is underway and at the end of the fourth quarter of 2016, 64 percent of the cards in the National Payment System were EMV compliant.

Further to that, all acquiring devices such as ATMs and Point-Of-Sale devices are now 100 percent EMV compliant and customers are being urged to replace the magstrip cards with the EMV cards.

Bank cards are now being issued with EMV chip card technology and the Payment Card Industry Data Security Standard (PCI DSS) which helps to thoroughly protect confidential payment information across all points.

“The process is still ongoing. The majority of the participants in the National Payment System are busy and have completed the scoping and setting of their requirements towards becoming compliant.  The Bank of Namibia continues to closely monitor the progress on the PCI DSS endeavour and forms part of the periodic engagements and discussions that industry undertakes on formal platforms,” said Zemburuka.

He said that unfortunately Namibia still continued to operate with physical or paper certificates to represent ownership of certain financial instruments such as equities and bonds, while only Treasury Bills are issued in a paperless form at present.

He added capital market characterized by physical paper is generally inefficient and is prone to fraudulent activities which compromises the integrity of capital markets.

“In an effort to develop the domestic capital market, the Bank of Namibia and the Namibian Stock Exchange have collaborated to jointly create a Central Security Depository company that will be licensed by NAMFISA (regulator) to hold and safeguard financial instruments in electronic format,” he stated.

The Central Security Depository (CSD) Company is already in existence and has a Board of Directors comprising representatives from the two institutions. Following industry-wide consultations, systems requirements for the Namibian CSD were developed and thereafter a vendor to provide a system for holding and safeguarding financial instruments was appointed.

“The CSD will cater for both equities and bonds. However, the full implementation of the system awaits the finalisation of the necessary legislation and regulations. This process is already at an advanced stage,” explained Zemburuka.    

Namibia has made notable achievements during the past five years, such as setting up standards for a Basic Bank Account and Cash Deposit Fees to enable and empower more Namibians to become part of the formal banking sector and have access to basic financial services with 136 200 active basic bank accounts.

Other achievements included the establishment of a stakeholder forum under PAN to broaden participation in the National Payment System by various interest groups; promoting financial inclusion through the implementation of instruments such as e-money and ensuring compliance of the Payments Industry to international Payment Card Industry Data Security Standards, which ensures that customer card data is better protected.

Further to that, Namibia has implemented the SADC Integrated Regional Electronic Settlement System (SIRESS) which allows banks within SADC to make transactions directly to one another.

To date, Namibia also boasts four separate authorised non-bank e-money issuers, namely Mobicash Payment Solutions known as Mobipay, Nammic Payment Solutions, Virtual Technology Services and Magnet Payment Solutions.

April 2017
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