Banks or scammers? Who’s responsible?

It is a crime that has become so prevalent that almost all of us know at least one person who was the victim of scammers who called and pretended to be from the person’s bank… and then cleaned out their bank accounts.

And in almost every case, the bank washed their hands of it and sent a noncommittal letter that, in essence, says no, you handed over your details. Not our problem. Your money is gone.

But why can’t banks refund us? They do in other countries.

AI and deepfake scams dominate South African banking fraud

The South African Banking Risk Information Centre (Sabric) warns that AI-driven scams, deepfakes and social engineering are rapidly emerging as the biggest threats in the country’s banking sector.

Sabric recently released its Annual Crime Statistics for 2024, showing that digital banking fraud remained the most dominant channel for AI-fraud, accounting for 65.3% of reported incidents, while the volume of cases almost doubled, increasing from 31 612 in 2023 to 64 000 in 2024.

Losses increased from R1 billion to over R1.4 billion.

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A pensioner, who wrote to The Citizen with his complaint, said he received a call on a Friday afternoon from an Afrikaans-speaking woman who wanted to know if he paid R9 999 to an online betting company.

He said he did not and the woman said she will reverse the payment on confirmation of an OTP forwarded to him. He confirmed the OTP number verbally on the phone and the woman said the payment will be reversed and that there is no need to be concerned.

The next day, the woman called again to confirm that the matter has been dealt with and that there is no need to worry. On the Monday, a man called him saying he is from the bank’s fraud department and wanted to talk to him about the transactions on his bank account to the online betting company.

Scammed to transfer funds from bank account

The man told the pensioner that the OTP he received on the Friday was incorrect, or fraudulent, and that his debit and credit card had now been stopped. He asked the pensioner to visit his bank branch to collect a new debit card.

However, later the same day, someone else called, also from the bank’s fraud department, saying the cards were not blocked and that they will be stopped now. This is when the pensioner realised that he was scammed to transfer funds from his bank account.

When he visited his bank branch, he saw that more than R500 000 was stolen from two of his accounts.

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The cards were blocked at that stage, seemingly only after the call on the Sunday from the person who represented the real fraud department.

The bank told the pensioner to open a police case and give them the affidavit and case number for investigation. He did it the same day and received little feedback from the bank regarding the investigation and lost funds.

When The Citizen inquired at his bank’s head office why the pensioner received no feedback, we received the response we are all so familiar with: “The bank expresses its empathy and understand the distress and disruption and sincerely regrets what happened.”

Banks do not store or have access to client’s digital credentials

The bank said the investigation determined the pensioner’s digital banking profile was accessed using his personal login credentials and OTPs. The bank emphasised that it does not store or have access to any client’s digital credentials, which are securely managed and controlled by clients themselves.

Clients are then reminded to never share OTPs, PINs or login details, even with someone claiming to be from the bank, as banks do not ask for this information over the phone or via SMS.

Basically, if the bank cannot get your money back from where it was transferred to, it will not refund you from its own funds.

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If your money is gone it is gone. And the bank says it is your fault.

The problem is that these scammers call you with all your information in hand. They even know about transactions you did the day before, which already makes them sound legitimate.

If you fall for the scam, the bank says it is your fault, because you approved the transaction and confirmed your details.

Older people not familiar with new banking tech

However, phone banking is new. Older people are not so familiar with technology and therefore the scammers target them.

They can often not hear very well and they do not know about the bank warnings about this scam.

Therefore, they fall for it and lose all the money they saved for the rest of their lives.

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Consumer lawyer Trudie Broekmann said it seemed the same warnings banks gave to protect customers were often repurposed by fraudsters to gain consumers’ trust while impersonating the bank.

Broekmann said recent advances in banking have been designed for the convenience and cost-cutting of the banks, rather than the consumer.

“It is high time that the banks responded to the epidemic of bank fraud by investing in safer technology,” she said.

Banks or scammers?

Until now, banks worked on the principle of who gave permission for the transaction to go through. But is the line between authorised and unauthorised transaction not getting a bit more blurred, making it necessary for banks to take more responsibility?

Broekmann said where a transaction was not authorised by a consumer who had all the facts about the transaction, such as when they are conned into providing permission, or think they are consenting to something else, it cannot be regarded as being authorisation.

“The banks are quick to wash their hands of a transaction where there was some type of ostensible authorisation, but if this were to be tested in court, the banks can only escape liability where the consumer knew and understood what they were consenting to and what all the implications were.”

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Since scammers use AI to scam consumers, is it not time for the banks to use AI to stop them?

Broekmann said as AI is available to the scammers now, the banks will need to increase the sophistication of their technology to ensure proper protection of their clients’ funds.