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Bankers, you must remain aware of the different tools that mitigate attempts at electronic fraud. That is essentially the message from Jerome Smalling, Vice President of the Jamaica Bankers Association (JBA). He was speaking at the JBA’s seminar on anti-fraud held recently at the Terra Nova Hotel in Kingston. His warning comes against the background of the increased attempts by criminal elements at defrauding financial services institutions.
100 Seminar Participants Hear About e-Fraud Technologies
Over 100 persons participated in the anti-fraud seminar that was also held in association with the Jamaica Institute of Financial Services (JIFS). International and local experts covered topics including fraud trends, artificial intelligence, data protection, and the use of closed-circuit television images in preventing fraud. Participants got first-hand data and information on the capabilities of existing technology in perpetrating fraud.
Dirk Harrison, the Director of Prosecutions at the Integrity Commission, presented statistics reported by Transparency International that demonstrate the harmful effects of corruption on the progress of governance mechanisms.
Stay Ahead of Fraudsters – Dirk Harrison
Harrison argued for a solution-oriented rather than a problem-oriented strategy to deal with fraud. “We must stay ahead of the fraudsters, who may ultimately be responsible for programming the same technology and machines on which we are to depend,” he said. Further, the Integrity Commission Director of Prosecutions emphasised how important it is to engage with the youth. He encouraged the seminar participants to reach out to the schools, youth clubs, and the cadet force to reinforce the message of “right and wrong,” and the consequences of choices.
Interestingly, Damian Small, the Director of Corporate Security at Scotiabank, argued that institutions must use a combination of strategies to effectively manage e-fraud. Such an approach, he explained, must be transparent and trustworthy for clients. Strategies must also create awareness on the different social engineering tactics that criminals use to collect data. Furthermore, fraud detection and prevention should also be objectives from an organisational perspective.
Law Enforcement Challenges and Weaknesses
But a report appearing in the media in 2018 highlighted major weaknesses in law-enforcement and the justice system in fighting fraud. Reportedly, in 2017, as electronic fraud spread, banks, and other financial institutions lost $750 million.
Also, the Jamaica Constabulary Force (JCF) data showed that between 2013 and 2018 the police Fraud Squad received reports on almost 3,400 alleged cases of fraud.
Unfortunately, the rate at which fraudsters are convicted in the island’s courts lags the arrest rate. Reportedly, the courts found only 115 persons guilty out of the 1,029 persons held for different rackets. Even then, more than 50 percent of the convicted persons over the five years received their conviction only in 2017. Also, according to police data, between 2015 and 2016, the police Fraud Squad secured only three convictions for fraud.
Fraud Officers Sometimes Redeployed
Even arrests fall behind reports. During the five years to 2018, the police Fraud Squad received almost 2,000 fraud reports, but only arrested a little over 900 persons. Distressingly, the situation concerning arrests and convictions for electronic fraud is much worse.
The bottom line is that the Duke Street-based police Fraud Squad is woefully understaffed and under-resourced. Up to 2018, the police Fraud Squad had fewer than a dozen investigators assigned to tackle fraud islandwide. Even with this shortfall, the police high command sometimes redeploys these officers to other duties including Zones of Special Operations (ZOSOs) and the State of Emergency (SOE) in Western Jamaica.
Official Ambivalence Regarding e-Fraud
Interestingly, Lloyd Parchment, an anti-fraud expert at the Jamaica Bankers’ Association, suggested that official ambivalence regarding the crime of fraud contributed to the low conviction rate experienced in Jamaica. For one thing, many see fraud, particularly that against institutions like banks, as a victim-less, white-collar crime.
Parchment suggested that:
“The justice system does not recognise fraud as a very important area of criminal activity; they do not treat it seriously.”
He further explained that the banking sector has urged the justice system to acknowledge fraud as a serious criminal offence. He also noted that the money gained from it is also fuelling more serious illegal activity. According to the JBA anti-fraud expert, banking sector leaders received only a lukewarm response from the justice ministry when they attempted dialogue on the matter of fraud.
Banks Choose Not to Report Fraud
Consequently, financial industry leaders are not so confident that investigations into the reported e-fraud cases will yield serious results. Furthermore, banks, in some cases, chose not to report fraud incidents to the police Fraud Squad as they do not see the point of doing so. Also, the substantial backlog of reported fraud cases investigated by the Fraud Squad is another disincentive for institutional victims of electronic fraud to report or follow up on fraud matters.
Parchment offered an example of what happened in a recent fraud incident:
“We had a guy recently who reaped millions of dollars in fraudulent funds from the banking industry through debit card frauds, and when we managed to engineer his arrest, and he was brought to court, he immediately pleaded guilty. He was slapped with a $200,000 fine. He then went and stole the money from a customer’s account to pay the fine. It didn’t even come out of his pocket, and he is back working the next day and continues to work right now. I have the evidence of that because we have the camera system.”
Participants in the recently held JBA/JIFS anti-fraud seminar got an earful on the scale of electronic fraud and the kinds of technology criminals use. Not only did presenters offer their experiences on the various ways financial institutions suffer at the hands of unscrupulous fraudsters, but they also got useful tips on how to address this growing problem.
The existing law enforcement weaknesses and challenges in the justice system, however, threaten any success in addressing the e-fraud monster.
But as an adage goes, “where there is life, there is hope”.