As South Africa grapples with a significant rise in fraud over the past four years, the Southern African Fraud Prevention Service (SAFPS) underscores the critical need for collaboration to counter this escalating threat effectively.
The not-for profit organisation was established over 20 years ago to facilitate fraud prevention and detection by sharing fraud incident data and learnings. Statistics released by the SAFPS last year, show there was a 600% increase in incidents of fraud reported by their members in 2022 when compared to 2018.
In the SAFPS’ titled “The scams landscape in South Africa” (2023), the not-for profit organisation showed that the unemployment rate in South Africa increased by 31% and employment fraud increased by 57%.
“People desperate to find a job are now falsifying documentation to make themselves more appealing to potential employers and in so doing are committing first-party fraud. Others are falling victim to employment scams in their desperate attempt to earn a living, with some even falling victim to human trafficking as reported by the Department of International relations and co-operation in South Africa,” stated SAFPS.
Money mules increased by a staggering 44% while scams increased by 150% compared to the previous year. SAFPS explained that the mules themselves are offered once-off lumpsum payments for opening and handing over the accounts to the syndicates or in some cases, they sign-up and take a cut of the scam funds deposited into their accounts looking at it as an additional source of income.
“Scams cannot be addressed alone or separately. It’s a balancing act between the various stakeholders impacted, the environments that enable scams and the sectors that have the power to change the dynamics and implement the proposed solutions,” said the SAFPS.
Sameer Kumandan (pictured), managing director of SearchWorks, agrees. He believes that by utilising data aggregation platforms each department in every business can help mitigate fraud. According to Kumandan, it is more important than ever to follow best practices when doing due diligence before sealing a business deal with someone – whether client or enterprise.
“Robust Know Your Customer (KYC) or Know Your Business (KYB) checks are one of the best ways to mitigate fraud risk,” he says.
SearchWorks is one of South Africa’s largest data aggregation platform. Kumandan says having reliable data is crucial before making any significant business decisions.
“Whether it’s hiring a new employee or partnering with a supplier, having accurate information will not only reduce the risk, but also provide confidence in the decision-making process.”
When job applicants lie on their CVs
According to a survey from CareerBuilder, 75% of HR managers have caught wind of a CV lie.
Kumandan says making a poor hiring decision based on fraudulent or falsified information can be time-consuming, resource-intensive at best. At worst, it could result in the safety of workers being jeopardises when, for example, a mining engineer exaggerates their previous experience.
“That’s why background checks are a smart way to uncover any red flags that could indicate that a potential new hire is a risk. This involves verifying all the information contained on their CV – from education to work experience and certifications,” he says.
Some of the background check searches that can be run on candidates include ID verification, qualifications checks, social media checks, criminal checks, BEE ID photo verifications, and driver’s licence/PDP verification. Other useful checks, especially for individuals working in finance or to be appointed in leadership roles, include politically exposed persons and sanctions, FAIS status, SAFPS fraud verification, employment confidence index, gross monthly income, and CIPC director search.
Finance – ensuring it adds up
If an accountant does not know their client or client’s business, they run the risk of inadvertently being complicit in committing fraud, money laundering or tax evasion.
“Besides the importance of having access to reliable, up-to-date data from several sources, professionals need information obtained within the remit of the law, aligned with the National Credit Regulator and compliant with POPI regulations,” says Kumandan.
A data aggregation platform allows users to conduct live, accurate searches on individuals and companies, and in-depth KYC checks online.
This gives potential employers access to reliable data such as credit checks, deeds checks, exclusive use area verifications, valuations of properties and vehicles, CIPC records, qualification searches, Anti-Money Laundering (AML), PEP and Sanctions.
“In addition, ID and bank account verifications, asset valuations, live tracing on individual and company records, and property and directorship searches can all be done within the confines of the law,” says Kumandan.
Procurement – the importance of vetting suppliers
Onboarding fraudulent suppliers or tender applicants can mean the end of a company, so vetting all suppliers and third parties is crucial. This includes the obvious checks such as BEE status and account verification, but also harder-to-come-by information such as checking whether there are any sanctions against a company.
“To assist in their role as gatekeepers in ensuring that their business only engages with legitimate partners and safeguards against fraudulent practices, procurement departments need the ability to thoroughly vet vendors, perform company background checks, and assist in crucial decision-making that ensures that organisations can grow with complete confidence,” says Kumandan.
Legal – quick access to accurate data
In the modern landscape, South African legal professionals can benefit from platforms that aggregate data from various public and private sources, including the Deeds Office, CIPC, credit bureaus, and additional reputable providers. Kumandan says these digital resources offer a multitude of search parameters that encompass individual, business, trust, property, credit, and adverse news searches.
He explains that this kind of platform allows lawyers quick access to accurate data on their clients, potential clients, and other parties involved in their cases.
“This can help with financial compliance, legal research and case preparation, as well as tracing and investigations in a broad spectrum of legal specialties, including conveyancing, litigation and commercial law,” he says.
