The threat of online fraud has never been greater than in recent times due to new and more sophisticated technology, particularly across modern-day Africa. An Interpol scam report revealed that Africa has an internet penetration rate of 28%, and crime groups take advantage of the increased digitization to perpetrate financial crimes. Africa loses over $500 million of its annual GDP to online scams ranging from social media, email, malware, romance, and more.
Fraud trends are continually changing, and this evolution is a threat for businesses, as they face a constant stream of new schemes, which are difficult to keep up with. We studied fraud and digital safety trends from previous years and have curated a list of predictions you should be aware of in 2023.
Increase in Fraud Volumes
The number of fraud attempts in Africa increased by over 50% in 2021. It worsened in 2022, as fraud attempts increased by 30% in the first half of the year. In Nigeria, 61,344 phishing attacks were detected in Q2 of 2022, a 79% increase from the first quarter. The largest share of attacks was directed at e-commerce websites, with payment systems and banks following.
As Africa's digital landscape expands, fraudsters will continue taking advantage of the anonymity of online channels to perform more crimes. Also, as technology makes it easier to execute fraud schemes, more greed-driven people will be drawn to it, drastically increasing the volume of fraud.
New Regulations Will Emerge
New and more severe regulations are on the horizon. We expect that regulators will define stricter KYC and AML requirements in a bid to strengthen digital security and reduce money laundering incidents.
Also, despite the pushback from customers and stakeholders in the crypto industry, more regulations are expected to cut into crypto, which will affect the level of anonymity the space has enjoyed in the past. There may be greater fines and sanctions for companies that fail to meet the compliance regulations that apply to their industry. However, it is unlikely that fines will increase as companies have become more compliant over the years. If anything, we expect a steep decline in fines when compared to previous years.
Global Increase in KYC and AML Spend
Businesses have deployed and are still deploying several countermeasures—digital and otherwise—in order to protect themselves and their customers from fraud. This urgent need to stay safe has led to a global increase in KYC and AML spending. A KPMG survey revealed that banks spend between ₦50 million and ₦400 million per annum on KYC requirements. On the global landscape, AML and KYC budgets have increased 22% over the last three years, and businesses spent around $1.6 billion in 2022.
As fraudsters become more adept in their schemes, businesses will dedicate more financial resources to securing fraud prevention services. Some of the services they will deploy are internal controls, transaction monitoring, AML checks, fraud detection systems, and identity verification solutions. Besides efforts to mitigate fraud, regulatory sanctions, monetary penalties, and loss of reputation due to non-compliance will also contribute to the increase in KYC and AML spend.
Synthetic IDs Remain a Threat
There is set to be an increase in the sophistication, intensity, and frequency of synthetic identity fraud. This is where fraudsters steal the identity data of real people and combine that with fake information to form a completely different identity that does not exist. In essence, a 'Frankenstein ID.'
This increase in synthetic IDs will be due to the rise of digital financial services, as more banking platforms go digital and online exchanges and fintechs pop up. The IDs make fraudsters anonymous and difficult to track because they masquerade as legitimate users and use that anonymity to launder money through the infrastructure of financial institutions.
Investing in strong identity verification solutions is crucial for fishing out fake users, particularly for businesses that offer financial services.
Start Protecting Your Business from Fraud
Digital innovation is clearly a major tool fraudsters use to execute fraud in Africa. However, it is also the tool you can harness to fight fraud. Gone are the days when manual preventative methods were adequate.
You can keep fraud at bay by leveraging Dojah's all-in-one platform to carry out KYC checks and rest easy knowing that you are onboarding only verified customers. With Dojah, you can easily access your customer's Financial data, Biometric data, Government data, Telco data, AML data, and more for seamless verification and onboarding. You can also explore multiple integration options via our APIs, widgets, and no-code tools to build custom onboarding flows for all stages of your customer journey.
Start verifying your users with ease today. Contact us if you have any questions or schedule a demo session.
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