<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



FTX founder Sam Bankman-Fried was convicted of multiple fraud and conspiracy charges Thursday, bringing an end to a month-long trial in which prosecutors accused Bankman-Fried of stealing and using billions of dollars from his own customers.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



Bankman-Fried, 31, was found guilty of seven counts of fraud and conspiracy and faces a maximum possible sentence of up to 110 years in prison.



Jurors in Manhattan federal court returned the verdict after less than five hours of deliberation.



Assistant U.S. Attorney Nicolas Roos said in his closing argument there was “no serious dispute” that $10 billion worth of customers’ money went missing from FTX’s crypto exchange, according to&nbsp;<a href="https://www.cnbc.com/2023/11/02/sam-bankman-fried-found-guilty-on-all-seven-criminal-fraud-counts.html" target="_blank" rel="noreferrer noopener">NBC News</a>, adding that the main issue was whether Bankman-Fried acted with criminal intent.



Bankman-Fried’s defense attorney, Mark Cohen, said Wednesday the prosecution was trying to paint his client as a&nbsp;<a href="https://www.axios.com/2023/11/02/sbf-ftx-trial-closing-arguments-defense" target="_blank" rel="noreferrer noopener">movie villain</a>&nbsp;and argued that Bankman-Fried’s business collapsed through no fault of his own.



<h2 class="wp-block-heading" id="h-chief-critic">CHIEF CRITIC</h2>



“We respect the jury’s decision. But we are very disappointed with the result,” Cohen said in a statement. “Mr. Bankman Fried maintains his innocence and will continue to vigorously fight the charges against him.&#8221;



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Bankman-Fried, who pleaded not guilty to all of his charges, was first charged in late 2022 with money laundering and multiple fraud counts. The charges revolved around allegations that Bankman-Fried was putting customers’ money into FTX’s sister trading firm, Alameda Research. The disgraced cryptocurrency executive resigned from FTX about a month before he was hit with the charges. At the same time, FTX filed for&nbsp;<a href="https://www.theverge.com/2022/11/11/23453164/ftx-bankruptcy-filing-sam-bankman-fried-resigns" target="_blank" rel="noreferrer noopener">Chapter 11 bankruptcy</a>&nbsp;while attempting to pay back investors, customers and creditors—a decision the exchange took after experiencing a liquidity crisis caused by a selloff of its own tokens.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/digital-assets/2023/11/02/sam-bankman-frieds-final-hours-in-court/?sh=6e810e3337f1">Sam Bankman-Fried’s Final Hours In Court</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/tylerroush/2023/10/27/sam-bankman-fried-testifies-a-lot-of-people-got-hurt-by-ftx-as-he-denies-defrauding-customers/?sh=64b1b675720d">Sam Bankman-Fried Testifies: ‘A Lot Of People Got Hurt’ By FTX As He Denies Defrauding Customers</a> (Forbes)<a href="https://www.forbes.com/sites/antoniopequenoiv/"></a>

Key Speakers At The Bloomberg Crypto Summit

Sam Bankman-Fried Found Guilty Of Fraud And Conspiracy

Hacker, IT and person with code on computer, programming and phishing scam with malware or virus. Hacking, system glitch and cloud computing error in dark room, cyber crime and cybersecurity fail

How AI Is Supercharging Financial Fraud–And Making It Harder To Spot

Think that £30 limit on contactless payments is going to protect you from big thefts? Think again.&nbsp;



<hr class="wp-block-separator"/>



Security researchers have found a way to bypass that limit on Visa cards. Their hack, which isn’t limited to U.K. cards, could let opportunistic crooks drain accounts with a single tap, and they claim they don’t even need to steal the credit card. And little on Visa’s side is being done to address this fresh fraud threat.



Forbes&nbsp;let the researchers—Leigh-Anne Galloway and Tim Yunusov from cybersecurity company Positive Technologies—try it out on a personal Visa card. They extracted three successful payments of £31 ($38). On their own cards they made contactless payments as high as £101, though it’s possible more could be stolen with just a tap.



Their hacks show how contactless fraud could get a lot worse. Typically, if a bank sees multiple £30 contactless payments, the card will cease to work, as fraud detection systems suspect it’s in the hands of a thief. But if it’s possible to make large transactions in one tap, the potential for significant frauds rises.&nbsp;



READ MORE | <a rel="noreferrer noopener" aria-label="Is Forex A Scam Or Money Goals? (opens in a new tab)" href="https://www.forbesafrica.com/investment/2019/04/01/is-forex-a-scam-or-money-goals/" target="_blank">Is Forex A Scam Or Money Goals?</a>



Card thieves can now make larger payments than they could before. But now, they don’t even need to steal the card. Criminals could, for instance, take a payment from a card when the user wasn’t looking with their own mobile payments machine (though a malicious merchant would eventually be caught by banks’ fraud systems if they used the same terminal). 



Or even more dastardly, it’s possible to take a payment reading from a credit card using a mobile phone, send the data to another phone and make a payment on that second device going beyond the limit, the researchers claimed. For the hack to work, all the fraudsters need is to be close to their victim.



“So that means if you found someone’s card or if someone stole your card, they wouldn’t have to know your PIN, they wouldn’t have to impersonate your signature, and they could make a payment for a much higher value,” said Galloway.



There should be some limits on just how much a hacker could steal. Galloway said that while it may be that thieves could go much higher than the £101 they tested, into the hundreds or possibly thousands, fraud detection systems at the banks may be able to spot any wildly high transactions. 



<blockquote class="wp-block-quote">“What we found is that actually, we can make reasonably high-value payments. So in the U.K., we’re able to make payments of £100 without any detection,” she added.</blockquote>



They’re still testing whether the hack would work elsewhere in the world, but Galloway confirmed it was not limited to a single country. The limit, of course, differs between nations. For instance, in the U.S., it’s considerably higher at $100.



No fix planned?



That doesn’t detract from the finding that the limit set on Visa cards can be broken. But Visa isn’t planning on updating its systems to deal with the hack. The financial industry giant argued that such a hack wouldn’t be likely to occur in the real world as the criminals would need to have their hands on the card and this doesn’t happen frequently.&nbsp;



A spokesperson for the company went as far as to say that despite the research there wasn’t a security problem that needed addressing.



“One key limitation of this type of attack is that it requires a physically stolen card that has not yet been reported to the card issuer,” a Visa spokesperson told&nbsp;Forbes, noting that Visa was continually working on improving its fraud detection tech.&nbsp;



“Likewise, the transaction must pass issuer validations and detection protocols. It is not a scalable fraud approach that we typically see criminals employ in the real world.”



READ MORE| <a rel="noreferrer noopener" aria-label="#30Under30: Technology Category 2019 (opens in a new tab)" href="https://www.forbesafrica.com/30-under-30/2019/07/01/30under30-technology-category-2019/" target="_blank">#30Under30: Technology Category 2019</a>



Galloway disagreed that the fraudster would need to steal the card. As their tests showed, the hacker only needs to get close enough to the victim’s card for a short period of time to take a payment. This kind of “skimming” has long been proven possible, even if it relies on the card owner being caught unawares.



The Visa spokesperson also claimed that Visa’s global contactless fraud rate declined by 33% between 2017 and 2018 and in Europe by 40%. But data from UK Finance shows fraud using contactless caused £19.5 million of losses during 2018, up from £14 million in 2017. 



UK Finance did, however, note this was “low” in light of total spending of £69 billion over the same year. And neither UK finance nor Visa said they’d ever recorded a case of contactless fraud in which the card hadn’t been stolen.



How the contactless hack works



To carry out their hack, the researchers used a specialized piece of hardware to intercept and insert messages in the communications between the card and the reader. For instance, they could tell the card that verification—like a PIN—wasn’t needed, even though the requested amount was more than £30. They then told the terminal that verification has already been made by another means.&nbsp;



The researchers said these checks hadn’t been made mandatory by Visa, as they had been by its rivals. And as banks follow the guidelines laid out by Visa, it could be doing more to address the issue, Galloway said. Though Visa said that card issuers are ultimately responsible for validating transactions.



For the attack using two mobiles, Galloway explained that it was possible to use one smartphone to tap a card and effectively clone it for a short period. That first mobile takes what’s known as a “payment cryptogram” from the card. This is essentially a signature that is supposed to guarantee the authenticity of future payments. 



READ MORE | <a rel="noreferrer noopener" aria-label="Cryptocurrency Thefts, Scams Hit $1.7 Billion in 2018: Report (opens in a new tab)" href="https://www.forbesafrica.com/technology/2019/01/31/cryptocurrency-thefts-scams-hit-1-7-billion-in-2018-report/" target="_blank">Cryptocurrency Thefts, Scams Hit $1.7 Billion in 2018: Report</a>



The cryptogram is sent to the second phone, which simulates the card as if it were making a mobile payment. The hackers can then go beyond the limit by doing the same interception attack as before.



Stephen Ridgway, cofounder and chief technology officer at cybersecurity startup th4ts3cur1ty.company, said that addressing such attacks at a technical level could be problematic. 



“There may be no ‘quick fix’ for this, even if the payment providers mandate authentication for payments over £30, if the card and reader are susceptible to a ‘man-in-the-middle’ attack that tricks the system into believing that authentication has already taken place,” he said.&nbsp;



As for what concerned cardholders can do to protect themselves, keeping cards physically secure is vital. For anyone worried about someone reading their card through their wallet, there are covers that can prevent such “skimming” from working. Ridgway said another cheap solution was to use a phone cover, as they often provide the same protection. And monitoring transactions could help consumers detect fraudulent transactions before banks do.



Improving bank security and fresh new regulation should also improve matters. Ridgway said that should contactless limit bypasses become common, it’s very likely that payment providers will quickly learn to recognize and block them. 



And incoming new EU rules could also prove a boon. From September 2019, banks will need to ensure a PIN is required once total contactless payments exceed a value of £130 or when five contactless transactions have been made in a day.



-Thomas Brewster; Forbes

960×0

Hack Breaks Your Visa Card’s Contactless Limit For Big Frauds

Businessman Looking Secretly to Woman Using Laptop

Is Forex A Scam Or Money Goals?

The global retail group Steinhoff is reeling under allegations of accounting fraud. Since the allegations surfaced last year the CEO of the multi-billion-dollar business, Markus Jooste, has <a href="https://www.iol.co.za/business-report/steinhoff-shares-nosedive-after-ceo-markus-jooste-resigns-12286137" target="_blank" rel="noopener">fallen on his sword</a> and the company’s stock has been <a href="https://www.sowetanlive.co.za/business/2017-12-07-steinhoff-share-price-continues-to-fall/" target="_blank" rel="noopener">hammered</a>, at one point losing about 90% in market value in a few days.
Observers are calling for harsh punishment, including jail, for the culprits.
<a href="http://www.forbesafrica.com/focus/2017/12/18/steinhoff-scandal-points-major-gaps-stopping-unethical-corporate-behaviour/" target="_blank" rel="noopener">READ MORE: Steinhoff scandal points to major gaps in stopping unethical behaviour</a>
Early reports suggest that Steinhoff was involved in massive <a href="https://www.timeslive.co.za/sunday-times/business/2017-12-14-steinhoff-accounting-woes-go-back-to-2016-as-scandal-grows/" target="_blank" rel="noopener">accounting fraud</a>, including the overstatement of the company’s financial position.
The company is listed on both the Johannesburg Stock Exchange in South Africa as well as the Frankfurt Stock Exchange in Germany. With a primary listing in Frankfurt and an <a href="http://www.steinhoffinternational.com/corporate-information.php" target="_blank" rel="noopener">Amsterdam</a> corporate address, Steinhoff follows the Dutch corporate governance code.
Consistent with this code, Steinhoff has a <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1001&amp;context=fisch_2016" target="_blank" rel="noopener">two-tier board structure</a>. This <a href="http://www.steinhoffinternational.com/leadership.php" target="_blank" rel="noopener">is made up of</a> a management board (comprised of four top executives) and a supervisory board (comprised of 9 non-executive directors).
The point of the two-tier board structure is to ensure that the supervisory board is independent from the executives who sit on the management board. The management board accounts to the supervisory board, which accounts to the shareholders or to the company.
The two-tier board structure is favoured in western Europe. The US and UK prefer the <a href="http://www.steinhoffinternational.com/leadership.php" target="_blank" rel="noopener">one-tier</a> – or unitary board – structure, as does South Africa for historical reasons.
It appears that Steinhoff’s decision to opt for the two-tier board structure may have contributed to its undoing. Natural holes in the structure, the biggest one being the fact that the management board doesn’t always keep the supervisory board in the loop, combined with Steinhoff’s corporate culture which was anchored by a <a href="https://www.moneyweb.co.za/in-depth/investigations/we-have-always-been-wary-of-markus-jooste-36one-founder-cy-jacobs/" target="_blank" rel="noopener">dominant personality</a>, appear to have created accountability holes.
<h2>Two-tier versus one-tier structure</h2>
There are pros and cons to both systems.
One of the good things about the one-tier board system is that executive directors and non-executives directors sit together on a single board. Traditionally there would be two or three executive directors (the CEO, chief financial officer and the chief operating officer) sitting alongside a majority of non-executive directors.
This means that there’s a seamless flow of information between executives and non-executives. The executives can be asked questions with the entire board present. This closes any information asymmetry. In addition, it can also facilitate quicker decisions.
On the downside, the unitary board structure has been criticised for its propensity to compromise the independence of the non-executive directors. This dilutes their oversight role.
For its part the two-tier system seems to have more checks and balances built into it given that the management board is subject to oversight by the supervisory board, and the supervisory board has to answer to shareholders.
But the two-tier structure is often <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1001&amp;context=fisch_2016" target="_blank" rel="noopener">criticised</a> for information asymmetry between the management board and the supervisory board. In other words management knows a great deal more about the business than the supervisory board. This can lead to operational challenges developing without the board noticing until it’s too late.
Steinhoff’s board structure followed the two-tier system. In 2016 its management board comprised three members, Jooste (CEO), <a href="http://www.huffingtonpost.co.za/2018/01/05/steinhoff-cfo-ben-la-grange-steps-down_a_23324706/" target="_blank" rel="noopener">Ben La Grange</a> (Chief Financial Officer) and <a href="https://www.fin24.com/Companies/Retail/steinhoff-shares-rally-as-beleaguered-retailer-names-acting-ceo-20171219" target="_blank" rel="noopener">Danie van der Merwe</a> (Chief Operating Officer and now acting CEO). As is normal under the two-tier system, none of the three members of the management board sat on the supervisory board.
Some analysis of the <a href="https://www.theguardian.com/business/2016/jun/22/volkswagen-handling-emissions-scandal-shambles-investors-agm-german-carmaker" target="_blank" rel="noopener">Volkswagen emissions scandal</a> apportioned blame to the two-tier system combined with a <a href="https://www.nytimes.com/2015/09/25/business/international/problems-at-volkswagen-start-in-the-boardroom.html" target="_blank" rel="noopener">corporate culture</a> that was anchored by dominant personalities.
A similar case can be made for the Steinhoff saga.
<a href="http://www.forbesafrica.com/billionaires/2017/12/08/south-african-billionaires-fortune-plunges-2-billion-day-amid-accounting-scandal/" target="_blank" rel="noopener">READ MORE: South African Billionaire&#8217;s Fortune Plunges More Than $2 Billion In A Day Amid Accounting Scandal</a>
<h2>Flaws in the Steinhoff structure</h2>
Did the two-tier structure give the CEO too much leeway to take decisions that in the end led to the near collapse of the company?
This may indeed have been the case. Take, for example, the fact that some believe the company <a href="https://www.iol.co.za/business-report/opinion/opinion-steinhoff-shock-the-warning-signs-were-all-there-12314186" target="_blank" rel="noopener">grew too quickly</a>.
The danger of companies expanding too rapidly was highlighted decades ago by <a href="https://books.google.co.za/books/about/Corporate_planning.html?id=FRMPAQAAMAAJ&amp;redir_esc=y" target="_blank" rel="noopener">author and corporate strategy guru </a> John Argenti who came up with <a href="https://accountingandplanning.files.wordpress.com/2014/12/qualitative-models-of-corporate-failure.pdf" target="_blank" rel="noopener">a model</a> that considered factors leading to corporate failure. Two of the higher scored factors were expanding too fast (referred to as overtrading) and high levels of loan borrowing.
Steinhoff seems to have suffered from both. And yet the supervisory board appears to have failed to raise the red flag when it comes to large transactions. An example of it failing to fulfil its oversight role was when it decided to not make public Steinhoff’s <a href="https://www.reuters.com/article/us-steinhoffintlaccounting-disclosure/steinhoff-didnt-tell-investors-about-nearly-1-billion-in-deals-idUSKBN1D81BZ" target="_blank" rel="noopener">$1 billion</a> transaction with a related company. Even if the supervisory board didn’t legally have to make this public knowledge, ethically it should have made the disclosure.
The functioning of the audit and risk committee didn’t help the situation either.
<h2>Audit and risk committee</h2>
Steinhoff had three standing committees of the supervisory board – audit and risk, human resources and remuneration and the nominations committee. The committee structure had two weaknesses.
The first was that too few of its non-executives actually served on the committees – only 5 of the 11 supervisory board members. And given that the then chairman Christo Wiese and Claas Daun only sat on one, it begs the question how only three members of the supervisory board could have been expected to carry the real responsibility of the standing committees.
The second flaw was that audit and risk were wrapped up in one committee. This is the norm under a two-tier governance structure.
South Africa’s corporate governance structures might have helped to address both these problems.
<a href="http://www.iodsa.co.za/?page=KingIV" target="_blank" rel="noopener">King IV </a> stipulates that the risk governance committee should be made up of a mixture of non-executives and executives (the majority being non-executives). And the governance guidelines warn against audit and risk being under one committee. Its advice is that a company should only combine them if it’s able to devote enough time to dealing with risk related issues.
For a company of Steinhoff’s complexity, it seems inconceivable that the audit and risk committee could have devoted the necessary time to undertake its responsibility.
<h2>Conclusion</h2>
The Steinhoff case highlights weaknesses in the governance structure the company had chosen to operate under. That said, the rules have worked perfectly well for thousands of other companies. The lesson therefore is be alert to the warning signs such as dominant directors who don’t heed the rules. They can pose a grave risk to any company. &#8211; Written by <a href="https://theconversation.com/profiles/owen-skae-315237" target="_blank" rel="noopener">Owen Skae</a>, Associate Professor and Director of Rhodes Business School, <a href="http://theconversation.com/institutions/rhodes-university-1843" target="_blank" rel="noopener">Rhodes University</a>
This article was originally published on <a href="http://theconversation.com" target="_blank" rel="noopener">The Conversation</a>.
<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/89704/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1" />

Did Steinhoff’s board structure contribute to the scandal?

Imagine you lose your identity document; on your way home from work, you get arrested. You discover someone has been committing fraud under your name. It could happen to you.
This happens across Africa and no one is safe. It’s called identity theft.
This is the sad tale of 37-year-old Bokang Tsie. We meet outside a restaurant in Krugersdorp, a town known for mining, west of Johannesburg. He is a bit anxious as he tells of what happened when his green identity book was stolen from him.
On a quiet Saturday afternoon in 2014, Tsie was going home from varsity when three men attacked him and ran off with his bag. Inside was a phone, books and an ID book.
“They grabbed me, and my bag. I tried to take it back but one of the guys managed to run away with it,” says Tsie, who is now a pastor.
Tsie opened a case at a police station and received a case number but nothing happened. Four months later he got a call from a police station in Pietermaritzburg informing him of fraud they alleged he tried at a bank.
“A policeman asked when I was last in Durban; I told him I haven’t been to Durban for five years. He also asked when was the last time I used my ID, I said I had lost my ID. And I started opening up to him about what happened,” he says.
Before he could plead his case, the police came to arrest him. It was a petrifying moment for Tsie; he says his heart beat fast. He was taken to a police station. Luckily for Tsie he had reported the loss of his ID book.
“They said if I didn’t report my missing ID I would have been arrested on charges of fraud. Imagine, I’d be sitting in jail for a crime I didn’t commit and I’d have a bad credit record,” he says.
<a href="http://www.forbesafrica.com/focus/2017/09/19/nigerian-atm-fraud-victims-swindled/" target="_blank" rel="noopener">How Nigerian ATM Fraud Victims Are Swindled</a>
Fraudsters wanted to cash a cheque of R160,000 ($12,000), that they had stolen, under Tsie’s name. They failed when a banker noticed the photo was torn out.
“I was told that when the banker was checking out the ID, they noticed that. They were caught and ran away. That’s when the bank called the police station.”
That’s not all. The fraudsters also opened an account at a retail shop, it also failed &#8211; because of a sharp-eyed shop assistant.
They removed Tsie’s photo and replaced it with another person who looked a few years younger than Tsie.
Tsie got his ID back and took it to private investigators to check for other accounts the fraudsters tried to open.
Sadly, its It’s been three years now and the people who attacked him and used his ID haven’t been arrested.
“Criminals don’t care how they ruin lives, they just don’t care. They could be stopping a person’s life, I don’t know what happens with their conscious,” says an upset Tsie.
<h1>‘It’s Like I’m Dead’</h1>
<h4>Aphelele Busuku got the shock of her life when she discovered she was married to a person she doesn’t know and had a child she’s never met.</h4>
<div id="attachment_33662" style="width: 510px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-33662" class=" wp-image-33662" src="https://www.forbesafrica.com/wp-content/uploads/2017/09/Aphelele-Busuku-e1506500246152-300x200.jpg" alt="" width="500" height="333" />Aphelele Busuku (Photo by Motlabana Monnakgotla)</div>
A devastated Aphelele Busuku found out that she was married to a person she never met.
It was the end of October last year, when Busuku moved to Johannesburg, from Durban, for a new job. She needed a place to stay and after meeting a private property agent, she had to submit an ID number, bank statements, proof of address and a payslip.
“It was just two weeks into my new job, I gave him all my documents and went to view the place and found out that it was a scam,” says 23-year-old Busuku.
The fraudster took Busuku’s money and documents.
“I was going to apply for a car so I had to get my credit record at TransUnion and found out that my score was very low. I was wondering what was going on because I only had a certain amount of debt which was from owing school fees and one account,” she says.
“When I received my credit statement I saw that I have a recurring Vodacom under my name, and there was a Sportscene account.”
What shook her most is when she found out that she’s married to a man she has never met.
That’s not all; she also found out that she has a child. She submitted an affidavit to dispute this.
“I was so shocked because I don’t have a child and now I’m registered as a mother of one. It confused me.”
“On the statement there were phone numbers that are not mine. When I called it a lady answered, I asked her who are you and then she hung up. I don’t even know if I’m married to a male or female, Home Affairs couldn’t give me proper details,” says Busuku.
<a href="http://www.forbesafrica.com/focus/2017/08/28/slaves-debt-oh-owe/" target="_blank" rel="noopener">Slaves To Debt: Oh, What We Owe!</a>
Home Affairs told her if she wanted to get married in the future, she’d have to first get a divorce.
Busuku had to start afresh; a new bank card, ID number and a cell phone number.
“I had to change at least one digit so that I can have a new ID book, and have a clean credit record. It’s like I’m dead.”
<h1>‘People Thought I Was A Scam’</h1>
<h4>After having her identity stolen, journalist Gabisile Mbele had to sign her own death certificate.</h4>
<div id="attachment_33661" style="width: 313px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-33661" class=" wp-image-33661" src="https://www.forbesafrica.com/wp-content/uploads/2017/09/Gabisile-Mbele-199x300.jpg" alt="" width="303" height="457" />Gabisile Mbele (Photo by Motlabana Monnakgotla)</div>
“I’ve been a whole new person since April last year. I had to get a new passport, a new ID number, I had to denounce myself and sign a death certificate. Everything that I’ve done in my life doesn’t exist.”
These are the words of Gabisile Mbele, a journalist and one of many victims of stolen identity. But here’s the twist; she never even lost her ID book.
It was in 2000, in matric when somebody opened a bank account using Mbele’s ID number.
“Luckily I was with FNB since I was nine years old; they quickly picked up that someone is using my ID and told me that this person has the same ID number, same birthday but different address,” says Mbele.
The person also tried to open an account at an Absa bank. All the banks were alert and informed Mbele.
Criminals use an ID, change the photo, buy on credit, apply for loans and open bank accounts.
“When I looked at that girl’s ID, I could swear it was mine but I had never lost my ID before. I was like ‘how the hell did this person get my identity when I’ve never lost my ID?’” she says.
Four years later, the problem resurfaced. Mbele had just started work and wanted to open a retail account.
“I wanted to open a Woolworths and an Edgars account. Woolworths was like ‘sorry this is fraudulent, we’ve already got an account with this number’. I gave them my bank details and cell number but they still said no.”
It got worse when Mbele fell pregnant and needed to apply for UIF at the Department of Labour.
“I was told I need to own up for the job of being a domestic worker and why don’t I have a UIF form. The first thing I thought was ‘do these guys think I worked as a journalist first and left to become a domestic worker?’ It didn’t add up,” says a puzzled Mbele.
She asked the labor department to give her the woman’s contact details.
“I called her employer, it was a white lady from Kempton Park; she said her domestic workers name is also Gabisile Ndebele, but from Zimbabwe. I then asked her ‘do you know that she can’t possibly have an ID?’ Her response was she has an ID, she went and registered her at the Department of Labour.”
When Mbele gave birth she couldn’t register her daughter for four months. She was a non-existent citizen because, according to Home Affairs, Mbele had another child who was eight years old.
“I’ve sworn at everybody, including Malusi Gigaba, the [then] Minister of Home Affairs, I went to them over and over. And still nothing.”
Mbele’s parents, and a witness not related to her, had to do an affidavit confirming that she never had a child. She also had to change her surname from Ndebele to her father’s surname Mbele.
In April last year, when she wanted to renew her passport for a trip to Los Angeles for the BET Awards, she couldn’t.
“A woman at Home Affairs said ‘hayi sisi (no my sister), we’ve just given you a passport last week and now you want a new one. I remember crying and sitting on the floor at Home Affairs thinking that this cannot be my life,” says Mbele.
“I had to change everything, people thought I was a scam. I had to get all the paperwork, emails and faxes. It is the most devastating thing ever; I don’t wish it on anyone.”
<h2>What to do when your identity is stolen: </h2>
<ul>
<li>Contact the credit bureaus</li>
<li>Change bank accounts</li>
<li>Change your car registration number</li>
<li>Seek legal advice</li>
<li>Report it to the police</li>
<li>Hire a private investigator</li>
<li>Renew your driver’s licence</li>
<li>Alert the Fraud Prevention Services</li>
</ul>
<h2>What to watch out for: </h2>
<ul>
<li>Identity thieves may shoulder-surf when you are entering your pin at an ATM</li>
<li>Dumpster diving – criminals seaching through rubbish</li>
<li>Phony websites that look identical to those of authorized banks</li>
</ul>
<h2>How to avoid identity theft:</h2>
<ul>
<li>Shred your documents</li>
<li>Do not disclose your identity number unless it’s necessary</li>
<li>Don’t provide sensitive information over the internet</li>
<li>Check your credit reports regularly</li>
<li>Never carry more credit cards than you need</li>
</ul>
&nbsp;

Nailed By Imposters

It has been three years since the Central Bank of Nigeria introduced the <a href="https://www.cbn.gov.ng/cashless/" target="_blank" rel="noopener">Cashless Nigeria Policy</a>. Its aim was to encourage the use of electronic systems for all monetary transactions.
The policy has yielded <a href="https://www.vanguardngr.com/2012/11/cashless-policy-has-come-to-stay-cbn-2/" target="_blank" rel="noopener">benefits</a>: it makes many transactions simpler and safer for more people. But there has been an increase in <a href="http://ndic.gov.ng/ndic-releases-2015-annual-report/" target="_blank" rel="noopener">fraud</a> in the banking and payment systems. These crimes are carried out using the information and communications technology that has flourished in Nigeria since the early 2000s.
A <a href="http://ndic.gov.ng/wp-content/uploads/2015/01/NDIC%20Report%202013.html" target="_blank" rel="noopener">2013 report</a> by the Nigerian Deposit Insurance Corporation identified 14 types of electronic fraud (e-fraud). Automated teller machine (ATM) fraud was in prime position. It accounted for just under 10% of the total value of funds lost to e-fraud and 46.3% of the reported number of cases. The agency’s <a href="http://ndic.gov.ng/ndic-releases-2015-annual-report/" target="_blank" rel="noopener">2015 report</a> points to an increase in the incidence of ATM fraud in Nigeria.
<a href="http://www.forbesafrica.com/entreprenuers/2017/09/01/watchdog-sniffing-deception/" target="_blank" rel="noopener">The Watchdog Sniffing Out Deception</a>
Despite the apparent importance of e-fraud, little scholarly attention has been paid to understanding how it affects the functioning of the financial system and its impact on victims. That’s why my colleagues and I carried out a <a href="http://www.ingentaconnect.com/content/hsp/jpss/2017/00000011/00000001/art00011" target="_blank" rel="noopener">study</a> to examine the experiences of ATM fraud victims in south-west Nigeria. We focused on what made a person more likely to be a victim and on the fraudsters’ tactics.
<h2>Study results</h2>
We found that a number of factors predisposed people to being victims of fraud. These include illiteracy, health problems and issues of vulnerability.
An elderly illiterate man who was interviewed said:
<blockquote>I was given an ATM card and nobody told me how to use it. Outside the bank I gave it to a young man at the ATM to help me withdraw cash. He did it and returned my card to me. After a few days I noticed money had left my account, which I promptly reported to my bank. At the bank I was told that the young man had swapped my card.</blockquote>
Our study also showed that close family members sometimes exploit people’s trust to defraud them. One middle-aged man gave his son his ATM card to draw N5,000 ($31.25) ahead of returning to school. He later discovered that his son had instead drawn N10,000 ($62.50). “If my son could do that to me while I was trying to help him, who can one trust?” he lamented.
<a href="http://www.forbesafrica.com/entreprenuers/2017/06/01/im-like-person-walked-house-got-mugged/" target="_blank" rel="noopener">&#8216;I&#8217;m Like A Person Who Walked Out Of My House And Got Mugged&#8217;</a>
When people are ill, they can be vulnerable to ATM fraud. They depend on others because they can’t get around. A “trusted” person may take advantage.
The story of a young man interviewed during our study helps illustrate this. He was ill and gave his ATM card to a friend to help him buy medication. He was later “shocked” to discover that his friend had drawn an extra N70,000 ($237.50) from his account.
<h2>The coercion factor</h2>
Of course, friends and relatives are not to blame for all ATM frauds. Some occur through coercion, particularly physical attacks and armed robbery at <a href="https://www.vanguardngr.com/2017/02/police-arrest-atm-robbery-suspect-lagos/" target="_blank" rel="noopener">ATMs</a>.
One young woman told us:
<blockquote>I wanted to make a withdrawal on a Sunday evening. The ATM on my street was not working so I had to look for another ATM a few streets away. Unfortunately I was robbed by an armed gang. They made me insert my ATM card to confirm the PIN number and balance. They went away with my ATM card and PIN. I couldn’t do anything until Monday, by which time my account had been drained of N200,000 ($1,250). They took my phone so I could not even alert the bank and block withdrawals.</blockquote>
The success of online fraud depends on offenders choosing easy victims.
<a href="http://www.forbesafrica.com/focus/2015/09/01/con-me-if-you-can/" target="_blank" rel="noopener">Con Me If You Can</a>
<h2>Stemming the tide</h2>
Reducing ATM fraud depends on making people less vulnerable.
For example, anti-fraud education campaigns must use indigenous languages and consider that some bank customers can’t read. Banks must show their customers how their cards work and how to get help when in trouble. Security officers who are not bank staff should not be allowed to deal with customers.
ATM users should be taught to change their passwords sometimes. They must also be cautious about when and where they withdraw money to reduce the risk of attacks. &#8211; Written by <a href="https://theconversation.com/profiles/oludayo-tade-244002" target="_blank" rel="author noopener">Oludayo Tade</a>, Lecturer of Criminology, Victimology, Deviance and Social Problems, University of Ibadan
Originally published in <a href="https://theconversation.com/africa" target="_blank" rel="noopener">The Conversation</a>
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How Nigerian ATM fraud victims are swindled

Time may have aged the face that conned millions, in a cloud of fraudulent cheques, but Frank Abagnale is as sharp and up-to-the-minute as ever on the shady world of fraud.
Abagnale, one of the world’s best known imposters, reckons that technology makes it a thousand times easier to be a conman.
“Today, I would have stolen $20 million easily. Back then, for me to produce a cheque would require a great deal of skill and time. Today, in just a few minutes, you can design a cheque on your laptop, go to a company’s website, check their logo and put it on a cheque. Capture the bank’s logo and put it on a cheque, and if you get a copy of the company’s annual report, on page three is a signature of the chairman of the board,” says Abagnale.
His smooth, charming tone that fooled bank tellers all over the world, assures me that Leonardo DiCaprio’s portrayal of him in the movie Catch Me If You Can has nothing on the real Frank Abagnale story in the 1960s.
&nbsp;
“I was 16 years old when I ran away from a broken home. The judge told me I had to choose between my mother and father (who had just divorced) and I ran away and ended up in the streets of New York City,” says Abagnale.
Out on the streets, his first task was to appear older. Abagnale altered his driver’s licence to make himself 10 years older. That was the first step to writing about $2.5 million in bad cheques before he was 21.
In this, Abagnale impersonated an airline pilot, a doctor, a lawyer and a university lecturer before being caught by the French police. The newspapers called him the Skyway Man as he used his pilot guise to fly for free on his way to paper the world with dud cheques. There was time in French and Swedish prisons before extradition to the United States, where he was sentenced to 12 years in federal prison; he served four.
“When I was 26, the government offered to take me out of prison on the condition that I go work for them for the rest of my sentence, until my parole expired. I agreed and now I have spent about four decades with the FBI in Washington DC,” he says.
Abagnale is a world expert on fraud who now lectures and consults for financial institutions, corporations and government agencies around the world. He mentions Russia and China as hotspots for cybercrime.
Nigeria is also on Abagnale’s list. He talks about how Nigerian conmen have progressed.
“Twenty years ago, Nigerians had all these scams where they’d write these letters with counterfeited postage stamps and they’d send thousands of them out hoping for 1 or 2 percent response. Today there is no letters. They send out millions of emails and all they have to do is hope that less than 1 percent responds to their emails and they’re going to make millions of dollars.”
Abagnale warns that the most common Nigerian email, right now, is from the ‘internal revenue office’ stating that the recipient owes taxes that need to be paid back within five days. When the recipient calls to enquire, they inform them that they can pay immediately using their credit cards, hoping people will hand over their numbers.
”When one thing wears out and people get used to that, they just come up with another idea,” says Abagnale.
Even Facebook and Twitter can be tools in cybercrime.
“If you’re on Facebook and you display when you were born and have a portrait style picture of yourself, I’m 98% [on my way to] stealing your identity. There’s technology called PittPatt which allows me to take your picture at the airport and in 7.5 seconds I’ll be at your Facebook page through facial recognition from the photo on your Facebook. Now if we have it, criminals have that technology as well,” says Abagnale.
With all the information criminals can find on Facebook alone, it would be wise to play it safe, he says.
According to Abagnale, it’s wiser to alter your date of birth slightly on social media platforms.
“I would never put a straight photograph of myself on social media. I’d post a picture of me with a group of friends or me playing tennis or volleyball or some sport activity where it’s not a straight on photograph.”
Wise words from a sharp-eyed, smooth talking, poacher turned gamekeeper.

Con Me  If You Can

It was a touching story, even inspiring; the sad part, most of it wasn’t true.
Thirty-year-old Thulani Khoza told FORBES AFRICA, plus a clutch of television shows, radio and national newspapers, his plausible story of building a smartphone in Africa. He even had a snappy name for it, T-Touch Mobile. His former partner alleged that he bought the phone at a shop in downtown Johannesburg.
At our offices in Sandton, Khoza said he would be on the cover of FORBES AFRICA one day.
Khoza told us of his transition from Bushbuckridge, a small town in Mpumalanga, to obtaining a degree in computer science from the University of the Witwatersrand in 2006 and earning honors in software engineering from the University of Nottingham, in Britain, and a master’s in business administration at Baker University in the United Sates.
“The university can find no record on its database of a Mr Thulani Khoza having graduated from the university with a BSc degree in 2006,”says Carol Crosley, the Registrar at the University of the Witwatersrand.
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Emma Rayner, a Media Relations Manager at the University of Nottingham, said: “I can confirm that our alumni team and our student services department can find no record of Thulani Khoza ever being a student at the University of Nottingham.”
Khoza said he worked as a systems analyst for South Africa’s public broadcaster, the SABC. But the SABC’s human resources confirmed it doesn’t have a Thulani Khoza in its records as an employee or even a freelancer.
In his company profile Khoza claims to have registered with Neotel, a national operator for fixed-line telecommunication services.
“Neotel is unaware of, and cannot locate, any records relating to Thulani Khoza or the company, Thules Communications,” says Sandra Sowray of Neotel.
It also appears that Thules Telecoms, a company Khoza claims to be his, belongs to his ex-girlfriend Beatrice Mashego who grew up with him.
“We attended the same primary school in Bushbuckridge Shatale Township. In 1998, we were doing grade six, he left to stay with his mother in Vosloorus until he invited me on Facebook in November 2015.”
According to Mashego, the company was registered in September 2016, under her name, but no more.
“It was registered under my name until I approached the CIPC (Companies and Intellectual Property Commission) to deregister after hearing that he used me to get government funds.”
Mashego says the company wasn’t registered with any trademark association.
“I am not sure if the phone is there or not but I can confirm that there are no technicians whatsoever. I only know the one phone he’s been showing everyone.”
Khoza told us that he has 89 employees and has received orders from as far as the United States, Britain, Mexico, Portugal, and Ghana. His former business partner, Karabo Masenyadiloana, says no.
“He’s been promising jobs; that once this factory is up and running he’s going to employ 2,500 people. Thulani is too calculated to be mentally sick because someone who is mentally sick would have dropped the ball but this guy is always on his game. It is deliberate,” says Masenyadiloana.
According to Masenyadiloana, there is no such thing as T-Touch Mobile that was supposed to be registered with the regulator, the Independent Communications Authority of South Africa (ICASA).
“I was submitting paperwork for my phone at ICASA, so I was having a conversation with the staff so I was like, ‘have you guys ever heard of T-Touch?’ They searched their system and there was no record of T-Touch. I then asked about Thulani Khoza, they searched again and there was no Thulani Khoza in their system. This guy doesn’t even know where ICASA is and what the paperwork looks like,” says Masenyadiloana.
“Thulani’s phone is cracked, don’t you think that if he really had a phone company he would have fixed that crack or got himself a new phone? &#8230;For him to go to a shop and buy a phone and tell media that he manufactured it himself shows that he has a skill in lying,” he says.
In November, Khoza received the government’s SA Man of the Year for Science &amp; Technology award that &#8220;acknowledges an individual that has played a significant role in ensuring community development in science and technology&#8221;. Khoza was going to be handed a R15,000 ($1,100) cash prize, but not anymore.
“He did lie to us. We withdrew the award in December as he failed to come forward to explain himself. We have also decided not to act in a way that would destroy him but to rehabilitate him,” says Bongani Ngomane, Chairman of the awards.
When FORBES AFRICA called Khoza on January 12, he said: “I’m in Mpumalanga and I cannot respond to your questions right now because you’ve caught me off guard. I will ask my PR company to send a statement and I have addressed everything in the statement.”
We phoned him repeatedly and, at the time of going to press, nothing, not a call nor a statement.

The Charlatan Who’s No  Longer  Taking  Calls

When, let’s call him Robert S, the CEO of Dutch multinational IT firm X, decides to open a branch in Kenya, he is enthusiastic about expanding into an emerging market that promises substantial return on investment. His firm teams up with a local shareholder to ease transition into the Kenyan business environment. With primary experience in developed markets, the choice of partner is largely financial, neglecting the shareholder’s political connections or ethical track record.
The local partner helps with raising finance, acquiring trading licenses, registering premises and managing the operational set-up including the supply chain. Issues like nepotism, fraud and bribery don’t cross Robert S’s mind until his company successfully tenders for a big contract and is promptly accused of corruption by the losing party. An internal investigation brings severe irregularities to light. Company X finds itself faced with reputational damage, threats from the local shareholders’ political connections and liability of hundreds of millions of dollars.
Two years later, Company X still operates successfully in Kenya, but Robert S wishes he knew back then what he knows now.
Bribery, theft, corruption and other types of fraud cost African governments and companies at least $11 billion last year, the first Africa Fraud Barometer, recently published by auditing firm KPMG, found. That’s a good 10% of the roughly $100 billion in foreign direct investment made on the continent in 2011.
The actual cost of fraud is likely to be much higher, since the barometer only takes into account cases reported in English-language media, and access to police and criminal justice statistics are unavailable in most African countries. More reliable corruption trends will emerge as KPMG updates the fraud barometer every six months.
“It’s very difficult to estimate how high corruption really is. The $11 billion might be quite understated,” admits the firm’s global forensics manager, Petrus Marais, who developed the barometer.
It’s a sobering reminder of the challenges facing the continent, which has, in recent years, attracted massive foreign investment due to impressive economic growth rates of up to 8%. Some of the continent’s largest economies—South Africa, Nigeria and Kenya—have the highest incidence of fraud, according to the barometer, showing clearly that with more economic activity and investment comes increased risk.
Everywhere on the continent, governments and the public sector were hardest hit, claiming about 40% of all fraud cases, closely followed by businesses with 17%. This shows that African business operations have practically experienced “a breakdown in the ethical and moral environment”, warns KPMG.
Investors need to be prepared for this. “It’s extremely difficult to turn the tide. If you don’t have a moral base to operate from, you will have to waste lots of money on checks and balances, on jacking up processes and systems to manage risk,” says Marais. That’s the tradeoff any company wanting to operate successfully in Africa needs to make.
The main culprit of fraud is white-collar crime. Almost every third employee commits some form of fraud, the study found, ranging from junior staff to top management. Perhaps unsurprisingly, the highest value of fraud—$3.3 billion in 2011—was committed by managers, who are generally in positions with authority to approve large transactions and override controls, followed by professional advisors.
“Fraud occurs most where money enters and exits a company or institution. At the interface of financial transactions, perpetrators tend to be most successful in defrauding funds,” says Marais, identifying procurement, recruitment and contracting as the biggest risk areas.
“We hear a lot of anecdotal evidence of corruption,” confirms Thomas Schultz, chief operating officer at Sanlam’s investment management arm in its Africa division, which has branches throughout the continent. But if companies plan well, they can avoid being drawn into corruption, even in Africa, he believes. Choosing a trustworthy local shareholder or auditing firm with the right code of ethics is therefore key.
That means expanding into Africa is not a simple step. Investors need to do a lot more homework before they decide to invest; be better connected to access inside information; consider weak infrastructure, from roads to electricity; and be aware that setting up operations, from administration to licensing, might take longer. “All those issues raise the cost of doing business. It’s not a bandwagon you can jump on,” says Schultz. “You have to be sure your profit margin is sufficient to cover those costs.”
But it’s not all doom and gloom. A 2011 Ernst &amp; Young survey predicts that Africa’s economic growth will outpace its Asian counterpart over the next five years due to increasing foreign direct investment. Africa has remained an attractive investment destination throughout the global downturn and stayed high on the agenda of global investors, with 42% of businesses considering investing further in the region and an additional 19% of executives confirming they will maintain their operations on the continent.
“Although the overall perception of Africa remains quite negative, investors recognize that the continent has a window of opportunity because of its economic growth potential,” says Marais. “Whoever wants to see good returns simply has to go to Africa. It’s a great place to invest if you have the ability to assess the risk involved.”
Another plus is that African governments have shown greater willingness to address fraud, and be more transparent and accountable by passing anti-corruption laws. But for now, this trend needs to be viewed with caution, as it remains mainly a commitment on paper, with little implementation and enforcement of those regulations. “Very few anti-corruption regimes have gone beyond rhetoric. There is lack of political will to implement them and they remain under-funded,” says Charles Goredema, a corruption expert at the Institute for Security Studies in South Africa.
Businesses should choose to invest in countries with regulatory and legal frameworks they can rely on to enforce contracts, says Goredema. That means taking a close look at a country’s real situation, not just skimming the paperwork. Rwanda, Mauritius and Nigeria, for example, have made “huge strides” in fighting corruption, he notes, while the situation in countries like the Democratic Republic of Congo and Zimbabwe remains “very bleak”.
In the end, investors must be careful not to tar the whole continent with the same brush.

Tag: Fraud

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