Issue 11 - Account Takeover Fraud; A Silent Threat to Africa’s Digital Growth

If you've ever wondered how someone could hijack your account or why your trusted fintech or online platform is pushing for stronger security measures and authentications—this is why. Account takeover (ATO) fraud is becoming one of the most common cyber threats in Africa, targeting everything from personal bank accounts to digital wallets and even business platforms.

In a continent that’s seeing rapid digital growth, especially in fintech and e-commerce, ATO fraud is a rising concern. From fintech apps to e-commerce platforms, cybercriminals are becoming more creative, and the consequences for both consumers and businesses can be devastating.

Whether you’re a business leader, tech enthusiast, or just someone who relies on mobile banking or online shopping, this is an issue you need to know about.

Account Takeover Fraud happens when a fraudster gains access to a user’s account, often through stolen credentials, phishing scams, or weak security. Once inside, they can drain funds, make unauthorized purchases, or even use the account to carry out more elaborate fraud schemes.

In 2024, account takeover fraud surged by 24% globally, with countries like South Africa and Nigeria experiencing significant spikes due to the rapid adoption of mobile and digital banking. As Africa’s digital landscape grows, so does the risk of ATO fraud.

Fraudsters don’t just rely on brute force; they have a variety of clever tactics up their sleeves. Here’s a look at some of the common methods they use:

1. Credential Stuffing: Using previously stolen login credentials from data breaches, hackers attempt to log in to multiple accounts, hoping the same passwords have been reused across platforms.

2. Phishing Attacks: Fraudsters send fake emails, text messages, or even social media messages designed to trick users into sharing their login details or other sensitive information. 

3. SIM Swap Scams: Fraudsters convince mobile network operators to switch a victim's phone number to a new SIM card, giving them access to one-time passwords (OTPs) and multi-factor authentication (MFA) codes used to protect accounts.

4. Malware & Keyloggers: By infecting devices with malware, fraudsters can track every keystroke a user makes, giving them access to passwords and sensitive account information.

Once they’ve successfully gained access, fraudsters can empty accounts, make fraudulent purchases, or even use the account for more extensive criminal activity like money laundering.

The Cost of Account Takeover Fraud to African Businesses

Account takeover fraud is more than just an inconvenience—it’s a serious financial and reputational risk for African businesses. E-commerce platforms and fintech companies, which handle a high volume of digital transactions, are especially vulnerable.

The costs don’t end with the stolen funds. Businesses often face expensive chargeback fees, recovery costs, and lost customers who no longer trust the platform. Rebuilding that trust can be difficult, especially in a market where consumers are still warming up to digital services.

Here’s how businesses across Africa can defend against this growing threat:

1. Strengthen Identity Verification: Ensure that you have robust Know Your Customer (KYC) processes in place. Implement multi-factor authentication (MFA) and biometric authentication to make it harder for fraudsters to gain access.

2. Use AI to Detect Fraud Patterns: Fraudsters evolve quickly, and your security measures should too. AI-powered systems can analyse user behaviour and flag suspicious activities, allowing businesses to take action before major damage is done.

3. Real-Time Monitoring: Keep a close eye on transactions. Detecting unusual activity in real-time—like large withdrawals or a spike in transactions from different IP addresses—can help prevent fraud from escalating.

4. Educate Your Users: One of the best ways to combat phishing attacks and SIM swap scams is by educating users. Simple reminders about password hygiene, avoiding suspicious links, and how to identify scam messages can go a long way in preventing attacks.

Looking Forward: A Safer Digital Ecosystem in Africa

As Africa’s digital economy continues to thrive, both consumers and businesses must stay vigilant. The rise of account takeover fraud highlights the need for stronger cybersecurity practices across the continent’s fintech and digital services ecosystem.

Fraud Watch

• CBN Directs Payment Service Providers to Begin PoS Transaction Tracking to Fight Fraud

  The Central Bank of Nigeria has directed that all Point of Sale operators must route transactions through licensed payment terminal service aggregators. Read more here

• Reserve Bank Fines HSBC and Bidvest Bank for Non-Compliance with the Financial Intelligence Centre Act

  The South African Reserve Bank’s Prudential Authority has imposed significant fines on HSBC Bank Plc and Bidvest Bank for failing to comply with the provisions of the Financial Intelligence Centre Act (FIC Act). These penalties come as part of ongoing efforts to. Read more here.

• SARS coming for millions of crypto traders in SA

  The South African Revenue Service (SARS) has expressed concern that citizens trading in cryptocurrencies are not declaring it on their tax returns. He says a staggering number of more than 5.8m South Africans hold a crypto asset, with Southern Africa boasting the largest uptake of Bitcoin in the world. Read more here

Country News Coverage

• 50 Shades Of Greylisting: When Will South Africa Meet The FATF Requirements?

  South Africa has been a member of the FATF since 2003. In a Mutual Evaluation Report, in 2019, the FATF concluded that South Africa had a solid legal framework for combating money laundering and terrorist financing, but significant shortcomings remained. Read more here.

• FIC Cracks Down on Non-Compliant Accountable Institutions

  Some accountable institutions' failure to submit their risk and compliance returns (RCRs) has proved costly to both the institutions and South Africa’s efforts to get off the Financial Action Task Force’s grey list, highlighting a significant gap in compliance. Read more here.

Have Your Say

What measures are you or your business taking to combat account takeover fraud? Have you encountered any security challenges in your online transactions? We’d love to hear from you! Reply to this newsletter and share your experiences.

Until next time,

The Smile ID Team.