Financial Crime World

Financial Fraud on the Rise in Saudi Arabia: Types of Frauds and Consequences

As digital services continue to gain popularity across Europe, the Middle East, and Africa (EMEA), cybercriminals are increasingly exploiting consumers and businesses in Saudi Arabia and other regions. According to a recent study, more than half of respondents reported an increase in fraud over the last 12 months, with 52% of fraud originating from digital channels.

Financial Services Vulnerability

In Saudi Arabia, financial services are particularly vulnerable to fraudulent activities, with new account creation being the largest contributor to fraud losses, accounting for nearly half of all losses. Stolen and synthetic identities are increasingly being used by criminals to open new accounts, taking advantage of the popularity of digital banking and commerce.

The True Cost of Fraud

The study found that the true cost of fraud in Saudi Arabia is staggering, with organizations incurring costs between three and five times the actual value lost to fraudsters. This does not include the impact on customer experience, which can lead to a detrimental effect on conversion rates, with 71% of respondents noting such an impact.

Types of Online Fraud

The study identified several key types of online fraud affecting financial services and retail institutions in Saudi Arabia, including:

  • Fake reviews and ratings: Criminals create fake reviews or ratings to manipulate consumer purchasing decisions.
  • Collusion fraud: Fraudsters collude with insiders to commit fraudulent activities.
  • Promotion fraud/policy-abuse fraud: Criminals exploit promotions and policies to obtain unauthorized benefits.
  • Inability to stay current and defend against new, more sophisticated payment frauds: Organizations struggle to keep up with the latest payment fraud techniques.

Challenges in Fraud Prevention

Organizations are facing challenges in balancing fraud prevention with customer experience, with 45% of respondents citing inability to manage and prevent fraud for new transaction methods as a major concern. Additionally, the lack of specialized fraud prevention tools for international orders/transactions and privacy concerns are also major issues.

Solutions for Effective Fraud Prevention

The study highlights the importance of having a comprehensive approach to identity and transaction verification solutions, including:

  • Geolocation: Verifying the location of transactions.
  • Email risk and verification: Validating email addresses to prevent fraudulent activities.
  • Automated transaction scoring: Scoring transactions based on their risk level.
  • Authentication of transactions/customers using OTP or two-factor authentication: Securing transactions with one-time passwords (OTPs) or two-factor authentication.

Conclusion

In conclusion, financial fraud is a growing concern in Saudi Arabia, with organizations facing significant costs and challenges in preventing and investigating fraudulent activities. It is essential for institutions to stay up-to-date with the constantly evolving trends and threats to prevent financial losses and maintain a seamless customer experience.