Brazil: Bank scams skyrocket, generating losses of US$488 million this year

The volume of scams in the Brazilian financial system should reach the significant mark of R$2.5 billion (US$488 million) this year.

It is estimated that a considerable part of this amount (about R$1.8 billion [US$351 million], or more than 70%) has to do with Pix, the instant payment system of the Brazilian Central Bank (BC) that went into operation in 2020 and quickly became popular.

The banks’ estimate for the close of 2022 considers data up to June – a period in which frauds already totaled R$1.7 billion, of which R$900 million were through Pix.

However, sources in the financial system say that this number may be underestimated since not all scams are reported to the banks by customers.

Officially, there is no consolidated figure, but with the increased digitalization of operations during the pandemic, the estimate is that fraud has tripled in two years.

A survey conducted by Serasa Experian showed that in May 2021, a total of 331,200 Brazilians were victims of some fraud, with more than 176,000 occurrences (53%) from bank accounts or credit cards – two months earlier, in March, this number was 79,900.

The study analyzes figures related to crimes such as identity misuse, opening accounts, and issuing cards without authorization.

The anti-fraud arm of the credit monitoring service Boa Vista, Konduto, also identified the seriousness of the problem: from January to April of this year alone, there were about 9 million fraud attempts in commerce related to credit card cloning and theft of personal data.

There were 2 million occurrences in April alone, an increase of 117% compared to the same month last year.

Besides data theft by hackers, another type of fraud that has grown in Brazil is classified as “social engineering”, consisting of the psychological manipulation of the user into providing confidential information such as credit card and account passwords.

A recent survey by the Brazilian Federation of Banks (Febraban) indicated a 165% increase in this type of fraud since the beginning of the pandemic.

This year, according to the association, 1 in every 3 Brazilians has suffered a scam attempt of this type.

Financial fraud is a global problem that seems comparatively more serious in Brazil. In a February 2022 study, IBM revealed that 31% of Brazilians said they had suffered some credit card scam the previous year.

In Germany, for example, this figure was 7%, and in the US, 18%.

“Brazil is a hostile market that has a public safety problem,” says Fabiana Saenz, security specialist at Zetta, the association representing fintechs (financial sector startups) in Brazil.

“When we present Brazilian cases in international cybersecurity forums, foreigners are very impressed with how criminals act here,” says José Luis Santana, cybersecurity leader at C6 Bank.

WORKING GROUP

Director of Institutional Relations at Nubank Bruno Magrani says that a group was formed to discuss security improvements with the Central Bank. The group includes Zetta, Febraban, Abipag (Brazilian Association of Payment Institutions), Abranet (Brazilian Internet Association), and ABBC (Brazilian Association of Banks).

One of the ideas discussed today is the cascading blocking of accounts under attack.

“One of the characteristics of criminals is to move money quickly between several accounts. The current process to block a scam victim account is very time-consuming. Our idea is to be able to block accounts that route money through different financial institutions all at once,” says Magrani.

The president of the Central Bank, Roberto Campos Neto, has already signaled his concern about the fraud issue.

In a hearing at the House of Representatives, he talked about the work to curb “orange accounts”, which are opened without authorization using other people’s documents. It is an attempt to improve the tracking of stolen money.

VICTIM

Retiree Patricia Leão, 58, was the victim of a series of scams in a matter of days. At the end of last year, she received a message on WhatsApp from a man who pretended to be one of her brothers – even with a name and profile picture.

The scammer said he had bought a new cell phone, justifying that he would only use the old device for professional contacts.

The script is not new, but the situation seemed pertinent at that moment. “Coincidentally, my brother was going to do just that because he has a micro business of mining products and was advised to leave a number just for work,” she explains.

The retiree was then asked if she could pay a person in her brother’s name, “I made the payment and created a story in my head. I thought it was a vendor payment, and that he really was in trouble at the bank,” she recalls.

Patricia said she was called again in the following days and made five transfers in all. The retired woman says that it didn’t occur to her to send a message to the number her brother used to use, nor did she think of going to his house, a few blocks from where she lives in Belo Horizonte.

“It sounds like a story from a soap opera; I can’t explain what happened. We create a story, become part of it, and don’t think about it,” Patrícia laments.

The retired woman explained she discovered it was a scam only on Thursday when she told the story to another brother, who tried unsuccessfully to call the scammer’s number. In the end, Patricia had a loss of R$39.700.

The retired woman filed a report with the Civil Police and called the two banks where she was a client. She says that no suspect has been located, and the amount has not been reimbursed.

One financial institution’s justification was that the scam should have been identified on the same day as the transactions.

Patrícia also says she has received other approaches from scammers posing as her brother in the following months. “My name must have been around; someone must be taking advantage of the R$39,000 until today.”

With information from O Estado de S. Paulo