Online fraud costing NAB millions
19 July 2005 | 9378 views | 0
The National Australia Bank is losing about A$1 million a month to Internet banking fraud, according to a confidential internal document acquired by Australian newspaper Herald Sun BusinessDaily.
According to the newspaper article, the document was issued to senior technology staff as part of a drive to improve online security and stem a "tide of losses".
The report warns that Internet banking fraud is on the increase with criminals using "increasingly sophisticated" ways of stealing customers' details. The document also claims fraudsters are tricking Web banking customers into becoming couriers and moving stolen funds out of the country.
The document is dated July last year and describes the growth in fraud in the year to June 2004 as "exponential". The report led to a security boost two months ago but it is believed the rate of fraud is still growing.
For June 2004, the bank incurred A$1 million in online fraud losses, most relating to "Type 007" activity which includes losses on accounts arising from the fraudulent use of worms, viruses and spoof Web sites.
According to the report, NAB incurred losses from Internet banking fraud totalling A$2.04 million in 2003, although net losses reduced to A$1.5 million after investigations.
The report says potential losses are expected to rise to A$6.1 million this year and A$8.3 million in 2008. But under worst case scenarios cited in the report, the bank's technology staff predict it could lose up to A$14.1 million this year and up to A$31.5 million in 2008.
The NAB figures suggest online losses by Australian banks could already be close to $70 million a year.
In a bid to increase online security and stem losses NAB has introduced an SMS messaging service to provide PIN-protected access to Internet banking services.
Although the SMS scheme is currently voluntary, the leaked document suggests that it will need to become mandatory "at some point". NAB executives predict the incidence of online fraud will reduce by 90% once the majority (90%) of online customers are registered for the SMS service.
According to figures from The Australian Bankers Association (ABA), the country's banks lost A$10 million to online fraud last year.
The ABA said in March that Australian banks would introduce an industry standard for two-factor authentication for verifying online banking customers later this year, although each bank is free to choose its own method of secondary identification.