Fines imposed by banking industry curb fraud

The new process of fining the originators of unauthorised debit orders up to R1 000 per debit order may go a long way to curb fraud in the industry.

Fred Steffers, MD of SmartCollect, said some operators who make use of payments systems companies to process debit orders on their behalf are committing fraud.

“While we have certain reservations about the fines system which will be imposed by the payment systems industry watchdog, Payments Association of South Africa (PASA), it will certainly help to weed out the criminal element which has infiltrated the debit order industry.

“An unintended consequence is going to be the fact that it is going to have an extremely negative impact on ethical payments systems companies such as ourselves because it is inevitable that a very small percentage of debit orders sent to us by our users are problematic for a variety of reasons including fraud.”

Steffers said although the major operators in the debit order processing industry had managed to rid themselves of fraudulent users a few still remained, “Even though this action by PASA is aimed at the criminal underworld that has been plaguing the debit order industry for years, it could conceivably do enormous damage to honest operators.”

He said it was impossible for the companies who processed debit orders to verify that the mandates on every debit order sent for processing by call centres was valid.

“We don’t have access to their databases and even if we did, the sheer volume of transactions that are processed every month would make it impossible to check every single transaction.”

PASA CEO Walter Volker said the new rules were not aimed at honest operators but at users who were part of a criminal enterprise.

“We know from years of experience who the ethical and honest operators in the payment systems arena are and these rules are definitely not aimed at them.

“What we are seeking to do is to put fraudsters out of business and to offer the maximum amount of protection to the 25m consumers who use debit orders on a monthly basis.” Volker said.

Although the fines will be levied against banks who will in turn pass them on to payment systems companies who will then forward them to their users, the danger exists that if a massive fine is levied against a particular user, they may simply close their doors and disappear, Steffers said.

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