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Malta Leads Europe in Credit Transfer Fraud, ECB Report Shows
August 17 2024 14:10 by PCLMedia
Malta has emerged as the European country with the highest rate of credit transfer fraud in terms of value, according to the latest report from the European Central Bank (ECB) on payment fraud.
The report reveals that Malta recorded a fraud rate of 0.006%, the highest among the countries assessed. However, this rate is still below the 0.01% threshold of total credit transfers, indicating that while Malta's rate is the highest, fraud in credit transfers remains relatively low across Europe.
Credit transfer fraud involves unauthorized or deceitful transactions between bank accounts. It generally occurs in two ways: fraudsters either trick individuals into authorizing transactions or issue fraudulent payment orders directly.
To combat this, the financial services sector has been enhancing security measures through Strong Customer Authentication (SCA), which requires additional verification steps for transactions.
The ECB report, produced in collaboration with the European Banking Authority (EBA), analyzed data from the first half of 2023, covering various payment methods including credit transfers, direct debits, card payments, cash withdrawals, and e-money transactions.
The findings offer a detailed view of the European payments landscape:
- The total value of reported fraudulent transactions across the European Economic Area (EEA) reached €2.0 billion in the first half of 2023, a notable decrease from €4.3 billion for the entire year of 2022.
- Credit transfers and card payments were the main sources of fraud by value, while card payments led in terms of the number of fraudulent transactions.
- The Netherlands had the highest fraud rate by volume at 0.014%, while Malta led in terms of value.
- Iceland reported only 125 fraudulent transactions, valued at €398,000, showcasing strong financial security.
The report highlights the importance of Strong Customer Authentication in reducing fraud risks. Transactions authenticated with SCA showed significantly lower fraud rates, especially in card payments, where non-SCA transactions were nearly ten times more likely to be fraudulent. The use of SCA, typically involving two-factor authentication, has proven to be a strong defense against fraudulent activities.
Most payment fraud occurs within national borders; however, a significant portion, particularly in card payments and credit transfers, is linked to cross-border transactions. This is especially true for transactions outside the EEA, where SCA requirements are not consistently applied, revealing a potential vulnerability in the global financial system.
The report also sheds light on how financial losses from fraud are distributed. In the case of credit transfers, payment service users (PSUs) bore over 80% of the total fraud losses. In contrast, losses from card payments and cash withdrawals were more evenly split between PSUs and payment service providers (PSPs).
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