How to prevent fraud in South Africa’s property market with Stitch

The property market has become an increasingly attractive target for fraudsters, affecting both the buying/selling and rental sectors. As this market involves large sums of money changing hands for down payments, property purchases and rental deposits - all of which are increasingly happening online - the opportunities for cybercriminals have expanded. The risks associated with property transactions are significant; those making a purchase often put their life savings or substantial investments down to make it happen - meaning they can’t afford to lose that money, and can’t make that payment again.

The same is true for any high value deposits across industries, from investments to savings to car or machinery purchases. Communicating via email, and sending funds offline via manual bank transfer, opens both the business and its customers up to interceptions, fraudulent communications and errors, in instances where there’s a lot at stake.

Understanding the fraud risks in property transactions

Property transactions in particular involve substantial financial commitments, which makes them prime targets for fraud. Here are some of the most common fraud risks in the different property sectors:

Buying and selling property

• Title Fraud: when criminals forge documents to transfer ownership of a property into their name without the owner's knowledge
• Identity Theft: when fraudsters use stolen personal information to impersonate buyers or sellers, taking out loans or selling properties they don’t own
• Mortgage Fraud: includes misrepresentation on mortgage applications, falsifying income and collusion between buyer and seller to inflate property values
• Payment Fraud: when fraudsters hack into email accounts of parties involved in the transaction, redirecting funds to their own accounts, which can result in losing large sums meant for property transactions 

Rental market

• Rental Scams: when fraudsters advertise properties they don’t own or that don’t exist to collect deposits and rent from unsuspecting tenants
• Lease Fraud: when tenants provide false information on lease applications, such as fake employment details or rental history
• Deposit Fraud: when landlords or property managers unlawfully withhold security deposits for false reasons or non-existent damages
• Subletting Fraud: when tenants sublet a property without the landlord’s permission, often leading to overcrowding or property damage

When dealing with property transactions, protecting yourself from fraud is crucial - both as the buyer and the seller or lessor. Licensed real estate agents, lawyers, payment providers and property managers are trained to spot and handle fraud risks and can be helpful if they’re aware of a fraud attempt. But fraudsters can also use public listings and other information to approach buyers directly, posing as the company accepting a deposit. If agents and property managers are relying on basic bank transfers to accept down payments, they may be opening themselves and their clients to the potential for fraud.  

At Stitch, we take fraud extremely seriously. One of the best ways to safeguard yourself is by using Stitch to facilitate Manual Electronic Funds Transfers (EFTs). Using our solution, vs executing these transactions independently, adds an extra layer of verification and control over financial transactions, making it harder for fraudsters to succeed.

Fraud in property: a recent case in South Africa takes centre stage

In a recent South African fraud case, as described in an article via GroundUp, the Supreme Court of Appeal overturned a ruling against a bank in a cybercrime incident. In this case, a fraudulent email was sent to a homebuyer and used to redirect a significant payment that was meant for a property purchase to another account, unbeknownst to the buyer. 

This incident underscores the vulnerabilities in manual or less secure transaction processes. In this case, the buyer was not able to verify that the person requesting the down payment, and the associated bank details, did in fact belong to the realtor they had intended to pay.

With the Stitch Manual EFT solution, every transaction is subject to thorough verification steps, including direct confirmation of bank details and transfer instructions through secure, offline communication methods. This reduces the risk of fraudsters intercepting or manipulating the electronic communications to redirect funds.

Furthermore, Stitch Manual EFT ensures that each step of the payment process involves human oversight, making it more challenging for cybercriminals to execute their schemes undetected. The court's decision in this case highlighted the legal and procedural complexities faced by victims of such fraud, emphasizing the necessity for robust preventive measures. 

Manual EFTs can include multi-factor authentication, direct bank-to-bank verification calls, and mandatory waiting periods for large transfers, allowing for additional scrutiny and the opportunity to detect suspicious activities before funds are irrevocably transferred. These measures collectively enhance the security of property transactions, protecting both buyers and sellers from significant financial losses and legal challenges associated with fraudulent activities.

Enabling secure collections for other high value transactions

Stitch payments solutions can also be used to ensure enhanced security and improve collections for other industries, including those that require recurring payments such as rentals, investments, savings and more. The high value and complexity of these industries make them a prime target for various types of fraud, and collections challenges. 

Stitch offers a number of secure payment methods for recurring payments - from tokenised card payments, to one-click Pay by bank and secure DebiCheck authorisation. Property managers and businesses in the real estate industry can benefit from an enhanced payments experience and reduce missed or failed payments through automated collections, in addition to leveraging fraud protection via Stitch Shield. 

Stitch Shield is a powerful, AI-driven fraud engine designed to detect a potentially fraudulent transaction and automatically block that user’s device or delay settlement of their funds for further investigation – across all of our clients.

These solutions are designed to support businesses managing payments at scale, and can play a significant role in enabling businesses to mitigate fraud, keep their clients safe and more easily move and manage money.