Coronavirus lockdown significantly increases fraud in financial markets in the Netherlands

Following the COVID-19 related lockdown in the Netherlands, the number of reports and victims of fraud has significantly increased thereby increasing the market’s attention to fraud detection and prevention.

In many of the reported cases, scammers have been posing as relatives or friends in need and sending messages asking for money to help with an emergency, such as an unpaid bill that is due imminently. Additionally, fraudsters have tried to earn thousands of euros through rogue websites from which customers would pay for fake products.

A key driver for the higher fraud rate on social media is its increased use by consumers as they turn to the virtual world to stay in contact with family and friends during the lockdown. In the Netherlands the Fraud Helpdesk, who assists actual and potential victims of fraud reported that they’ve received more reports in the first four months of 2020 than in all of 2019. Dutch banks have also reported receiving about three times as many reports of social media scams in the lockdown months of March, April and May 2020 compared to 2019. As an illustration, in May, the banks were receiving an estimated number of 70 reports per day.

As a result, the payments industry has seen enhanced measures put in place to detect and prevent fraud. For example, banks and payment institutions have been refining their fraud detection systems and controls and campaigns have been undertaken to enhance consumers’ awareness of detecting fraud, notably through Veiligbankeren.nl (safebanking.nl).

In addition, the police force is now playing a key role to assist in detecting and locating fraud: they are now managing a website where fraud victims can report fraud in a fast and easy manner and they have now set up the National Hotline for Internet Fraud (“NHIF”) in partnership with various private and public entities. The NHIF allows affiliated payment and electronic money institutions to be notified about merchants against whom reports of fraud are made and enables firms to access records of all merchants who have had a record. In other words, the NHIF is assisting firms in undertaking enhanced diligence on potential new merchant clients and assess existing ones. Finally, unusual transactions related to fraudulent merchants are also reported to the Financial Intelligence Unit.

What this means for you.

Fraud in financial markets is not only an important point of attention for banks, but also for payment institution and even for electronic money institutions. These institutions play an increasingly important role in detecting fraud, both in the preliminary phase of the customer journey and on a continuous basis. Because of collaboration with the police force, financial institutions can perform a more adequate customer review as they are able to search the customer’s portfolio due to the fraud notification systems of NHIF and the police and lower the risk of doing business with malicious parties. Those institutions can play a significant role in the combat against fraud, which makes it important for these financial institutions to have appropriate customer due diligence procedures in place.

This publication is part of our larger international publication Payment Matters No. 47