Hungarian Banks: HUF 50,000 Stolen Every Minute in 2023 Scam Surge

Development of Giro’s AI-based real-time fraud prevention system has been launched, which will allow banks to stop suspicious transactions. The system’s specifications are still being drawn up, with testing expected by the end of the year; it is slated to go live next summer.

The authorities are also working on filtering out spoofs (relying on falsifying mobile phone numbers) and unsolicited SMS, and influencers will be included in educational campaigns.

Speaking at the MNB’s cyber fraud press conference on April 8, Csaba Kandrács, a central bank deputy governor, said the steep increase in scams has been halted, and there has been a slight decrease in customer complaints. However, card fraud incidents continue to rise, and customer reports are still significantly higher than two years ago. Hopefully, fraud statistics will soon start to decrease across the board, Kandrács added.

Several banks have upgraded their IT fraud filtering systems, and the lenders themselves have made significant efforts to change the trends. Moreover, people are becoming more aware, and so-called Cyber Shield cooperation is operational with the participation of 10 authorities.

At the beginning of 2022, the MNB received 20 customer complaints per month regarding fraud. This number had jumped to 122 at the beginning of 2023. Since the beginning of October last year, however, there has been a downward trend, with the number of customer complaints dropping to 106.

Cyber fraudsters employ various tactics, with the most common types currently being phishing through fake e-commerce sites referencing package delivery and scams that cite banks, the post office or governmental offices. There’s also a new scam method involving a link sent by the fraudster that supposedly requires transaction approval via a QR code, but upon scanning it, the victim’s data is stolen.

Shocking Statistic

The most shocking statistic, however, was that HUF 50,000 were stolen from Hungarian customers every minute in 2023. In a concerted attempt to stop that, commitments have been signed through 2027 by participants of the Cyber Shield program. A police hotline has been established, and at the National Media and Infocommunications Authority (NMHH), work is also being done on filtering out spoof and unsolicited text messages.

The MNB has recently issued two circulars for senior management, mandating the placement of banners on bank homepages that lead to a site providing information on scams. The goal is to make it easy for someone visiting a lender’s website to navigate to topics related to cyber scams. According to the national bank, it is good practice for customers to decide which banking channel to use.

“Every scammer will end up behind bars, with 20-30 criminals being caught each month. Through the education of the populace and the capture of fraudsters, the number of scammers will eventually decrease,” said Levente Kovács, secretary-general of the Hungarian Banking Association.

He elaborated that, alongside educational campaigns, most banks bombard their employees with fake phishing emails to prepare them for real attacks. He noted that even senior bank executives have fallen victim to cyber fraud, as fraudsters target people with great precision. However, there are recurring themes, such as the need for urgency or the installation of various programs.

In a twist on the old story of children programming TV controls for their grandparents, influencers will also be involved in an educational campaign as the younger generation follows them, and they can prepare their parents for scams.

When someone’s money is stolen, they usually only realize it the next day. Selecting a daily limit is not easy and is only possible with difficulty at some providers. AI-based transaction monitoring mechanisms will help recognize fraud by identifying unusual patterns: some are implemented at the individual bank level, and some at the national level.

Lajos Bartha, the MNB’s Executive director responsible for financial infrastructure and banking operations, noted that for the past 10-15 years, Hungarian authorities had always been pleased to note that the rate of misconduct here was very low, but that position has deteriorated.

The good results may have made market actors complacent, but Bartha added that Hungary is still only in the midfield, slightly above the EU average regarding the ratio of fraud to payment transactions.

Customer Authentication

The value of card fraud has increased, and the trend here is negative. Strong customer authentication should be applied across Europe. A significant portion of misuse occurs in countries where authentication does not work. Bartha also pointed out that many merchants offer to save card details, but this data can be stolen, so it is wise to be cautious.

In 96% of card misuse cases and 65% of transfer fraud cases, the criminals directly initiate the transaction. Therefore, a portion of the misuse can easily be managed via simple filters such as examining the IP address, device identification, and looking for two-factor authentication, especially for new devices.

A noticeable trend is that customers are increasingly bearing the brunt: a few years ago, customers were responsible for 8-10% of the losses in card misuse cases, but they now bear 71% of the losses and almost the entire amount in transfer cases.

The power of widespread collaboration is apparent. Where an institution has a real-time fraud filtering system, the fraud rate is much lower, so the MNB has made it a requirement for banks to introduce and operate such systems.

Moreover, banks have been mandated to implement stricter customer identification and payment procedures. The former is vital to prevent criminals from opening accounts with false identities, and the latter aims to make it harder to disappear with the money.

Monitoring devices and habits are also important, with many methods available for profiling customers. Interestingly, the mobile channel is currently one of the most securely protected. Setting simple transfer limits is also essential, as fraudulent transactions exceeding one million forints accounted for 85% of fraud cases.

The national bank’s recommendations include several elements of the EU’s third Payment Services Directive (PSD3) and Payment Services Regulation (PSR), which the MNB has brought forward somewhat.

This article was first published in the Budapest Business Journal print issue of April 19, 2024.