Bank fraud cases skyrocketing in Canada: national banking ombudsman

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Consumer complaints about banking and investment services skyrocketed in Canada last year with fraud concerns driving a one-year, 63 per cent increase in case volume at the office of the national banking ombudsman.

The Ombudsman for Banking Services and Investments (OBSI), an independent dispute-resolution service for consumers and business, reported more than 17,000 consumer complaints in 2023, up from 10,640 the previous year.

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“Credit card complaints and e-transfer complaints reached historic levels,” the ombudsman’s office said in reporting its annual statistics.

“Fraud complaints continued to surge to new record-setting highs and continued to be a top concern for banking consumers and a growing concern for investors.”

Credit card complaints were up more than 240 per cent, and e-transfer complaints — primarily driven by fraud cases — were up almost 540 per cent. Complaints related to savings and chequing accounts more than tripled, and complaints about wire transfers more than doubled.

Fraud was the leading issue among bank customers with 951 fraud-related complaints, an almost 350-per-cent increase from 2022.

“We did see a very dramatic increase in case volumes,” ombudsman Sarah Bradley said in an interview. “There’s huge amounts of fraud going on, and it’s affecting more and more people all the time.”

Bradley said the OBSI had seen an increasing number of fraud cases that targeted e-transfers and other kinds of electronic banking.

“What we’re seeing is situations where criminals are gaining access, one way or another, to a victim’s online banking platform and doing some quick transactions,” she said.

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Although fraudsters are gaining access to other people’s online banking platforms in different ways, there are two main methods, Bradley said. One involves the use of malware — often downloaded inadvertently — giving fraudsters the ability to view a victim’s computer or cellphone in real time and to steal online banking information.

They can then enter accounts and change security settings to frustrate detection while absconding with money through e-transfers and wire transfers.

The other method involves direct contact with a victim and tricking an individual into sharing account information or one-time passcodes.

“They do this by impersonating a bank employee or someone in a position of authority, like police or Canada Revenue Agency employees,” Bradley explained, adding:

“It’s easy sometimes when you hear the stories of the fraud, to think, ‘Oh, how could someone have fallen for that? It’s so obvious.’ But in the moment it’s really not obvious, and some of these frauds are really very clever in terms of how they trick people.”

This newspaper recently published stories about two Ottawa bank customers currently involved in fraud disputes with the Bank of Montreal. In both cases, fraudsters illegally accessed their accounts and sent money overseas using global money transfers (GMTs).

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Bradley said GMTs were attractive to overseas fraudsters because it allowed them to move money out of Canada.

So how should consumers protect themselves against these online bandits? Bradley outlined some fundamentals:

• Be careful clicking on any unknown link in a text, email or website.

• Never share passwords or one-time passcodes.

• Make sure passwords are complex, and changed frequently.

• Always log out from electronic devices.

• Enable two-factor identification and auto alerts that notify customers of account activity.

• Ensure e-transfers can be automatically deposited to prevent their interception by fraudsters.

• Question suspicious callers; hang up and call back on a verified phone number.

“It so hard to recover from a fraud after it’s occurred, so being proactive, fraud-aware and understanding how well-executed these frauds are is really important,” Bradley said. “We need to raise the profile of this.”

Cherolle Prince, director of fraud and identity management at Equifax, said analysis at the consumer credit reporting agency showed identify theft was driving an increase in fraud cases. Prince recommended that consumers closely monitor their credit files — to ensure no one else is trying to obtain loans in their name — and to safeguard their personal information.

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“People have to be careful about how they handle bank statements, bills, any kind of sensitive information. Those documents should be shredded,” she said.

Bradley said the increased volume of complaints had posed a challenge at her office. The organization has doubled its staff from pre-pandemic levels and is continuing to grow.

Bradley said complaint volumes had also increased because of the new consumer protection provisions of the federal Bank Act, which came into force in June 2022. Among other things, the new rules changed the way customer complaints are handled by banks and require them to be resolved within 56 days. That has led to more cases being pursued at the OBSI, she said, which can consider the appeals of dissatisfied bank customers.

The Financial Consumer Agency of Canada supervises the country’s banks and is tasked with protecting the interests of bank customers. A spokesperson for the agency said banks were expected to have procedures in place to identity and flag unusual customer transactions.

“Based on best practices, banks should proactively inform consumers of unusual transactions,” Léonie Laflamme-Savoie said. “Banks should also inform consumers on what types of communications they can expect from them as their bank — for example, a bank will never ask for personal or financial information via email — and how to report unauthorized transactions.”

Andrew Duffy is a National Newspaper Award-winning reporter and long-form feature writer based in Ottawa. To support his work, including exclusive content for subscribers only, sign up here: ottawacitizen.com/subscribe

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