Fraud Awareness Week 2024: Curbing Identity Fraud in Africa

Africa has recently seen a significant increase in both internet access and mobile technology adoption as digital transformation reshapes economies across the continent. This has opened up new opportunities for growth, but it has also created fertile ground for identity fraud—a critical issue that continues to impact millions. In the first quarter of 2024 alone, African businesses saw a 20% surge in cyberattacks, compared to the same period in 2023, averaging 2,373 attacks per organisation per week, according to a Check Point report. Identity fraud constitutes a substantial portion of this figure. Every year, Fraud Awareness Week unites organisations and individuals worldwide to address the critical issue of fraud, spotlighting the importance of education and prevention as essential tools in fighting this escalating problem.

At Smile ID, we’re deeply committed to raising fraud awareness, especially within the African context, where digital fraud and identity theft are rapidly rising. As part of our commitment, we’re excited to share practical insights, trends, and resources on combating identity fraud all week long. By highlighting the most effective prevention techniques and sharing real-world examples across our LinkedIn and other channels, we aim to empower businesses and individuals to take meaningful steps in protecting their identities and fostering secure online transactions.

Join us in recognising the importance of fraud awareness and in taking action to curb identity fraud in 2024 and beyond.

The Current Landscape of Fraud in Africa  

Fraud in Africa is an escalating threat, driven by the continent’s rapid digital expansion and growing online connectivity. With more people and businesses transitioning to digital platforms for financial services, retail, and other sectors, cybercriminals are seizing new opportunities to exploit digital identities and commit financial fraud. Identity theft, in particular, has become increasingly sophisticated as attackers leverage loopholes in digital verification processes and take advantage of the digital landscape’s weaknesses.

In Nigeria, for instance, financial losses due to fraud spiked by 23% in 2023 compared to 2022, largely fueled by recent tactics like synthetic identities—where AI is used to create fake profiles—and document falsification. Similarly, countries like Kenya and South Africa, with over 80% mobile penetration, are seeing heightened fraud risks as weak digital identity protections expose users to identity theft and unauthorised transactions.

Africa’s diverse digital identity landscape and the reliance on national IDs, which alone account for 80% of identity fraud cases, compound the problem. Despite significant growth in mobile penetration—over 46% of Africans now access the internet via mobile devices—identity verification infrastructure has not kept pace, leaving vulnerabilities across digital financial services. In unregulated regions, fraud prevention becomes particularly challenging, especially as limited access to secure verification tools and low digital literacy contribute to the difficulty in detecting and preventing fraud effectively.

Our 2024 fraud report further highlights a worrying rise in fraud targeting digital payment channels, with nearly 42% of attacks directed at these platforms. Variations in fraud rates across regions underscore the need for localised approaches to prevention, especially as social engineering, biometric fraud, and phishing scams become common across the continent. Strengthening Africa’s defences will require advancements in AI-driven fraud detection and digital verification solutions, which are crucial for protecting Africa’s expanding digital economy and its users from evolving threats.

Biometric Fraud: Emerging Threats and Defense Strategies

Biometric fraud has become a significant threat in Africa causing more businesses to adopt biometrics verification techniques to strengthen security. It involves the use of forged or manipulated biometric data—such as fingerprints, facial recognition, or iris scans—to impersonate legitimate users or bypass security measures. Although biometrics are generally more secure than traditional methods, attackers are finding ways to exploit loopholes, often using tactics like "spoofing" with high-quality images, videos, or even deepfake technology to manipulate verification systems.

Fraudsters are becoming more sophisticated, focusing on digital platforms and leveraging biometrics fraud, which has risen to around 13% in certain regions as we found in our fraud report, emphasising the growing need for robust verification methods beyond document-based checks​.

Smile ID’s Biometric Suite

Smile ID addresses this challenge head-on, leveraging an advanced biometric suite designed to detect and prevent fraud in real-time. Our biometric suite is powered by features such as facial recognition, active liveness detection, and anti-spoofing technology, each integral to verifying genuine users and intercepting suspicious activity. 

Smile ID’s biometric suite, anchored by its SmartSelfie™ Enrollment, Authentication, and Compare products, provides robust identity verification tools designed for seamless user onboarding, secure authentication, and accurate identity comparison. SmartSelfie™ Enrollment ensures that user identity is verified at the initial sign-up, leveraging advanced facial recognition and liveness detection to prevent fraud at the very start. SmartSelfie™ Authentication then allows businesses to reverify users at critical points, like accessing sensitive accounts or completing transactions, enhancing security without compromising user experience.

SmartSelfie™ Compare offers an adaptable solution to confirm a user’s identity by matching their live image against an ID photo or a previously verified image, ideal for ongoing customer verification needs.

Our biometric solutions have demonstrated measurable success in reducing fraud for some of Africa’s largest digital platforms. For example, through a collaboration with Flutterwave, our biometric authentication tools reduced fictitious account signups by up to 90%. 

“So Smile ID has helped us verify different IDs in different markets. We find that the features they provide on their solution help make it easy to use just one provider to verify all of the IDs as opposed to using different providers, which is what we've done before now.”

Aramide Ayinla Senior Associate, Financial Crimes, Flutterwave

Key Technologies and Methodologies in Fraud Prevention

Multi-factor authentication (MFA) plays a crucial role by requiring users to verify their identity through multiple methods, such as passwords, biometrics, or SMS codes. MFA significantly reduces the risk of unauthorised access, with studies showing that it can block up to 99.9% of account compromise attacks when deployed effectively. As fraudsters become increasingly sophisticated, MFA has become a frontline defence, especially for eCommerce and financial platforms that handle sensitive transactions. 

Another key technology in fraud prevention is Active Liveness Detection, which goes beyond basic selfie verification by requiring users to complete real-time actions, like blinking or turning their heads, during identity checks. This approach has proven highly effective, with data from our 2024 fraud report indicating that active liveness detection was responsible for catching up to 87% of attempted biometric fraud cases, as it’s much harder to deceive with static images or pre-recorded videos. Complementing these are AI-based fraud detection and behavioural biometrics, which use patterns in user behaviour to detect suspicious activities. 

What are the Common Types of Fraud in Africa?

Fraud in Africa is evolving rapidly, posing significant risks to digital payments, banking, and identity verification systems. Let's look at a few of the most common fraud types: 

a. Transaction Fraud

Transaction fraud has seen a sharp rise as online and mobile payments gain popularity across the continent. This type of fraud involves unauthorised or deceptive transactions, often with stolen or manipulated credentials. At Smile ID, we’ve been tackling transaction fraud head-on with our proprietary deduplication tool, Smile Secure, which has identified over 1.7 million duplicate faces for our clients, minimising fraudulent attempts and enhancing security in high-volume transaction environments.

b. Account Takeover Fraud

Account takeover fraud is another common threat, where attackers gain control of users' accounts through phishing or credential stuffing. This type of fraud can result in unauthorised access to sensitive information and financial losses. Smile ID’s Document Verification solution is an effective defence against account takeovers, supporting over 8,500 documents from 226 countries, including emerging African markets. By enabling businesses to verify document authenticity and confirm user identities through selfie comparison, Smile ID provides a robust, reliable way to secure onboarding and prevent unauthorised access.

c. Synthetic Identity Fraud

Synthetic identity fraud is a growing concern in Africa, with attackers creating fake identities by blending real and fictitious information. These synthetic identities are particularly challenging to detect because they often bypass traditional identity verification systems, allowing fraudsters to establish credibility and exploit businesses. Smile ID’s SmartSelfie™ authentication is specifically designed to combat synthetic fraud by verifying individual identities through advanced active liveness biometric checks.

How to Build a Robust Anti-Fraud System

A robust anti-fraud system integrates multiple security layers, each reinforcing the other to detect and prevent fraud effectively. Here are four essential components:

i. Real-Time Monitoring

Continuous monitoring allows businesses to detect suspicious activity as it occurs, enabling faster responses and minimising fraud impact. Real-time monitoring tools flag unusual patterns—such as rapid transaction volumes or sudden changes in account information—that may indicate fraud. 

ii. Identity Verification

A key element in preventing identity-based fraud is robust identity verification, including document and biometric checks. This process verifies that users are who they claim to be, helping reduce account takeovers and synthetic identity fraud. Solutions like Smile ID’s SmartSelfie™ verification, which uses facial recognition and liveness detection, add an additional layer of security, ensuring that only legitimate users access services.

iii. Multi-Factor Authentication (MFA)

MFA strengthens security by requiring multiple forms of verification before granting access. This could include a password, a biometric check, or a one-time code sent to the user's device. With MFA, even if one credential is compromised, unauthorised access is prevented, as the additional factor is required.

iv. Continuous Fraud Detection and Machine Learning (ML)

AI-powered systems and ML algorithms continuously learn from vast datasets to improve fraud detection capabilities over time. ML models adapt to new fraud tactics, ensuring that anti-fraud systems stay effective against evolving threats. Behavioral biometrics—such as analyzing typing patterns or device use—also add an additional layer, helping businesses identify anomalies that signal potential fraud.

Steps for African Businesses to Strengthen Fraud Defense

African businesses face unique fraud challenges, including increased reliance on mobile transactions and National ID verification. To build a strong anti-fraud system suited to these conditions, businesses can consider these steps:

• Invest in Scalable Verification Solutions: African businesses benefit from solutions that can verify diverse ID types, including national IDs and mobile numbers, and adapt to variable connectivity. Identity verification tools designed for low-bandwidth environments ensure reliable verification, even in regions with limited internet access.
• Implement Region-Specific Fraud Detection: Fraud trends can vary significantly by region. African businesses should monitor local patterns and tailor their fraud detection systems accordingly, adapting to common types of fraud, such as mobile money fraud and payment gateway breaches, that are more prevalent in specific areas.
• Leverage Trusted, Compliant KYC Providers: Working with established, compliant KYC providers is essential for maintaining regulatory standards and secure data handling. Providers like Smile ID offer identity verification tools that meet local regulations and address regional fraud challenges, enabling businesses to comply with AML requirements while enhancing security.
• Conduct Continuous Fraud Risk Assessments: Regular assessments help identify new vulnerabilities, including shifts in transaction types or spikes in suspicious activity, allowing businesses to adapt their fraud prevention strategies. With continuous risk assessment, businesses can remain proactive, mitigating risks before they affect operations.

Looking Forward: The Future of Fraud Prevention in Africa

As we move into 2025 and beyond, fraud in Africa is expected to evolve alongside the rapid digitization of the continent. Here are some key trends to look out for:

1. Rising Payment Fraud: With the increased adoption of digital payments across Africa, payment fraud is still projected to rise. As online transactions and mobile money services grow, fraudsters are finding new ways to exploit these systems. In fact, fraudulent attempts targeting digital payments have surged in recent years, driven by the growing use of eCommerce and mobile platforms. 
2. Increased Adoption of Biometrics: Biometrics, especially facial recognition and fingerprint scanning, will continue to see widespread adoption across sectors such as banking, telecoms, and eCommerce. Businesses will increasingly turn to biometric technologies to secure identity verification and prevent identity theft as fraudsters become more sophisticated. 
3. The Role of Regulatory Changes in Fraud Mitigation: Regulatory frameworks across Africa are expected to tighten, with governments and financial institutions introducing more stringent anti-fraud and anti-money laundering (AML) regulations. This regulatory shift will compel businesses to adopt stronger identity verification methods, ensuring compliance while simultaneously reducing the potential for fraud.
4. Rise in Generative AI Fraud: As artificial intelligence (AI) evolves, so too does its use in committing fraud. Generative AI is becoming a tool for fraudsters to mimic legitimate transactions, create synthetic identities, and even fabricate documents. This new form of AI-driven fraud will require businesses to adopt advanced AI-driven fraud detection systems capable of distinguishing between legitimate and fraudulent actions.
5. Layered Money Laundering through Fintechs: With the rapid expansion of fintech services, fraudsters are increasingly using multiple channels to launder money. This trend is expected to grow as digital financial platforms offer greater anonymity and less scrutiny. The combination of digital identity verification and real-time monitoring will be essential in combating these complex fraud schemes.

At Smile ID, we are committed to staying at the forefront of fraud prevention. Our constant innovations in biometric authentication are designed to evolve with the changing landscape. One such initiative is the development of an Enhanced SmartSelfie™ feature, which will improve our Biometric Suite by integrating dynamic active liveness detection across all our products. This will further strengthen our solutions against fraud and continue to lead the industry in secure identity verification.

We will explore these trends and more in our 2025 Fraud Report, so be sure to stay tuned for comprehensive insights and predictions for the future of fraud prevention in Africa.

Bottom Line 

The importance of adopting robust fraud prevention mechanisms remains paramount as businesses continue to expand across the continent. From multi-factor authentication to advanced biometric technologies like Smile ID’s biometric suite, Africa is at the forefront of using cutting-edge solutions to combat fraud.

As we’ve discussed, the rise in payment fraud, the adoption of biometrics, and the tightening of regulations are key factors shaping the future of fraud prevention. With emerging technologies such as generative AI fraud and the complex layering of money laundering schemes, the digital landscape is bound to become more challenging. However, with the right tools and strategies in place, businesses in Africa can not only stay compliant but also protect their customers, improve trust, and ensure the growth of a secure digital economy.

Join us in the fight against fraud. Book a demo today to discover how Smile ID can empower your business to prevent fraud effectively. And don’t miss our upcoming webinar, where we’ll showcase our comprehensive biometric suite and share actionable insights to help build a safer, fraud-free future for your business. Register now.