South Africa has the highest rate of suspected digital fraud on the continent, with 3% of consumer transactions last year flagged for this, according to global information and insights company TransUnion.The country’s digital fraud landscape has become more complex, with generative AI accelerating the scale and sophistication of criminal activity and enabling fraudsters to target consumers and businesses with greater precision and speed, TransUnion said in its latest Top Fraud Trends report.AI investment has grown exponentially in recent years, and while businesses in South Africa figure out how to make the most of the new technology, the government is under pressure to create rules to protect rights.The government is working on a new AI policy which will be finalised and released for public comment by the end of this year after pulling an earlier draft — ironically compiled with the use of AI — which hallucinated at least six of its citations.A seven-member expert review panel, including top university academics and led by Wits University Prof Benjamin Rosman, will guide the process.ReportThe TransUnion report said South African consumers are increasingly facing co-ordinated, identity-driven and cross-channel attacks similar to those seen in mature digital economies. One third of South consumers who lost money from digital fraud in the past year said the losses stemmed from third-party seller scams on legitimate e-commerce platforms. “This signals a market where criminals are exploiting established trust, active accounts and verified digital relationships and is a clear break from global fraud patterns typically dominated by phishing and vishing — fraudulent phone calls or voice messages designed to deceive consumers into sharing sensitive information or sending money,” TransUnion Africa senior director of fraud product management Amritha Reddy said.“In South Africa, fraudsters succeed where trust is already established, particularly inside mainstream digital platforms where consumers reasonably expect safety and legitimacy.“As GenAI accelerates the sophistication and scale of criminal operations, the threat landscape is evolving faster than ever for consumers and businesses. Addressing this requires a new generation of identity-centric defences that combine advanced analytics, adaptive authentication and multilayered digital fraud detection.”The rate of suspected digital fraud where the consumer was in the country was the most prevalent among government transactions, at 12.5%, highlighting risks tied to public-sector digitalisation. “Digitalisation has improved access to public services, but it has also created new risks for fraud. Fraudsters are leveraging official government branding and service-related messages to impersonate the state and deceive citizens,” Reddy said.The report shows South Africa is one of the few countries where the highest rate of suspected digital fraud attempts happen at account login, suggesting attackers are increasingly trying to compromise existing accounts, in contrast to other countries where new account creation is a key focus for fraudsters. “This means vendors and financial institutions need to expand their fraud prevention strategies beyond the new customer onboarding phase, continuing to implement verification throughout the consumer lifecycle, but without the unnecessary friction that will see genuine consumers seeking alternative sites,” Reddy said.Business Day