RISK MANAGEMENT | 07 September 2023

Keeping your
Digital FX Safe

Author Paul Fenwick

Paul Fenwick

Head Foreign Exchange
Business Bank Sales,
Markets Absa CIB


The global marketplace is a world of opportunity – and risk. How do our systems keep your cross-border transactions safe?

Cross-border payments give your business access to a world of opportunities, but they also expose you to a world of danger. “Purely by their nature, cross-border transactions are seen very much as high-risk,” says Paul Fenwick, Head Foreign Exchange Business Bank Sales, Markets at Absa CIB. “Once the funds leave the South African ecosystem, it’s incredibly difficult to keep up with all the moving parts and all the players involved.”

Fortunately, though, there is a series of protective layers shielding clients from unauthorised or fraudulent foreign payments.

Know your supplier, reduce your risk

“When you’re doing cross-border transactions, you often never meet your suppliers or the beneficiary on the other side,” Fenwick explains. “You may have a verbal conversation or a string of emails, but there’s always a risk because you can’t easily go and physically see what the other party’s operations are.”

The first firewall against cross-border payment fraud is knowing exactly who you’re dealing with. “We always tell our clients, you’ve got to be 100% sure that this relationship you’re developing is authentic, particularly when you’re going into new markets or new geographies,” says Fenwick. “We’ve seen it happen in some markets where our clients pay for goods, but when the containers land in South Africa they’re empty – and then you’re chasing a ghost on the other side to try to get your money back.”

Automatic protection

Fenwick says every cross-border transaction is automatically flagged on Absa’s system. “If the transaction is unusual – say, it’s something that we don’t typically see in your normal, day-to-day course of business, or it’s the first time you’re executing via a new channel – then we will follow a few manual steps to ensure that it is a transaction that you have, in fact, initiated,” he says. “We’ll give the client a call just to make sure that they were the ones who initiated the transaction, and that they are comfortable that it’s going out.”

The foreign exchange (forex, or FX) team will also monitor clients’ trading behaviours, and if there is a sudden spike on a certain profile, the system will produce an alert and a manual check-in with the client will occur.

Digital banking has made these protections tighter, even as greater digitisation has created more opportunities for cybercrime to occur. “Our controls are incredibly tight when it comes to digital transactions,” says Fenwick. “And again, whenever we see anything out of the ordinary it is immediately flagged, and the appropriate measures are taken by our teams.”

Layers of approval

Further controls exist in the corporate and business banking space, with approval being a key line of defence. “Our clients have Category A, B and C approvers, defined by the organisation,” says Fenwick. “The bank would need, say, at least one Category A approver and two Category B approvers to have sight of any cross-border transaction before it gets submitted. Internal employees are sometimes the greatest risk, taking advantage of loopholes in the system. If someone has control of the full end-to-end process, they might use that to their advantage. Putting these approval layers in place helps to prevent the misuse of funds when you’re going cross-border.”

Exchange controls

Another, perhaps unintended, layer of cybersecurity exists in the South African Reserve Bank’s exchange controls. “The validations that must be done for outward payments provide a control layer that helps to mitigate cross-border risk,” says Fenwick. “If the transaction goes beyond your single discretionary allowance of R1 million, then there’s documentation and additional proof that’s needed for the transaction to go through. That, in a way, acts as an additional hindrance to fraud.”

But before those exchange controls come into the picture, Absa’s internal security measures will have filtered out the threats and bad actors.

“As an authorised dealer, we are very cautious whenever a cross-border transaction takes place, and we rather err on the side of caution to ensure that no accounts are compromised,” Fenwick concludes. “We take security incredibly seriously, and we approach this with a lot of caution.”

Author Paul Fenwick
Paul Fenwick

Head Foreign Exchange Business Bank Sales, Markets Absa CIB

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