Capital Market Authority tightens fight against fraud: demands review of accounts opened in the last two years

The Capital Market Authority is attempting to intensify its handling of identity theft and financial fraud and is requiring supervised financial service providers to conduct a comprehensive review of their identification and verification systems, including a retrospective examination of customer accounts opened in the last two years. This comes against the backdrop of what the Authority defines as an increasing risk of fraud, embezzlement, and identity theft in the financial system.

In a letter published by the Authority on Tuesday to regulated financial service providers, it notes that fraud and impersonation risks are carried out through a variety of methods, both in digital interfaces and in face-to-face meetings. Among other things, the Authority points to the use of forged identification documents, identity theft, social engineering, and the use of advanced technologies. The Authority warns that technological developments make it difficult to identify impersonators and increase the risk of fraudulent activity.

Accordingly, supervised entities are required to re-examine the effectiveness of their identification and verification measures, both in remote channels and in face-to-face meetings, and to examine the control system and identification procedures in the company. As part of the review, they must also examine the use of technological means to identify forged documents and to perform liveness checks and technological verification of the client. The updated policy must be brought for discussion and approval by the board of directors by mid-October.

In addition, the Authority requires a scan and review of customer accounts opened in the last 24 months, with special emphasis on accounts opened via remote identification. The review is intended to examine compliance with verification and identification requirements and to detect suspicious signs of fraud, impersonation, or the use of synthetic identities. Companies will be required to submit the findings of the survey, including the corrective and control actions taken, to the Authority by November 4. Furthermore, the Authority requires reporting on material fraud events and a breakdown of the steps taken in their aftermath.

The instructions are published in proximity to the 'Calcalist' exposure of two cases in which apartment owners in Netanya, who reside abroad, claimed that impersonators used stolen identification documents to mortgage their properties. In one case, a couple residing in Moscow claimed that a mortgage of 1.2 million shekels was registered on their apartment without their knowledge, after their apartment was broken into and identification documents were stolen from it. In another case, a brother and sister residing in Germany claimed that impersonators received a loan of 2 million shekels and mortgaged their apartment. In both cases, the mortgages were registered in favor of the non-bank credit company 'Magen Afikim'. The claims are in legal proceedings and have not yet been decided.

Similar claims have also recently arisen in the field of vehicle financing. The 'Fraudsters' investigation by Channel 12 presented dozens of inquiries from people who claimed they discovered loans for vehicle purchases taken out in their name without their knowledge, including loans from 'Mimun Yashir'. In response to the investigation, 'Mimun Yashir' stated that it views cases of fraud and impersonation with severity and is investing resources in improving security and identification procedures. Following the investigation, it also announced that it would not continue proceedings against the victims presented in it.