Japan is seeing an increase in cases where money is illicitly withdrawn by criminals abusing cashless financial services.
A total of around 28 million yen (roughly $265,000) has been withdrawn from banks via a virtual wallet service provided by mobile carrier NTT Docomo Inc. Over a month has passed since the issue came to light, but the full extent of the damage remains unknown.
Japan Post Bank Co. was hit with many cases of illicit withdrawals, and it was revealed that money was stolen from the bank using other electronic payment services. The bank says it compensated clients for nearly 50 million yen (roughly $474,000) in losses, but it continues to receive inquiries from users.
The reason behind why the fraud cases couldn't be prevented is the fact that both payment service providers and banks left security measures up to the other side. As a result, proper identification checks, such as two-factor authentication, was not conducted when setting up the e-money service and linking it to a bank account.
Illegal transactions are also spreading among online security exchanges in Japan. A total of 98 million yen (roughly $928,000) was taken out from accounts of six users at SBI Securities Co.
This was done by criminals who abused other people's login ID and passwords to access their accounts and sell stocks, and then transfer the funds to a bank account they set up disguised as the victims. The banks involved in these cases apparently could not detect counterfeit IDs, which is a serious problem.
In all these cases, it is not known how bank account information was stolen in the first place.
Financial fraud regarding online services is becoming more sophisticated every day. The finance industry and the Japanese government, which promoted cashless businesses without even implementing a thorough identification method, cannot escape criticism that they were lacking a sense of crisis.
The fact that victims were not compensated earlier, and that the only way to confirm whether one has been victimized is by checking their own bankbook is also cultivating a sense of distrust.
Payment service providers and banks did not have rules on sharing responsibility for when illegal actions take place. The bank industry has only started considering organizing a system to detect abnormal online transactions in response to the string of problems.
Japanese Finance Minister Taro Aso criticized the response by banks and other companies as "slow," but the government also has a heavy responsibility for not being able to fully supervise the industries. The public and private sectors must work together to swiftly reorganize safety countermeasures.