KATA recently hosted a seminar for her members on fraud prevention in travel agencies.
The seminar whose main objective was to provide a comprehensive overview of the current trends in fraud and fraud risk management also discussed the different types of fraud that affect the travel agencies and provided a platform for members to share their personal experiences and learn from one another on fraud prevention tactics.
Speakers at the seminar were drawn from audit firm KPMG (EA), Amadeus East Africa, International Air Transport Association (IATA) and Direct Pay Online. The highly interactive seminar was proudly sponsored by AIG Kenya Insurance Co. Ltd. `
Ms. Linah Ottichilo of KPMG (EA) in a session titled addressing the fraud turbulence in travel agents stated that the travel industry suffers from high levels of fraud, both in online and traditional travel agencies, with online bookings through agency sites having the biggest rate of fraud. The Association of British Travel Agents (ABTA) reports that travel fraud is up 425% year-on-year.
According to IATA, an estimated cost to airlines of up to USD 1 billion is caused by fraud. More than 50% of that fraud occurs through phony companies that appear to be real travel agents.
As a result of the impact of fraud, travel agencies now set aside 1-2% of their revenue to managing fraud. With the advent of technology, fraudsters have become sophisticated and are working tirelessly to beat the prevention system in place. It is therefore advised to that a multi-layered approach is used. Travel agencies are exposed to several risks of fraud the common ones being social engineering, client-perpetrated fraud and the employee fraud.
Brand/company names that have earned their trust in the market can be used as bait by fraudsters which leads to lack of caution when travel agents are responding to communication. In return cause social engineered fraud. Travel consultants may have pressure to make sales, therefore tickets are processed before adequate information has been collected from the client.
Card payment systems need to conform to the industry standard, in order to prevent unauthorized persons to make the card payments. Therefore, the need to Invest in up-to-date secure systems and maintain the industry standard such as Payment Card Industry Data Security Standards (PCI DSS.
Employee fraud can also be caused by employee dissatisfaction, economic recession, lack of code of ethics, weak internal controls and many more.
Making a presentation on Trends and Patterns of GDS related fraud in Kenya, Elly Kwasi Product and solutions specialist at Amadeus East Africa gave examples of real case studies of fraud in Kenyan travel agencies. It is estimated that 74% of data breaches in hospitality are a result of Point of Sale (POS) intrusions. In 99% of cases, it took weeks for victims of data fraud to become aware of it —at the same time, actually breaching the data occurred in a matter of minutes.
On Credit card and online payments and the fraud risks, Kate Gathii, Head of Marketing at Direct Pay Online observed that the golden rule to protect your firm from fraudsters is to know your customer. From the many cases the company had observed, social engineering was the biggest cause of credit card fraud. She cautioned agents to be weary of new emerging tricks by fraudsters where they pretend not to be in a hurry to purchase short term travel tickets only for them to perpetrate their fraudulent schemes as the “booked travel date” nears.
Disruption of cash flow, affects profitability, loss of market share, loss of clients, Reputational damage, loss of Key staff, legal suits and closure of the business are some of the various effects that fraud has on business as identified by Walter Orato, Head of Distribution & Travel, AIG Kenya Insurance Co. Ltd. He advises agents to consider taking up insurance covers that would assist them to quickly recover should the inevitable happens.
While fraud will continue to be a major challenge for travel sellers, successful travel agencies of today and tomorrow should have the tools and practices in place for a strong defence.
The Kenya Association of Travel Agents in its vision to be the leading authority in travel trade in Kenya is determined to fight fraud in the industry through equipping its membership with knowledge on fraud handling.Back to news articles