Two months ago, a well-dressed man in his thirties walked into Dawit Basazinew's furniture store on Africa Avenue (Bole Road) and selected a long list of items worth over 70,000 Br. Dawit, the store's owner, was accustomed to delivering sold items the day after payment, but the customer's urgency raised some concerns. The situation became suspicious when Dawit received a screenshot of a payment transfer on his phone.

"I immediately noticed something was off," Dawit told Fortune.

The fake bank deposit looked like it had been made in Weliso City, Oromia Regional State, a 100-kilometer journey from the capital.

"There is no way he could have travelled that far and in that little time," the veteran retailer says.

Dawit ordered his employees to pause the delivery of the goods and went to check the authenticity of the bank account, which proved to be fake.

He says without meticulous attention to detail, sellers can easily be swindled by digital transactions in the rush to move inventory.

The rising use of digital financial technologies has simplified transactions, expanded financial inclusion and streamlined commerce while introducing new risks to customers and institutions alike.

A report by the National Bank of Ethiopia(NBE) released two weeks ago highlights increased operational risk for commercial banks with the expanded introduction of new technology-based products and services. It indicates that bank frauds and forgeries, including false texts and calls, withdrawals using stolen ATM cards, false financial instruments, and embezzlement, doubled to one billion birr in 2023.

The Bank for International Settlements(BIS) defines digital fraud as including operational risk, social engineering(phishing emails or SMS), and cyber risk. It has recently extended the scope to include elements of spoofing (impersonation of a bank), fake financial products, and account takeovers.

Nahom Mekbib, a thirty-year-old technician, was contacted by an individual purporting to be from a commercial bank's digital banking staff three months ago working on 'system integration'. He was told to open his mobile banking app and given step-by-step instructions, culminating in a request for a PIN.

"I refused to give him the code, which agitated him," Nahom told Fortune.

Last year, the thirty-year-old was scammed out of 3,000 Br for a fake digital investment scheme on the popular online messaging application Telegram, which made him more cautious.

"I have stopped opening links altogether," he says

A report on global financial fraud by the International Criminal Police Organization (INTERPOL) released last month reveals a rise in digital scams involving advance payments, investments, and business email fraud. It highlights a growing sophistication of criminals powered by Artificial Intelligence (AI) without the need for advanced technical skills and at relatively little cost.

Ethiopia's Financial Intelligence Services (FIS) was re-established two years ago to monitor suspicious financial transactions and combat financial crimes across all platforms. It receives around 2,100 reports annually of potentially fraudulent transactions from financial institutions.

Endale Assefa, Communication director of the FIS, points out that aggressive technology adoption will invariably increase potential fraud attempts. He says each financial institution in the country is expected to report any suspicious transaction to the Service within 24 hours of its occurrence through an internal online system.

"We prioritize the reports based on their potential harm," he told Fortune.

Endale emphasized the importance of coordination between FIS and financial institutions to identify potential fraud before it causes damage.

"If the perpetrators succeed, it becomes a criminal investigation," he said.

The Federal Police Commission Crime Investigation Bureau brought hundreds of financial fraud cases, a significant portion of which related to digital banking, before courts in 2022, with the majority being in Addis Abeba.

The director indicated that FIS assists in the subsequent criminal investigation and prosecution of fraudsters who are caught.

"Creating awareness will prevent most of the fraud," Endale says.

He suggested that most fraudsters channel money from victims to fund other criminal activities.

This sentiment is echoed in the Global Scam Alliance's 2023 report, which indicates that around one trillion dollars was stolen from victims worldwide last year, exacerbated by inadequately supervised financial technologies. As Ethiopia targets a three-year increase in the value of digital payments and financial services fourfold to 17 trillion Br, some financial institutions have begun to strengthen their security protocols.

Sosina Mengesha, Chief Digital Banking officer at the Bank of Abyssinia(BoA), says most incidents of digital financial fraud in Ethiopia arise from unsophisticated perpetrators who exploit people's lack of financial and digital literacy.

She also noted that poor Know Your Customer(KYC) practices and financial institutions' eagerness for new customers to open bank accounts have further widened the security gaps.

"Identification problems and improper password managment cause most incidents," Sosina told Fortune.

The bank employs an AI-embedded system that flags transactions and risk-based security protocols across most services. As digital financial transactions now make up 60pc of total transactions, the exposure to risks has increased.

She indicated that most problems reported by customers are handled at the branches, while an entire department dedicated to digital security exists at a corporate scale. "People need to be very cautious with their financial information," Sosina says.

Two years ago, the Ministry of Justice(MoJ) report revealed that the banks had suffered around 1.8 billion Br in losses due to fraud over four years.

The Bank, which accounted for 17pc of the losses in the study, has recently begun collecting biometric data on some branches to improve customer identification procedures.

The central bank's inaugural financial stability report indicates a marked rise, as one billion birr was defrauded within a quarter of the time from 20 banks.