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The rising frequency of fraud and forgeries in Nigeria’s banking sector is becoming worrisome and requires urgent solutions to avoid eroding the confidence of customers. The 2020 Annual Report of the Nigeria Deposit Insurance Corporation (NDIC), which was released recently, revealed that the total amount resulting from bank fraud and forgeries stood at N120.79 billion. Though this represents a modest decline of 40.9 percent when compared to the N204.65 billion reported in 2019, according to the NDIC report, the incidence of fraud cases reported by the commercial banks increased by an alarming 177 per cent or 146, 183 cases in the year in review (2020). The reported fraud cases in 2019 stood at 52,754.
The NDIC says that fraud cases in digital and electronic payment systems are on the surge, with banks’ staff allegedly aiding and abetting such fraudulent activities. Some banks are not diligently reporting the losses as they occurred. Nonetheless, in the Q3 2020, for instance, the banks recorded actual loss of N2.51 billion or 25.73 per cent of the total value involved within the period under review. According to the NDIC report, 10 out of 30 banks accounted for N119.2bilion or 99.17 per cent of the total amount lost due to fraud and forgeries in 2020. Despite the introduction of Bank Verification Number (BVN), the banks are witnessing rising cases of fraud and forgery. Unfortunately, the use of digital channels contributed to the rising incidence of fraud and forgeries cases in the sector.
Also, previous NDIC and CBN reports confirmed the steady increase in fraudulent activities in the banks. For instance, the CBN Financial Stability Report in 2017 showed that the value of fraud and forgeries in the industry rose to N5.52billion at the end of June, 2017, from N4.12billion at the end of December 2916.
The Financial Stability Report also revealed that fraud cases rose to 16,762 in 2017 financial year from 9,929 recorded in the corresponding period of 2016. These include robbery attacks, conversion and suppression of customers’ deposits, illegal fund transfer and fraudulent ATM withdrawals. To curb rising cases of bank fraud and forgeries, it has become necessary for them to improve their cyber-security platforms. Moreover, continuous customer education and sensitisation can immensely help to reduce fraud in the banks. Wire and ATM card-related fraud accounted for the highest with 24,266 cases, representing about 92.68 per cent of the total reported fraud cases or N1.51billion.
This is followed by mobile banking with 17.35 per cent. Fraudulent conversion of customers’ cheques contributed the least with 0.63 per cent. In all the reported cases in 2020, insider abuse featured prominently, with 474 bank workers implicated. The number of banks’ personnel implicated in 2016 and 2017 was 320 and 231 respectively. Based on the NDIC and CBN reports, it is obvious that bank fraud is rising because of unethical and unprofessional practices by bank workers and other criminals. This has affected the banks in carrying out their roles as financial intermediaries that supply financial services to diverse sectors of the economy.
Therefore, all factors that breed corruption in the sector should be quickly addressed. These include poor corporate governance, infraction in foreign exchange operations, lack of effective and deterrent sanctions against offenders. Where necessary, the anti-graft agencies like the Economic and Financial Crimes Commission (EFCC) should wade in. Following the growing concern about unethical and unprofessional practices in the banking and financial services sector, we call on the Bankers’ Committee to look into some of the fraudulent cases and recommend far-reaching measures that will sanitise the sector.
Bank workers should comply with the rules and regulations in the sector. They must maintain high ethical standards in the banker-customer relationship. Fraud and forgeries in the banks can be prevented through the deployment of technological innovations.
This involves the use of multiple control systems at the corporate headquarters of the banks where two or three persons should be overseeing and monitoring transactions, especially when huge sums of money are involved. Therefore, all hands must be on deck to check bank fraud.
