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Recently, the Nigeria Inter-Bank Settlement System (NIBSS) disclosed that the banking sector lost N9.5 billion in seven months, from January to July, 2023 due to the activities of electronic fraudsters. The revelation was made by Musa Jimoh, Director, Payment System at the Central Bank of Nigeria (CBN) during the recent Third-Quarterly meeting of the Nigeria Electronic Fraud Forum (NeFF) held in Lagos. Also, the Chief Risk Officer of NIBSS, Temidayo Adekanye, has decried the current surge in e-fraud in the banking and financial services industry.
While expressing concerns about the increasing cases of e-fraud in the banks, the management of NIBSS said frequent cases of bank fraud has escalated partly due to the cashless policy introduced by the CBN some years ago. According to latest figures, in the Q1’2023, the total fraud recorded in the banking industry stood at N5.1billion. Fraud cases have been on a steady increase in the last five years, according to the NIBSS report. The amount lost between January and July, 2023 represents 39 per cent or 8,649 cases. In July alone, N1.2billion, representing 54 per cent of recorded cases, by fraudsters. In January, the figure was N2.7billion. Identified key tools used by cyber criminals include betting platforms, wallet accounts and Point of Sale (POS) agents.
There is no doubt that e-fraudsters pose a major risk to the banking sector, and indeed, the economy since the banks’ funds constitute over 40 per cent of the economy. Though there may not be a zero fraud in the sector, the problem calls for urgent measures that will secure the banking, digital and cyberspace environment. Statistics show that e-fraud is fast eroding public confidence in the banking sector. For example, the 2020 Annual Report of the Nigeria Deposit Insurance Corporation (NDIC), showed that the total amount resulting from bank fraud and forgeries stood at N120.79 billion. Though this represents a modest decline of 40.9 per cent when compared to the N204.65 billion reported in 2019, the incidence of e-fraud cases reported by the commercial banks increased by an alarming 177 per cent or 146, 183 in 2020. Reported e-fraud cases in 2019 stood at 52,754.
Of particular concern in the NDIC report is the fact that e-fraud cases in digital and electronic payment systems are on the surge, with banks’ staff allegedly aiding and abetting the fraudulent activities. Also, some banks failed to report the losses as they occurred. Nonetheless, in the Q3 2020, Deposit Money Banks reportedly 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 N119.2billion or 99.17 of the total amount lost due to fraud and forgeries in 2020. It is unfortunate that despite the introduction of Bank Verification Number (BVN), the incidence of bank fraud is not reducing. It is clear from many NDIC Annual Reports that the use of digital channels contributed to the rising incidence of fraud in the banking sector.
Also, many CBN reports have confirmed the steady increase in frauds 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 2016. The Financial Stability Report also revealed a further increase in fraud of 16,762 in 2017 financial year from 9,929 recorded in the corresponding period of 2016. These included robbery attacks, conversion and suppression of customers’ deposits, illegal funds transfers and fraudulent ATM withdrawals.
We urge the banks to improve their cyber-security platforms. Continuous customer education will reduce the rising cases of fraud. In the last five years, digital and ATM card-related fraud cases accounted the largest, with 24,266 cases, representing 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, insider abuse featured prominently, with 474 bank workers allegedly implicated. The number of banks’ personnel implicated in 2016 and 2017 was 320 and 231, respectively. The number may have since doubled.
The factors, which breed corruption in the sector, such as poor corporate governance, infraction in foreign exchange operations and lack of deterrent sanctions, should be addressed forthwith. The Economic and Financial Crimes Commission (EFCC) should assist in curbing rising cases of e-fraud. Besides, the Bankers’ Committee can investigate some of the fraudulent cases and recommend far-reaching measures to curb the menace. The sector’s code of ethics must be strictly enforced. Banks should upgrade their soft and hardware systems with multiple control systems for monitoring huge transactions. With due diligence, e-fraud can be curbed.
