Nigerian Banks with rising fraud, lose billions to perpetrators
.…loses N42.6 billion in second quarter of 2024
…fraud cases jump by 65% to 19,007 incidents by 3rd quarter of 2024
…Experts Call for Stronger Regulations
Nigerian banks are facing an alarming surge in fraudulent activities, resulting in substantial financial losses and raising concerns about the security of the nation’s banking system. Recent reports indicate a dramatic increase in both the number of fraud cases and the amounts involved, underscoring the urgent need for enhanced security measures and regulatory oversight.
In the second quarter of 2024, Nigerian banks reported a staggering loss of N42.6 billion due to fraudulent activities, a sharp rise from the N468.5 million lost in the first quarter. This represents an 8,993% increase quarter-over-quarter. The total amount involved in these fraud cases also escalated from N2.9 billion in Q1 to N56.3 billion in Q2, marking a 1,784.94% surge.
The upward trend continued into the third quarter of 2024, with reported fraud cases jumping by 65% to 19,007 incidents. The amount involved in these cases more than doubled to N115.9 billion. However, the actual losses in Q3 were curtailed to N10.1 billion, a 75.4% decline compared to the previous quarter.
The most prevalent fraud types identified include computer/web fraud, mobile fraud, and point-of-sale (POS) related fraud. These digital channels have become prime targets for fraudsters, exploiting vulnerabilities in online and mobile banking platforms. In Q2 2024, ‘miscellaneous and other fraud’ categories accounted for 96.46% of the total losses, amounting to N41.14 billion.
Recently, First Bank denied allegations of fraud leveled against it by a Nigerian businessman, Dr. Agbai Eke, who alleged that the bank had defrauded him of over N550 million from his fixed deposit account. Reacting to the allegation, the bank’s acting group head, marketing, and corporate communications said findings indicate that unprofessional and unethical dealings between Dr. Agbai and a former employee of First Bank, involving a personal relationship to facilitate unauthorized transactions outside the bank’s knowledge or involvement.
The Financial Institutions Training Centre (FITC) has called on banks to strengthen their monitoring and auditing procedures. Recommendations include the adoption of artificial intelligence-driven tools to detect unusual patterns and the implementation of continuous, automated monitoring systems. Regular, unannounced internal audits focusing on settlement processes are also advised to promptly identify and address irregularities.
Access controls are another critical area of focus. FITC suggests limiting access to sensitive files to a small, vetted group of authorized personnel, implementing multi-factor authentication, and employing role-based access controls to mitigate unauthorized changes. Furthermore, enhancing ethics and compliance programs is deemed essential to ensure employees understand the consequences of engaging in fraudulent activities.
The escalation of fraud has prompted stakeholders to seek innovative solutions. Dr. Chizor Malize, Managing Director and CEO of FITC, emphasized the urgent need to address rising fraud rates, noting that such activities erode trust in the financial services sector. She highlighted the potential of artificial intelligence in combating cyber threats and digital risks.
The cumulative losses underscore the severity of the situation. In the first nine months of 2024, Nigerian banks lost an estimated N53.4 billion to fraud, a significant increase compared to the N9.4 billion lost throughout 2023. This trend highlights the pressing need for financial institutions to bolster their defenses against both internal and external fraudsters.
As fraudsters employ increasingly sophisticated methods, Nigerian banks must remain vigilant and proactive. Implementing robust security measures, fostering a culture of compliance, and leveraging advanced technologies are critical steps in safeguarding assets and maintaining public trust in the financial system.
Experts Call for Stronger Regulations
Cybersecurity experts have called for stricter regulatory policies to combat fraud in Nigeria’s banking sector. Dr. Olumide Adegbite, a financial security analyst, noted that while banks are investing in security infrastructure, regulatory authorities must impose harsher penalties on fraudsters and compromised banking staff.
“The banking sector needs more stringent cybersecurity regulations and mandatory compliance measures. There should also be an industry-wide fraud reporting system to track and mitigate risks effectively,” Adegbite said.
As fraud cases continue to rise, financial institutions, regulators, and customers must work together to address the threats and ensure the security of Nigeria’s banking system. With billions of naira at stake, failure to act decisively could erode trust in the nation’s financial sector and hinder economic growth
