• Wednesday, February 28, 2024
businessday logo

BusinessDay

Cbn and ‘’magic’’ of biometrics

businessday-icon

In February, consumers of banking services may begin to experience the “magic” and security offered by biometrics in banking and financial transactions. “Imagine a world very soon where you do not need to come out with your cheque book or ATM card, all you need to do is just walk to an ATM machine or bank and all you need is your finger to take money’’ That would be the “magic” of biometrics, spearheaded by the Central Bank of Nigeria (CBN) in collaboration with Bankers Committee.

Biometrics are the new E-verification tools for online and mobile banking which offer unique customer identification system that gives unchangeable identification that helps in “KYC” (know your customer). It uses your unique physical characteristics such as your iris, your finger print, your voice, your face or even your veins to make sure you are you.

The contract for the project was signed in 2013 between CBN and Dermalog for $50 million (N8 Billion). Dermalog is one of the world leading biometric identification companies and the largest biometrics manufacturer in Germany.

Biometrics was necessitated by identity fraud plaguing banks and other financial institutions.

According to Steve Cook ‘’one of the biggest fraud scams plaguing banks is when fraudsters pose as someone to obtain a password reset. This is fairly common practice which banks have to deal with daily, and in a lot of cases the fraudsters manage to convince banks to accept they are the real person on the other end of the line’’.

Identity theft has been noted to increase at an alarming proportion. The US Federal Trade Commission reported there is a new victim of ID theft every three seconds, while in UK, CIFAS (the UK Fraud Prevention Service) reported that two out of every three cases reported were cases of ID theft. In Nigeria, the Financial Institutions Training Centre (FITC) reported that between 2000-Q1 2013, banks lost N159 billion to electronic fraud. Biometrics has become the more important as more transactions have gone mobile. It is estimated that mobile payment for goods and services are set to reach over $720 billion in 2017, thus the need for effective and authentic customer verification as current methods are said not to be working efficiently enough.

Biometrics offers fraudsters a bad deal as it will reduce bank frauds to the barest minimum and they will not be able to steal any of your unique physical characteristics listed above. Experts believe that a combination of face and voice of the account holder guarantee 99.9 per cent accuracy against theft.

The technology can be integrated with banks, ATM machines, into USB keys that can be hooked into computers at retail location to be used with credit cards and ATM cards, and anywhere you may make a financial transaction. It could act on its own or in conjunction with your PIN to securely identify you as the owner of the card and the person who has access to the money being exchanged.

Fraud in the banking system are often understated because, financial institutions routinely under represent fraud loses for fear of negative publicity. In1998 and 1999 the banking industry lost N3.196 billion and N7.404 billion respectively. In 2002, almost $10 million was lost through employee fraud, which represents a 40 percent increase over the previous year’s figure. In 2003 bank fraud increased by 40 percent. The Nigerian Deposit Insurance Corporation (NDIC) believed that most of the thefts were the result of forgeries or illegal withdrawals from customers’ accounts.

In a research report titled “Bank Frauds in Nigeria: Underlying Causes, Effects and Possible Remedies’’, Eseoghene Jospeh Idolo of the University of Benin, Nigeria noted that “Nowhere are frauds more serious and more pronounced than in the banking sector of the economy. They are the biggest single causes of bank failure and distress in the Nigerian banking system.

The report identified institutional causes of bank fraud as 1.Volume of work, whereby the amount of work done by officials could be so heavy (role overload) that frauds could easily pass undetected. 2. Banking experience of staff, whereby fraud occur with higher frequency among staff with little experience. 3. Poor management. 4. Nature of services whereby documents of value and liquid assets are exposed to undisciplined staff. 5. Poor security arrangement, whereby security arrangement for valuable documents are weak, poor and vulnerable, thus making it easy for fraudsters to have their way undetected.

The environmental /societal causes include, high level of poverty and unemployment, where 80 percent of the Nigerian youths especially university undergraduates are unemployed irrespective of the fact that Nigerian is one of the richest countries in the sub- Sahara Africa, and the world in both human and natural resources; societal value where wealth determines the reputation associated to a person, the personality profile of the dramatis personae of individuals with inordinate ambition without qualms.

Types of bank fraud identified in the report include cheque kiting, account-opening fraud, money transfer fraud and money laundering fraud. Others are loans fraud, over stating interest  charges, counterfeited securities, clearing frauds, manipulation of dormant accounts and forging of banks rubber stamps Others are substitution of names in credit vouchers, letter of credit fraud, unauthorized printing of bank stationeries and computer fraud.

Computer fraud takes the form of computing the programme and even breaking into the system via a remote sensor by a computer programmer or specialist. Hacking your bank account could not be easier. In 2013, three undergraduates were reported to have hacked into the system of Union Bank and affected transfers worth billions of naira before the bubble burst.

Cybercrime poses a big challenge to CBN’s cashless policy which became operational in 2013, and gaining country wide acceptance even in the face of infrastructure deficit. As at the end of August 2013, value of mobile money transfer was N10.14 billion through the use of mobile phones, banking tools for transfer and payments across the country.

The Minister of Communication Technology Mrs. Omobola Johnson had said last year that government was addressing the issue of cybercrime through the approval of Cybercrime bill by the Federal Executive Council in order to enhance the system.

While the bill is still in the works, the biometrics project which is “revolutionary” and “transformational”, according to CBN governor, Sanusi Lamido Sanusi, promises a safe key to secure banking.

By:  Arize Nwobu