Collaborating to tame fraud in banking sector
… Access Bank takes the lead
The payment system globally has become largely digitalised with its attendant security threats, and Nigeria as a nation that houses the banks and other financial institutions, is not left out.
Banks are primarily the custodians of money and other valuables including gold. This makes the banking sector vulnerable to fraud.
Determined to fight fraud and fraudsters in every way possible, Deposit Money Banks (DMBs) have continued to collaborate with the Central Bank of Nigeria (CBN) and FinTechs in the area of awareness and engagement with clients.
The collaboration becomes more rewarding in promoting the implementation of digital payments in a safe and secure manner.
Leading in this collaboration is Access Bank Plc, which last week organised annual anti-fraud awareness workshop. The workshop is in line with the International Fraud Awareness Week which officially started on Sunday, November 17, 2019.
Herbert Wigwe, group managing director/CEO said the workshop is the bank’s avenue of reaching out to members of its community on issues around fraud risk and cyber security through close engagement and collaboration of various stakeholders in the industry.
In Nigeria, he said customers are culturally not attuned to security issues around digital transactions, even well-educated people run the risk of falling victim to social engineering and identity theft traps.
“We must go beyond educating customers on the protection of crucial information to actual data protection and integrity amongst operators and stakeholders,” Wigwe said.
“I am a great believer in collaboration to solve problems. Our collaborative efforts in data protection and customer education are required in countering security threats in Digital payments,” he said further.
Wigwe said the failure of creating customers on digital payment channels which are useful but not needed by the customer due to lack of customer profiling is a major security threat to Digital payments in Nigeria.
Selling of digital products should be done according to needs. Evolving payment technologies like Blockchain and cryptocurrency, should also be well regulated and come under the radar of security checks by regulators, he said.
According to Sam Okojere, director, payments system management department, CBN, digital banking has made life easier and has brought a lot of opportunities for financial and social inclusion. Yet, it has made it easier and faster for larger amounts of funds to be lost in the event of a breach. Digital banking has made “banking” even more vulnerable. But we should not be distracted, regulation is there to reduce the vulnerability, he said.
The CBN said it has been embedding fraud risk mitigating measures in its guidelines and periodic circulars to ensure that adequate measures are being implemented at all levels of digital product development and its operations. The circular for implementation of two factor authentication for internal banking processes of 2015 mandated banks to institute maker-checker controls and implement two factor authentication at login points for applications driving transfers, withdrawal, deposit, standing order, account maintenance and their system maintenance processes.
In addition, the circular also mandated all payment processing gateways and third party processors to implement fraud-monitoring tools to check transfers from an account to multiple bank accounts. All these directives were mitigation steps responding to early indicators of risk in the industry, Okojere said.
In 2018, 38,000 fraud count with over N9 billion attempted fraud value was recorded, while an estimated N2.0 billion was completely lost in the same year. This represents a 25.7 percent increase when compared to the N1.6 Billion lost in 2017.
“While we are not happy with the increase in value of lost fraud, there are indicators that our controls are working,” CBN director said.
This is demonstrated by the fact that the percentage of actual losses compared to attempts, have reduced from 40.46 percent in 2017 to 23 percent in 2018. More succinctly, in 2017 the industry lost 40 kobo for every N1 attempted, while in 2018 the losses abated to 23 kobo on every N1 attempted.
In another attempt to ensure customer funds are secure, the regulatory framework for the Use of Unstructured Supplementary Service Data (USSD) for financial services in Nigeria was issued partly to ameliorate the rising fraud emanating from SIM swap schemes. The Framework prescribed the need for effective second factor authenticator for some amounts beyond a certain threshold transacted via the USSD channel.