Over the past year, banks have dismissed at least 93 employees due to fraud-related incidents. Fraud losses amounted to N10.70 billion between the first quarters of 2023 and 2024.
According to data from the Financial Institutions Training Centre (FITC) ‘Report on Fraud and Forgeries in Nigerian Banks for Q1 2023 to Q1 2024,’ there were 318 cases of staff involvement in fraud during this period.
Internal fraud has been increasing in recent years. In June, it was reported that a staff member of First Bank stole N44 billion over two years.
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In a letter dated May 10, 2024, purportedly written to the Lagos State Police Commissioner, the bank stated, “We hereby bring to your notice the discovery of fraudulent transactions into various transactions within and outside the bank and request your good offices to set up the machinery of investigation with a view to unravel the circumstances surrounding the said fraud and to get the culprits apprehended to face the wrath of the law.”
The Nigeria Inter-Bank Settlement System (NIBSS) recently noted that fraud loss via Internet banking increased by 325 percent between 2022 and 2023, mainly due to a N2.4bn internal fraud on corporate accounts reported by a deposit money bank (DMB).
Confirming the prevalence of insider fraud, Oguzi Moses, assistant commander of the Economic and Financial Crimes Commission (EFCC), said, “This fintech arrested an IT guy and brought him to my office. Millions were diverted as he has access to the accounts.”
A part of an article titled, ‘Nature of frauds in Nigeria’s banking ecosystem, 2015-2019’ by Oludayo Tade (Criminology and Victimology Unit, Department of Sociology, University of Ibadan, Ibadan, Nigeria) in the Journal of Financial Crime explained, ‘In relation to the role of insiders, all cadres of staff were involved in the fraud but majority of those involved were temporary staff… Employing temporary staff should be phased out while online and offline vigilance should be mounted.”
74,978 fraud cases were recorded during the period under review. While insider involvement totalled 318, outsider involvement was 67,712, indicating a significant external influence on most fraud cases. FITC receives its data from twenty-four (24) deposit money institutions.
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The top three prevalent forms of fraudulent activity during this period were computer/web, mobile, and POS-related fraud. Fraud has surged in recent years due to the rapid growth and adoption of digital payment channels.
In its fraud report for 2023, NIBSS revealed that fraudsters successfully scammed 80,658 bank customers within the year. Mobile channels became the most vulnerable to fraudsters.
“A lot of fraud is perpetuated by devices or through mobile devices,” noted Babagana Digma, head of the New Media and Information Security Department of the NCC.
Fraud losses have increased over the past five years, with bank customers losing N59.33 billion between 2019 and 2023. “The amount lost to fraud has increased over the past five years along with the growth of financial transactions in the digital payments sector,” NIBSS said.
“The payment landscape is such that the volume of payments has increased over the years. Fraud has also increased, and it is expected because when you have a country that processes over $1 trillion annually,” Efemena Ogie, head of partnerships at Moniepoint, explained.
This growth in fraud is happening despite the Nigerian payment system’s capacity to self-protect against fraud. “Nigeria can self-protect against fraudulent transactions,” Ogie said. However, the system is slow to work because it is still largely dependent on manual processes.
In Q1, 2024 FITC disclosed that banks’ losses to fraud declined by 77.62 percent to N468.42 million in the first quarter of 2024 from N2.09 billion in the last quarter of 2023, a testament to improving efforts to combat fraud in the country.
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“We need to understudy fraud control activities in this quarter and improve upon same to ensure that going forward the numbers keep dropping while also implementing continuous vigilance and proactive measures. Banks need to ensure the application of advanced fraud detection technologies and analytics to continuously monitor transactions of suspicious patterns and anomalies,” FITC said.
Ogie, earlier quoted, suggested that Nigeria needs to create a collaborative platform to combat fraud. “With AI and Machine learning, I should be able to as a bank right, if fraud happens, I should be able to ring a bell on the platform, which I will call maybe. A transaction escalation platform where all stakeholders, banks, and even CBN are connected.”
Industry experts also noted the need for the financial sector to be more transparent about reporting fraud incidences so that other players can learn and protect themselves. Out of 163 profiled institutions required to submit fraud incidences to NIBSS in 2023, only 60 reported their fraud cases.
