Nigeria’s fintech sector is booming, but so is fraud. And when fintech companies are involved, it’s becoming difficult to resolve cases without involving the Central Bank of Nigeria (CBN).
In a traditional fraud case, where money is moved from one commercial bank to another, the banks can usually resolve the issue between themselves without needing to involve the CBN. However, the process can be more complicated when a fintech company is involved.
For example, if a fraudster uses a fintech company to move money from a commercial bank to a different bank, the commercial bank will need to contact the fintech company. But often, the fintech company may be slow to respond or even refuse to cooperate. This gives the fraudster more time to move the money and makes it difficult to recover.
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Experts say that the majority of fintech fraud cases go unreported, but some of the high-profile cases that have been reported include:
Access Bank: N2 billion fraud
Fidelity Bank: N2 billion fraud in over three cases
Shago: N800 million fraud on airtime and bill payment
Flutterwave: N2 billion fraud
FCMB: N2 billion fraud
In many of these cases, hackers could access the banks’ systems with the help of insiders. They then exploited the banks’ interbank services to move the money out.
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Some stakeholders believe that some fintech companies’ aggressive shareholder expectations may contribute to the problem. Some companies may prioritise profits over necessary security measures to meet these expectations.
Another factor contributing to the problem is the concept of the mule. In financial fraud terms, a mule is a person who is used to cash out stolen funds or move them through legitimate financial channels to hide the intent and path of the money.
Simon Aderinlola, an agent network specialist and one of the drivers of antifraud governance in Nigeria, told BusinessDay that the larger an agent network is, the greater the possibility of it being used for fraudulent cashouts.
He also said that any licensed entity must work hard to disassociate itself from any connotation of being party to such activities.
The CBN is aware of the problem and is working on new regulations to address it. However, in the meantime, it is important for both commercial banks and fintech companies to implement strong security measures and to cooperate to investigate and resolve fraud cases.
