Banking Frauds are under reported in Nigeria

Grassroots and Gender Development Center's picture

Banks in Nigeria are not talking about fraud they persistently suffer, especially because of the sensitivity and response to such exposure. Enquiries reveal that banks are still suffering from incidents of high-level fraud, either due to betrayal by some bank workers themselves or scamming activities by fraudsters.

Industry watchers and bank officials say incidents of bank fraud are hugely under reported and due to lack of statistics, solutions cannot really be proffered to address such occurrences. "Banks do not report fraud because of its sensitive nature. Banks are continually suffering from fraud incidents, but they are scared to talk about it because they do not want their customers to panic", a banker at Standard Chartered Bank said at the Card, ATM and Mobile Expo 2011 event held in Lagos last week. "You can imagine the fate of a bank that reports it just lost a huge amount to fraudsters. The first reaction of people would be to withdraw whatever money they have there, before they hear the conclusion of the matter," she added.


"I feel that with Nigeria moving towards e-banking, e-payment, we shouldn't underestimate the extent to which fraudsters can go. The challenge we have at the moment is that most of such eventualities are not reported and so there are no statistics, meaning that we can't put this issue into context and proffer solutions.


"Once we begin to get the banks reporting, and we have the more accurate statistics to work with over a period of time, it is only then that solutions can be proffered."


According to another participant, who also works in a finance institution, "There are two stakeholders that are very much aware of all that is happening. These are the banks in Nigeria and the Central Bank. This is because some of these customers and cardholders with complaints have written the Central Bank to lay their complaints.


"If we all look at what is happening now, we will notice that most banks are investing much on security, and they are also focussing on card insurance. Most of the insurance companies too are coming up with card insurance products. It's all because of what is happening and what they are aware of," he said, adding that, "I can tell you that banks are losing hundreds of millions to fraud-related activities. It's huge. It's far higher than is reported. The scamming activities are well organised."


During the global and local financial crisis, hordes of bankers lost their jobs. Most of the people in the telecoms industry also suffered the same fate. Meanwhile, a good number of them had been fully trained and already know the details of how card management works, putting the whole system at risk.

Houssein Kazzaz, Managing Director, DPMS Nigeria, however said fraud in Nigeria was still less alarming compared to some other countries, adding that the existing level of fraud can still be addressed. "The major problem is from the inside. They are insider-related. When a staff is earning N50,000 a month and someone comes to say, Please, do this and this for me; alter this and this and I will give you N20 million, what do you think will happen? This is where I think most of the penetration emanates from. He urged banks to educate their customers on why they shouldn't give their PINs and cards out.


Yakub Abdullahi, a participant, said if a bank, for instance, decides to blow up certain issues within its system, there is a tendency for customers to shy away from the bank, claiming it is vulnerable to attack, so they won't put their money there. "The Central Bank should therefore step in to contain these challenges, either by standing as a guarantor for the bank, so that people would not withdraw their funds due to fear," he said. Mr Abdullahi added that, in Nigeria, there is so much poverty. The average banker who is not well paid, or the average banker who is well paid but decides to live above their means, would also go the extra mile to do what their mates are doing.


Nigeria's financial system has been battling with accounts and card-related fraud. As part of the Central Bank's strategy to minimise the level of card fraud in the Nigerian payments system, it directed banks to migrate all their cards from magnetic stripe technology to chip+PIN, otherwise known as EMV (which stands for Europay, MasterCard and VISA, a global standard) due to weaknesses inherent in the former.


Also, in response to the growing complaints on disputed ATM transactions and banks' delay in responding to the issues, the Central Bank stipulated that such complaints be responded to within 72 hours. In its efforts to facilitate ease of contact and rapid response to complaints on electronic card transactions, the Central Bank mandated all banks to set up effective help desks for handling card-related complaints and equally set up a help desk for receiving public complaints on card transactions, with a view to fast-tracking resolutions and monitoring compliance with the 72- hours timeline.

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