Checking rising cases of bank fraud – The Sun

A recent report by the Nigeria Interbank Settlement System (NIBSS) that banks in the country lost N3.5billion between July and September 2020 to fraud-related cases is very disturbing. The loss represents 534 per cent rise from the same period in 2019 when it was N552 million. According to the report, the highest number of fraudulent practices, 35.5 per cent of the total, was committed on the web channel transaction. This is a transaction done using web browser. Also, transactions done over the phone accounted for a loss of N410 million. This represents 11.7 per cent of the entire loss recorded within the three-month period covered by the NIBSS report.

The report found that web and mobile channels have become viable platforms for the rising incidence of cyber fraud in the banking industry. Data from the Nigeria Deposit Insurance Corporation (NDIC) reveal that online fraud has become a growing concern for investors in the financial services sector, with a hefty N15.5billion lost in 2018, a massive jump from what the industry recorded in the previous four years, having lost a total of N12.30billion between 2014 and 2017.               About 89 per cent of all the fraud happened through electronic channels, while over 60 per cent originated online due to banks’ growing investment in internet-based technology-related banking services. Web and mobile banking transactions accounted for 71.42 per cent, higher than the 68.65 per cent recorded in the third quarter of 2020. A research conducted in 2020 showed three levels of cyber fraud. These include internal fraud where bank staff with access to information technology such as system and database, conspire with outsiders to perpetrate fraud. We agree that internal fraud, together with external and social engineering also account for the most techniques used in defrauding banks, as these risks account for a large incidence of fraud in recent times.

According to the Financial Stability Report of the CBN, unsuccessful attempted fraud and forgery cases within the same period of six months stood at N7.99billion.  Undoubtedly, these are worrisome trends in the banking industry that call for urgent measures to check them. There is need for strong management and a huge investment in technology system.

The number of fraud cases attributed to insider abuse increased exponentially from 16,751 in 2016 to 26,132 in 2017 from 286 responses received from 24 banks. This represents over 56 per cent. The amount of losses rose to N3.3billion from the N8.68bilion reported in 2016. The figure increased to N2.37billion in 2017. In 2015, fraud and forgeries reported to have been facilitated by insiders increased by 36.42 per cent, representing 12,279 cases. ATM- related cases constituted most of the cases.

We believe that getting to the root of the current rise in cyber fraud in the banking sector requires more than identifying the symptoms. Efforts should be geared towards correcting the underlying causes and tackle them forthwith. Based on the CBN and NDIC reports, we urge the banks and the Bankers Committee to address the problems of conflict of interest and other unethical conducts of insider abuse among bank workers. Banks should regularly investigate complaints on high-profile customers’ deposits. Beyond that, all factors that breed corruption in the banking industry should be addressed. These include poor corporate governance, lack of effective sanctions on offenders, among others.

In all, the laws guiding cybercrime should be strengthened by the National Assembling and strictly enforced by the relevant law enforcement authorities, especially the Economic and Financial Crimes Commission (EFCC). In addition, banks should rise to the challenge by tightening their security systems so that fraudsters won’t have easy access to them. Due diligence has become necessary in the recruitment process of staff to avoid insider abuse. These measures must be enforced to check rising cases of bank fraud.

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