The recent report on rising cases of fraud and forgeries in the nation’s banking industry, calls for the tightening of internal controls and supervision by the regulatory authorities. In the Central Bank Nigeria (CBN) Financial Stability Report (FSR), the value of fraudulent activities in the Nigerian banking sector rose to N5.52 billion at the end of the 2017 financial year, while the value of 2016 fraud was N4.12 billion.
The value of fraudulent activities in the banks from 2016 to 2017 showed an increase of N1.40 billion. Earlier, the Nigeria Deposit Insurance Corporation (NDIC) had decried the rising fraudulent activities in the banking sector, especially fraud and forgery cases perpetrated by bank workers. The NDIC also revealed that the number of fraud cases attributed to internal abuse by bank workers increased to 320 in 2017 from 231 in 2016.
This was the outcome of the organisation’s recent report on off-site supervision of the Deposit Money Banks in the country. The report relied on a total of 286 responses received from 26 banks during the period. The regulator noted that there were 22 nil monthly responses from the banks as at the end of December 31, 2017.
There were 26,132 cases of fraud and forgeries from the 286 responses received from the banks last year. This represented 56.30 percent higher compared to 16,751 cases reported in 2016. In the same vein, the amount of money involved in the fraudulent activities documented rose by N3.33 billion from the N8.68 billion reported in 2016 to N12.01 billion in 2017. This represented 38 percent increase. The actual loss decreased by N24.42 million or 1.03 percent from the N2.39 billion in 2016 to N2.37 billion in 2017.
Altogether, both the (Automated Teller Machine), ATM-related fraud constituted the largest with 24,266 cases (about 92.68 percent) of all reported cases or N1.51 billion of losses in the sector in 2017.
Other fraudulent activities were traced to transfers and withdrawals through insider facilitation, presentation of forged cheques, Internet banking and diversion of customer deposits and outright theft.
Although the report showed that the level of attempted cases of fraud and forgeries declined by N0.32 billion, or 11.94 percent between March and June, 2017, there was an upswing in fraud and forgery cases from July to December, 2017. According to the NDIC, reported cases of fraud and forgeries rose by 36.42 percent from 12,279 cases in 2015 to 16,751 in 2016. Actual loss in respect of Internet banking fraud was N857 million, which represented 27 percent of total loss of the industry that year.
We lament the rising cases of fraud and forgeries in the nation’s commercial banks and call on the regulatory authorities to check the menace. The regulatory authorities need to do much more than they are doing currently, just as the management of the banks must tighten their internal control mechanisms that seem to have become vulnerable to the activities of fraudsters and other internal abuses. More than before, these worrisome trends call for improvement in the regulatory/supervisory oversight, in addition to increased vigilance by the banks in the area of security in the banking industry.
All factors that breed corruption in the sector should be squarely addressed. These include poor corporate governance, infraction in foreign exchange operations, lack of effective sanctions of offenders, among others.
From what can be gleaned form the CBN and NDIC reports, it is clear that issues bordering on unethical financial practices and conflicts between customers and their banks are yet to be properly addressed. The Bankers Committee should look into this urgently. The CBN should take the advice of the International Monetary Fund (IMF) and check the country’s rising bank risks.