The continuous advancement of technology has opened up the risks of financial fraud in Nigerian banks, and many banking employees have been found to be complicit.
Nigeria has some of the most advanced electronic payment capabilities in the world, and while this has significantly made banking operations more effective, it also gives fraudsters more leeway to perpetrate their crimes.
There are various channels, such as cash, automated teller machines (ATMs), point of sale (PoS) devices, mobile devices, etc., through which financial crimes are carried out in collaboration with bank staff.
TechEconomy obtained a report titled “Report on Frauds and Forgeries in Nigerian Banks,” it stated that all cash theft instances reported in Q3 2022 were committed by bank employees.
In the 18-page report that was put together by the Financial Industry Transparency Council (FITC), specifically, 19,314 cases were reported in the third quarter of 2022, down from 20,195 cases observed during the same period in 2021, or 4.36 percent fewer cases overall.
According to FITC, foreigner involvement in the scams increased, rising from 14,243 in Q3, 2021 to 16,125 a year later, which was a 324.50 percent growth.
Employee involvement dramatically expanded, rising by 250% from 32 in Q3, 2021 to 112 in Q3, 2022. Within this period, 14 positions were terminated in Q3 2021, while 20 bank workers were relieved of their jobs a year later.
As of the third quarter of 2022, there had been around N3.62 billion worth of fraud committed but the overall sum involved fell from N34.8 billion to N9.62 billion, a reduction of 72.34 percent.
However, the overall loss during the same period in the previous year was N857,167,293.61 (2021) as opposed to N3.62 billion in Q3, 2022, which represents an increase of 324.50%.
According to the Nigeria Inter-bank Settlement System, fraud-related transactions cost Nigerian banks an average loss of N14bn yearly.
In another report, four Nigerian deposit money banks namely, Access Bank Plc, Guaranty Trust Bank Plc, First Monument City Bank, and Wema Bank lost a total of N1.77bn to fraudulent activities involving the banks’ employees and consumers in 2021.
With 10 people conspiring, four bank employees and five outsiders were involved in 22 reports of teller fraud during the review period, totaling N121, 763,258.91 with an estimated loss of N83.5 million.
Four bank employees and 12 outsiders were involved in 36 reported forgeries of checks and signatures totaling N521, 349,800.96, but N305.4 million was lost, the FITC report said.
“8830 incidences of computer/web fraud occurred, involving 8911 outside parties and six bank employees. N305, 495,175.25 were lost in this, and N2, 621,953,247.60 were involved.”
In terms of mobile fraud, 6631 fraud cases in total were reported, with 33 bank employees and 5194 outside collaborators involved. In this case, FITC reported that N2, 669,417,856.44 was involved, and N1,222,095,081 was lost within the period under consideration. 16 bank employees were involved in 16 reported cases of cash theft totaling N569.6 million, of which N452.2 million was stolen.
However, within the period, there was no clearing fraud, illegal printing of bank papers, falsification of accounts, foreign currency fraud, cross-shooting of cheques, or kite flying.
Mitigating Financial Fraud
FITC stated that, although there has been a decrease in fraud incidents, the amount involved, and the amount lost, banks must boost their internal control systems so that fraud activities are preemptively stopped.
For the organization, the decrease in fraud incidents, amounts involved, and losses are valuable to the banking institution.
“I think there is a gap in the education of customers on what to do and what not to do.” Times are hard, and those in crime are inventing new ways to move forward, said Olugbenga Odeyemi, ICT expert and Senior Partner at e86 Limited
He advised banks to adopt sophisticated measures to mitigate current cyber threats and intensify their efforts in educating customers on ways to avoid falling prey to fraudulent actors.
“So, banks, especially the central bank, need to be steps ahead of those in financial crime.” They should think ahead and come up with certain measures that would mitigate cyber fraud and attacks and ensure that their customers are well educated on how not to become prey.”