How Nigerian Banks lose N43bn to fraud in 91 days

The Financial Institutions Training Centre (FITC) has revealed that a whopping N42.6 billion was lost to frauds within the second quarter, (April -June) of 2024.

The FITC, in its Q2 2024 Fraud and Forgeries report just released, noted that the development is worrisome.

With the staggering increase in losses to fraud, the Centre advised the banks to enhance their monitoring and auditing procedures.

According to the FITC, deposit money institutions can utilize AI-driven tools that flag unusual entries or patterns to implement continuous and automated monitoring systems that can detect anomalies or discrepancies in settlement files.

Additionally, regular unannounced internal audits focusing specifically on settlement processes can be conducted to identify and address any irregularities promptly.

With a total of about N9.4 billion loss for the whole of last year, the second quarter loss alone is a major leap, a development that analysts say the end of year figures might be mind bugling and worrisome.

Also, the amount shows an embarrassing increase when compared with the N468.4 million lost in Q1 2024.

N5.7 billion loss was recorded in Q2 of last year.

Major channels for the perpetration of these crimes, according to FITC include, ‘miscellaneous and other fraud’ with the largest loss of N41.14 billion or 96.46% of the total amount lost.

This was followed by losses from fraudulent withdrawals and computer/web fraud, amounting to approximately N781.2 million and N400.7 million, respectively.

Some analysts last night blamed the ugly development, partly to the growing incidences of insider abuses, ocassioned by the overbearing influences of ‘owner chairmen’ as well as billionaire owners running the institutions through their proxies.

Also, the rat-race for supremacy and meeting up of some regulatory requirements were identified as contributory factors.

This is even as the analysts also blame the Central Bank of Nigeria (CBN) for what they regard as ‘supervisory laxity’ ocassioned by what they also attribute to the apex bank’s preoccupation with mundane issues, outside its purview, particularly in recent times.

“CBN is becoming overtly involved in the management of the economy and leaning more to government bidding than its price and exchange rate stability, among other core mandate. Concentrating more efforts to increasing FDIs, attainment of the proposed $1 trillion economy, may not be the best options as similar efforts and energy should be directed at periodic examinations,” says an analyst.

Specifically, the FITC report noted that the total amount involved in fraud cases in Q1 escalated from N2.9 billion to approximately N56.3 billion in Q2 of this year.

The report also revealed that during the second quarter under review,fraudulent activities were carried out through various channels, including ATMs, online platforms like web and mobile banking, bank branches, and point-of-sale (POS) terminals.
Among instruments used, card fraud recorded a significant decrease, declining by 47.66%. from 21,469 in Q1 to 11,237 in Q2.
In contrast, fraudulent activity involving cheques and cash increased by 36.67% and 9.09%, respectively, with cheques surging from 30 cases in Q1 to 41 cases in Q2, while the use of cash rose from 209 in the first quarter of 2024 to 228 in the second quarter of 2024.

Further analysis of the data shows a significant rise in the amount lost across all channels, except for mobile fraud, which recorded a decline.

In terms of magnitude, losses through bank branch-related channels rose by 31,497%, to a value of N42.2 billion in Q2 from N133.9 million in Q1 2024.

Additionally, computer/web frauds also saw a monumental increase of 1,560%, with losses growing from N24 million to N400.8 million.
However, there was no indication of the amount lost due to ATM-related fraud.

Further advising the financial institutions on ways to curb the menace, FITC said,

“Access controls should also be strengthened by limiting access to settlement files to only a small, vetted group of authorized personnel given the appropriate clearance and are regularly trained on the latest security protocols.

“The implementation of multi-factor authentication (MFA) and role-based access controls (RBAC) can aid the reduction of the risk of unauthorized changes to settlement files.”