Surge in Bank fraud threatens Nigeria’s financial system

Nigeria’s financial sector is facing an alarming surge in fraud cases, with billions of naira being lost to fraudsters every month.

The latest report from the Financial Institutions Training Centre (FITC) highlights a dramatic rise in fraudulent activities, signaling a growing threat to the stability and trust in the country’s banking system.

According to the FITC’s third-quarter 2024 Fraud and Forgery Report, fraud cases in Nigerian banks spiked by 65% in the third quarter, with reported incidents increasing from 11,532 cases in the second quarter to 19,007 cases in the third quarter.

The financial losses have been equally staggering, with fraudsters attempting to steal a total of N115.9 billion, more than double the amount targeted in the previous quarter, which stood at N56.6 billion.

Despite this sharp rise in attempted fraud, the actual financial losses were significantly lower, totaling N10.1 billion, a 75.4% decrease from the N42.8 billion lost in the previous quarter.

However, the cumulative losses for the first nine months of 2024 now stand at an estimated N53.4 billion, far surpassing the N9.4 billion lost in the entirety of 2023.

This sharp increase in fraud is attributed to the growing sophistication of fraud tactics, particularly within the digital and cyber realms.

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Fraudsters are increasingly exploiting all available transaction channels, including online platforms, mobile banking apps, and Point-of-Sale (POS) systems.

Dr. Chizor Malize, Managing Director and CEO of FITC, expressed deep concern about the escalating fraud rates, stressing that it is eroding consumer confidence in Nigeria’s financial services sector.

“The rise in fraud affects not only businesses but also the trust that consumers place in the financial system,” she stated.

“Fraudsters now have access to every possible transaction channel, including web platforms, mobile apps, and POS systems, which poses a significant challenge for the industry.”

Dr. Malize also emphasized the potential of Artificial Intelligence (AI) to help combat the growing digital risks, urging the adoption of AI technologies as part of a comprehensive solution to the fraud crisis.

“AI has the potential to play a critical role in mitigating risks and strengthening the resilience of the financial system,” she added.

Mr. Pattison Boleigha, CEO of Pattison Consulting Limited, echoed Dr. Malize’s concerns, stressing the need for stronger governance and regulatory oversight. “Regulators must enhance their understanding of emerging technologies, as fraud continues to evolve in line with digital innovations,” Boleigha remarked.

“It is vital for regulators, consumers, and operators to collaborate more effectively in the fight against fraud.”

Mrs. Favour Femi-Oyewole, Group Chief Information Security Officer at Access Bank, called for enhanced security measures to safeguard against fraud.

She highlighted the importance of machine learning and broad cybersecurity measures to detect and prevent fraudulent activities in real-time. “We must work together, as the threat of cybercrime is a common enemy that we all face,” she stated.

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The FITC report also identified specific trends in the types of fraud being committed. Fraudsters are increasingly targeting computer and web-based platforms, mobile transactions, and POS systems.

Card-based fraud saw a significant 54.2% increase from the second quarter to the third quarter of 2024, while cash-related fraud rose by 125%. Interestingly, cheque-related fraud cases dropped by 48.8%, indicating the decline in cheque usage in favor of digital transactions.

This shift toward digital platforms highlights the growing vulnerability of online financial systems, which are being increasingly targeted by cybercriminals. The rise in digital fraud calls for urgent reforms to enhance the security of online banking services and educate consumers about potential risks.

Experts agree that addressing the escalating fraud problem will require a multi-pronged approach.

This includes the adoption of advanced technologies such as AI and machine learning, enhanced regulatory frameworks, better consumer education, and closer collaboration between financial institutions, regulators, and consumers.