Banks lose N52.26bn to fraud

…NIBSS, EFCC recover N1.74bn

By Chinwendu Obienyi

Nigerian banks recorded a staggering N52.26 billion loss to fraud in 2024, a development that exposes the growing sophistication of financial crimes despite ongoing efforts to enhance security measures. The latest report by the Nigeria Inter-Bank Settlement System (NIBSS) reveals that fraudulent activities, including identity theft, account manipulation, and insider collusion, continue to pose significant threats to the banking sector.

However, in a bid to curb these illicit activities and recover stolen funds, NIBSS, in collaboration with the Economic and Financial Crimes Commission (EFCC), successfully retrieved N1.74 billion. The report highlights cases where fraudsters exploited loopholes in the system, including the use of stolen identities to open accounts, manipulation of Bank Verification Numbers (BVNs), and unauthorised fund transfers through compromised bank staff.

The report documents fraud activities, whether attempted or successful, and related metrics identified by local financial institutions or agencies. NIBSS is the central system responsible for the settlement of inter-bank transactions within Nigeria.

Furthermore, the NIBSS platform connects Deposit Money Banks (DMBs), Mobile Money Operators (MMOs), Switches, and Payment Service Providers (PSPs).

The NIBSS Industry Fraud Desk compiles all reported fraud incidents within a period, analyses them and delivers industry-wide reports.

Specifically, the bank revealed that fraudsters targeted senior citizens and minors to open accounts using stolen identities, adding that approximately N400 million in proceeds from fraud were transferred into these accounts and subsequently dissipated.

The report also highlighted that over N1 billion was moved using two accounts after Bank Verification Numbers (BVNs) were registered for two minors by compromised bank staff.

Giving insights, NIBSS said, “The accounts were operated by an individual from Asia whose selfie was used for verification, with locations showing as Hong Kong in at least three financial institutions.”

However, the report did not disclose the names of these institutions.

The report said, “On July 30, 2024, a corporate account for an oil and gas company was opened using doctored documents and a registered company number picked from the internet. Supporting documents were also fabricated to open the accounts.

“A total of N335 million from fraud proceeds was received on the same day the account was opened.

The funds were then transferred to unlicensed Bureau De Change (BDC) operators in July 2024.”

When totaled together, the money stood at N1.735 billion during the period under review.

The report further said, “NIBSS, in collaboration with law enforcement, managed to recover all the funds, and an account officer was found with incriminating documents by the Economic and Financial Crimes Commission (EFCC).”

NIBSS also revealed that financial institutions in Nigeria lost N52.26 billion to fraud in the year under review, representing a significant increase of N34.59 billion compared to the N17.67 billion recorded in 2023.

According to the latest report, the amount lost to fraud has increased by 196 percent over the past five years, in parallel with the growth of financial transactions in the digital payments sector.

Although the annual fraud count reported decreased by 31 percent, from 101,624 in 2020 to 70,111 in 2024, the amount lost to fraud grew by 350 percent, rising from N11.61 billion to N52.26 billion within the same period.

Reacting to the development, experts advocated for stronger identity verification to prevent fraudulent account openings.

They added that more oversight of BVN registration is needed to stop compromised staff from exploiting the banking system.