In recent data by the Nigeria Inter-Bank Settlement System (NIBSS), fraud losses in Nigeria significantly reduced to N3.007 billion in the first quarter of 2024, down from ?5.47 billion in the fourth quarter of 2023.
According to NIBSS, the decline in fraud losses occurred despite an increase in fraud attempts with 20,638 attempts in Q1 2024 and 7,423 in February.
While fraud occurs across several channels, Mobile, POS, and Web are the most popular choices for criminals. NIBSS notes that the mobile channel remains the preferred means for fraudsters, as it increased significantly compared to the rest. Meanwhile, channels like ATMs and Internet banking saw only a handful of attempts.
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In a sign that customers need to be more careful in sharing their personal information, social engineering was the most popular fraud technique in Q1 (10,007 attempts) followed by phone and card theft (4,008 attempts).
Nigeria’s economic hub Lagos, is reported to be the headquarters of fraudulent activities, accounting for more than 60% of all the attempts in Q1 and also a significant amount of the actual losses suffered.
NIBSS revealed that in Q1 2024, 27 deposit money banks, 65 microfinance banks, 20 payment service providers, 5 mobile money operators, 2 payment service banks 3 EFT Switches, and 15 Other Financial institutions reported their fraud data.
The institution noted that “non-reporting of fraud is a breach of the Central Bank of Nigeria’s circular on the establishment of Industry Fraud Desk.”
Meanwhile, the sharp decline in fraud losses, underscores the effectiveness of enhanced security measures and stricter regulatory frameworks within the financial sector. Authorities and financial institutions have been intensifying their efforts to combat fraud, including the implementation of advanced technology and more robust monitoring systems. The progress seen in the reduction of fraud losses highlights a positive trend towards a more secure financial environment in Nigeria.
An analysis of reports on fraud and forgeries in Nigerian banks from FITCS revealed that out of 270 bank staff members involved in various acts of fraud last year, just 54 faced terminations of employment. This marks a slight decrease from the 22% termination rate recorded in 2022.
KYC (Know Your Customer) is today a significant element in the fight against financial crime and money laundering, and customer identification is the most critical aspect as it is the first step to better perform in the other stages of the process.
The global anti-money laundering (AML) and countering the financing of terrorism (CFT) landscape raise tremendous stakes for financial institutions.
Amid growing concerns stemming from high-profile fraud incidents and critiques of lenient KYC standards, Nigeria is promoting financial system stability by reinforcing KYC procedures. In December 2023, the Central Bank of Nigeria (CBN), mandated stricter KYC processes for banks and fintechs.
While deposit money banks offer Tier-1 accounts—bank accounts that usually require no identification—neobanks like OPay and Palmpay may have popularised these easy-to-open accounts using the narrative of aiding financial inclusion. It has allowed them to onboard customers with little friction or without a need for national identity cards, which only 30% of Nigerians have.
The new rules come as an amendment to Section 1.5.3 of the Regulatory Framework for Bank Verification Number (BVN) Operations and Watchlist for the Nigerian Banking Industry.