Increasing Bank Frauds in Nigeria Traced to Contract Staff

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Umar Ibrahim, MD, NDIC

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The Nigerian Deposit Insurance Corporation traces 64 percent of fraudulent activities in the banking system in Nigeria to contract staff

By Anayo Ezugwu  |  Nov 9, 2015 @ 01:00 GMT  |

Temporary staff in Nigerian banks are responsible for the increasing cases of financial frauds and forgeries in banking system. According to the Nigerian Deposit Insurance Corporation, NDIC, 64 percent of such fraudulent activities were traced to temporary staff members of banks in 2014. The agency regretted that in spite of the modest improvement recorded in the adoption of electronic payment system in recent times, it was worrisome that the banking system had continued to record very high incidences of fraud and forgeries in recent years.

Umaru Ibrahim, managing director, NDIC, made the revelation at the just concluded seminar for business editors and financial journalists in Ilorin, Kwara State.  He disclosed that a total of 10,612 of such cases were reported in 2014 as against 3,786 cases in 2013, which showed an increase of 183 percent. The amount involved in 2013, was N21.80 billion as against N25.61 billion in 2014, which was a 17.5 percent increase with expected/actual loss increase from N5.76 billion in 2013 to N6.19 billion in 2014.

Ibrahim explained that the types and nature of frauds and forgeries were largely web-based (online banking)/ATM card related, fraudulent transfer/withdrawal of deposit frauds and suppression of customer deposits among others. “It was also discovered that temporary staff, clerks and tellers accounted for 64 per cent of the frauds and forgeries in 2014, which required urgent attention to improve the electronic payment controls, IT Security, human capital and integrity profiling as well as motivation of staff.”

He pointed out that Section 35 and 36 of the NDIC Act, 2006 had mandated all deposit-taking financial institutions to send returns on frauds, forgeries and other financial malpractices to the corporation on monthly basis. According to the NDIC boss, banks are also expected to notify the corporation on any member of staff that has been dismissed or have their appointments terminated or advised to retire on grounds of financial infractions.

Ibrahim, however, said the corporation, in collaboration with the Central Bank of Nigeria, had embarked on various public awareness initiatives with a view to drastically reducing the percentage of Nigerians who have no access to any form of financial services from 39 percent to 20 percent by 2020.

Corroborating the NDIC’s claims, Ibrahim Shazali, an official of the Economic and Financial Crimes Commission, EFCC, noted that Nigerian banks, like their global counterparts, experience more external than internal fraud. According to him, while outside fraud represented 99.79 percent of cases in the bank at a particular period, the value of losses was N786 million, while insider fraud, which only represented  a minuscule 0.21 percent, resulted in an actual loss of N114 million.

He disclosed that about N6.2 billion was lost to cybercrimes in Nigeria in 2014. He said the figure was grossly higher than the N485 million that was lost through the same channels in 2013. Shazali identified Point of Sales, PoS, ATMs and mobile banking as the major avenues where the cybercrimes were being committed. He, however, said that while the value of cybercrimes had been growing exponentially, it was comforting that the value of fraudulent transactions was less than one per cent of the total transactions. “This should not, however, lead to premature sighs of relief as the success rate of attempted fraudulent transactions rose from a mere three per cent to 80 per cent in the space of just one year.”

He said the lack of a well-defined legal framework for prosecuting cybercrimes and financial frauds had led to poor success rate in the fight against the crimes. The EFCC official said of the 1,461 suspected fraud cases reported in 2014 only fraudsters in 41 or three per cent of the cases were apprehended.

Shazali said that it had finally dawned on global financial and business leaders that cybercrime was not merely a technology issue, but at the heart of it.

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