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Banks’ losses to fraud hit N203 billion in 14 years


CBN Governor, Emefiele

CBN Governor, Emefiele

Total losses by the nation’s Deposit Money Banks due to fraud related cases have been put at about N203 billion in the last 14 years.

The development, which still persists in the industry, with sophistication and some unreported cases by some financial institutions however, is not peculiar to the country, but globally.

But the stakeholders- the Nigeria Electronic Fraud Forum (NeFF), Nigeria Interbank Settlement System (NIBSS) and DMBs, appear more worried as the fraudsters become more ingenious in an effort to undermine every security measures put in place, duping unsuspecting customers of banks and corporate organisations of billions of naira.

The Director of Banking and Payment System, Central Bank of Nigeria (CBN) and Chairman of Nigeria Electronic Fraud Forum (NeFF), Dipo Fatokun, decried the number and size of frauds against organisations, which are on the rise.

Fatokun, at NeFF’s first general meeting of the year, with the theme: “e-Fraud: Shining a Light on Insider Abuse,” Fatokun, said that recent investigations have revealed that as many as 20 or 30 persons are involved.

The Executive Director of Operations, First City Monument Bank, Nath Ude, while speaking on the topic: “E-fraud: Insider Abuse,” at the forum, said that the consequence of the menace on the banking landscape has been reputational damage, loss of share value, loss of customer confidence and increased audit costs.

Citing NIBSS reports on the loss of revenue to fraudsters, he noted that between 2000 to the first quarter of 2013, banks had already lost N159 billion, and subsequently lost N40billion for the rest of the year, while from January to September 2014, they also lost N4 billion.

According to him, fraudulent activities are on the increase, which amount to severe consequences for the financial industry in Nigeria, even as most electronic fraud is from insiders- including dedicated employees.

He said banks could curb insider abuse by watching out for warning signs like employees living above their means, frequent manipulation of data by employees and continuous, excessive use and abuse of privileged and systems account.

“Banks will be able to combat electronic fraud by filtering out predatory employees, reviewing upwards, the required reliability status for all staff who need privileged roles to work as well as deploying appropriate prevention and detection technologies like CCTV monitoring and access cards with authorizations,” Ude explained.

But the Chief Internal Auditor, First Bank of Nigeria Plc, Uduak Udoh, pointed out that the fraud committed by an insider is always hard to detect than those by outsiders, as the impact is usually higher when an insider is involved.

According to him, though, at a particular period, investigation showed that outsider fraud volume was 5,173, representing 99.79 per cent, worth N786 million, while insider related fraud volume was 11 (0.21 per cent) and valued at N114 million.

“Outsiders and insiders remain the greatest challenge as they are both vectors and actors in e-fraud space. For without them banks will have good sleeps and less rough relationships with customers and regulators.

“The outsiders are those outside the wall of the bank who wants to reap where they never sowed. They are social engineers, impostors, con artist and gold diggers. Outsiders are usually the first focus to protect against by banks,” he said.

On mitigating the risk, FBN chief auditor said that each organization has to decide how much loss they are willing to tolerate, as each of these areas requires an investment, in some cases substantial investments that may outweigh the benefits.

“Even with these controls in place, there will still be the residual risk of user carelessness or of those angry users who are determined to circumvent the system. Thoughtful implementation of some or all of these controls can deter, prevent, detect, or reduce the ultimate impact of the incident,” he added.

The Head, Information System Security, NIBSS, Olufemi Fadairo, decried that 2014 was quite alarming in terms of fraud as it recorded very high volume of fraudulent transactions, noting that the unreported cases were far higher than the reported cases of frauds perpetuated in the system.

He also disclosed that Internet and ATMs remain the most popular channels for e-fraud, while Point of Sales (PoS) terminals have been discovered to be the preferred channel of cash out for fraudsters.

According to him, in 2014 there was a record of 1,461 fraud cases, with attempted value of N7.8 billion and actual loss value of N6.216 billion.

In 2013, the fraud cases were 855, with attempted value of N19.149 billion, while actual loss value was N485.194 million.

According to him, the fraudulent cases help to emphasize the need for more security measures in handling payment cards as individuals, and improved security practices as corporate bodies to help minimize fraud rates.

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