By Omodele Adigun, Bimbola Oyesola, Uche Usim, Chinyere Anyanwu, Merit Ibe and Chiwendu Obienyi
Since 2012 when the Central Bank of Nigeria (CBN) began a sustained push to deepen the digital banking policy and improve financial inclusion in the country, its biggest headache has been keeping the banking system safe from scammers feeding fat on bank deposits.
This is because, while some experts have applauded the Federal Government’s effort at getting more Nigerians financially included, concerns about the policy’s unintended risks, especially with the rising number of naive depositors falling prey to cyber criminals in the electronic banking ecosystem, remain a big issue.
But even with some progress being made with financial inclusion, many Nigerians re rattled by the incidence of unauthorised access to bank customers’ deposits and financial information, giving them sleepless nights.
Several bank customers already stung by online scams are becoming lethargic to formal banking, with many vowing never to return to banking halls and the inherent fraud threats now eroding the little gains recorded with financial inclusion.
It is estimated that the Nigerian banking industry has lost more than N20 billion between 2018 and 2021 to fraudsters using various electronic devices. For instance, a recent report by the Nigeria Inter-Bank Settlement System (NIBSS) revealed that the number of fraud attempts in the digital banking space between January and September 2020 grew by 186 per cent, year-on-year (YOY) to 46,126 cases, driven mainly by increased attempts via mobile (330 per cent YOY), online (173 per cent YOY) and point-of-sale (POS) machines (215 per cent YOY).
It further highlighted that total amount lost to online scammers during the period was N5.2 billion, with a 93 per cent success rate.
In its broader analysis, the high rate of electronic banking fraud in the last one year springs from the COVID-19 pandemic that forced the world to lock down, thus reducing physical contact, as many migrated to virtual economic services in the online space.
In Nigeria, the pandemic forced millions of bank customers to shift to digital space, having substantially disabled physical banking operations.
The NIBSS report further noted that 56 per cent of all reported fraud attempts were carried out using “social engineering” techniques, which entail the psychological manipulation of people to gain confidential information on their accounts. Common instances of this criminal initiative in Nigeria’s case include receiving emails and phone calls from fraudsters posing as bank staff and tricking depositors to reveal their bank details through which they are scammed.
From the report, bank customers who did not set up the two-factor authentication systems were the next big target at 19 per cent.
Although many could infer that the N5.2 billion lost to online banking fraud between January and September 2020 is relatively small, as it represents just 1 per cent of total nine-month net profit for commercial banks and 0.03 per cent of customer deposits in 2020, the trauma lies in the cyber security risk it poses to banks as more people adopt their digital banking platforms and the long-term consequences for earnings.
With regard to growing adoption of e-payment channels, in 2020, the banking industry witnessed a 303 per cent YOY expansion in the volume of transfers using mobile phones, a 50 per cent YOY growth in POS transactions and 77 per cent increase in the volume of online transactions done through the NIBSS instant payment platform.
According to Tellimer, a UK-based economic research firm for emerging markets, “Excluding the impact of reduced e-banking charges by the CBN in 2020, these growing metrics have been positive for most of the banks we cover. Among those banks that provided disclosures on their e-banking operations in first nine months of 2020, Access Bank recorded an average growth of 41 per cent in transaction volumes from its e-banking channels (USSD, ATM, mobile and Web), FBNH recorded a 29 per cent YOY growth (Mobile and USSD), while transactions grew by 82 percent yoy (mobile, Web and USSD) for FCMB.”
The firm added that, as Nigeria’s rate of financial inclusion grows and more customers embrace digital payments, the growing incidence of fraud poses a great risk to the growth numbers banks are recording as well as customers’ faith in the integrity of their digital products.
“With scammers pretending to be bank officials, the major means of carrying out fraud, banks will no doubt need to ramp up security to protect customer confidence in their digital products as well as raise awareness.
“In addition to the risk to volumes, revenues from digital channels for Nigeria banks are also at risk, if the rapid growth in fraud is not curtailed. This is particularly important for banks that are focused on boosting retail transactions and growing fee income to support earnings, as they navigate a lower yield environment that has pressured net interest margins. Among the banks that we cover, Access (44%), FBNH (39%) and UBA (33%) have the highest contribution of digital income to their fee income, while GTB and Zenith have signalled their commitment to continue growing digital income lines,” Tellimer noted.
Interestingly, the lending institutions have also been alerting their customers to ensure more caution in transactions and continue to utilise the e-payment channels available to them.
First Bank of Nigeria stated that it recorded over 275,000 new sign-ups to alternative channels covering its Firstmobile; the USSD and First-Online platforms when the lockdown started.
In a mail to its customers, it stated, “We observed that scammers are beginning to have sleepless nights over our customers’ accounts.
“They have started sending messages on purported ATM card deactivation, due to differences in date of birth.
“They even go as far as telling you to dial their fraudulent numbers to activate your card. As in, they want to defraud you and they still ask you to waste your money on them! Don’t fall for it; it’s a lie!
“Let them know that you are not a zombie, let them know smartness is in your DNA. If you get any suspicious message as such, delete it immediately.
“Rest assured, FirstBank will never ask for your personal details or ask you to call a personal number.
“Also, do not click on any online link asking for your account details such as your BVN, personal information, ATM card number, PIN or OTP.”
Access Bank Plc had also urged its customers to be vigilant as incidents of fraud are on the rise.
It said, ‘Since the start of the coronavirus pandemic in the country, which necessitated the lockdown of first, three major cities, and eventually the entire nation, the bank has observed a worrying increase in reports of fraudsters targeting unsuspecting customers.
“This development has become even more worrisome, especially as these people not only disguise themselves as bank representatives, but also use the palliatives from the government as bait to collect customers BVNs and other key banking details.”
The Executive Director, Retail Banking, Access Bank Plc, Victor Etuokwu, said, “Access Bank is imploring its customers to be wary of any message, demanding their personal or bank details.
“Customers must remember that the bank will never ask for their BVN, full card PAN, PIN, mobile app activation code, OTP or password as it is readily available to the Bank via its database.
“Any call, email and text message, claiming to be from Access Bank demanding for any of these details is certainly a scam,” he concluded.
In an email to its customers, Fidelity Bank said, “Dear customer, it has come to our attention that scammers are utilising the COVID-19 pandemic as an opportunity to defraud the public by impersonating COVID-19 officials alongside some of the following.”
While mentioning some of the techniques, it added, “Please, do not click on any link or respond to any of such messages; delete immediately!
“If or when in doubt, please contact our customer care representatives.”
As a long-term solution to stem the tide of online banking fraud, experts have called for the opening of more job opportunities in the ICT ecosystem to absorb thousands of young graduate computer engineers and scientists.
A former technical adviser to the Ministry of Petroleum Resources and former group executive director, Corporate Services of the Nigerian National Petroleum Corporation (NNPC), Dr. Rabiu Suleiman, in an interview with Daily Sun, advised that young ICT enthusiasts be given some specialist training so that they can understand ICT as a tool rather than as an opportunity.
“ICT plays a significant role in optimisation, efficiency, technology advancement and all that. So, if a company like Huawei focuses attention on optimisation, efficiency, control and improvement, cyber security and others, it will be very good.
“Today, we’re talking about artificial intelligence and many other things. It’s my honest opinion that ICT is a key player in terms of optimisation, safety and profit in many spheres of the economy.”
More so, an accountant and financial expert, Vera Augustine, has advised Nigerian youths to identify meaningful and legitimate ways of earning a living, rather than delving into fraudulent activities capable of destroying them.
Vera noted that the get-rich-quick syndrome has made youths lazy, warning that if the scourge were not immediately tackled, the future of Nigeria remained bleak.
Her words: “The sad truth is, among the joblessness, there are millions of jobs in Nigeria. The issue of using shortcuts to success is becoming the order of the day in Nigeria and it is sad. Every day, you see on the pages of newspapers the arrest and conviction of Yahoo boys. Sadly, most of these guys are graduates.
“So, the question is, did you spend four years in school to end up as a fraudster? Our youths need to have a rethink. It is high time they realised that the future of this country lies in their hands.”
Meanwhile, despite concerted efforts to check fraud in the country, the public space is still gripped by rising incidence of online banking fraud across the nation.
Oludayo Tade, researcher, criminology, electronic fraud and cybercrime, at the University of Ibadan, said about N15.5 billion was lost to bank fraud in 2018 and about 60 per cent of the fraud was perpetrated online owing to available Internet-based and tech-rated banking services. His research also revealed that banking fraud cases were in three dimensions: internal fraud carried out by banking staff; external fraud carried out by ordinary Nigerians; and collaboration between fraudsters and banking staff.
For instance, a seven-man syndicate arrested recently by operatives of the Rapid Response Squad (RRS) over a botched transfer of N25 million from a local bank and $220,000 from an international account confirmed to investigators that they worked with bank insiders.
Police investigations revealed that the fraudsters scouted for obituaries of well-to-do personalities, used bank insiders to determine the deceased’s account balance and cloned their SIM cards for online transfer. It was learnt that one of the bank insiders was arrested in Lagos, while another one based in Benin is on the run after suspecting the gang had been busted and that police were on his trail.
Tade, in his work, also discovered that inefficient supervision, non-performance of oversight work by regional heads of banks, and poor follow-up on customers’ addresses (Know Your Customer) accounted for the fraud that took place at that time. He observed that the governance structure of banks was weak and so there was a need to check fraud through customer awareness and financial literacy education.
While fraudsters continue to design new ways of working on customers’ vulnerabilities, Nigerian banks need to use the Cybercrime Act to prosecute offenders as a way to boost confidence in the banking sector and deter fraud in the future.
A report by the Nigeria Deposit Insurance Corporation (NDIC) on fraud attributed to internal abuse by staff of banks states that Internet/online-banking and ATM/card-related fraud-types reported constituted 24,266 or 92.68 per cent of all the reported cases, resulting in N1.51 billion or 63.66 per cent of losses in the industry in 2017.”
The report noted that out of the 26,182 fraud cases reported by the 26 licensed banks, 320 cases were attributable to internal collaboration by bank staff.
“A total of 320 bank employees had their appointments either terminated or were summarily dismissed in 2017, as against 231 in 2016,” it stated. That represented an increase of 38.53 per cent in the total number of fraud cases reported in 2017. However, the losses arising from the reported cases decreased from N760 million in 2016 to N682 million or about 11.43 per cent in 2017. Internet/online-banking and ATM/card-related fraud-types reported constituted 24,266 or 92.68 per cent of all the reported cases, resulting in N1.51 billion or 63.66 per cent of losses in the industry in 2017.”
Mr. Kurfi Garba, managing director of APT Securities, however, sees online banking fraud as not peculiar to Nigeria alone as it is a global phenomenon perpetrated everywhere in the world, which needs much time to be tackled.
He said: “Online banking is the new reality right now and it is very difficult to do away with technology now because we are in a digital world. The number of users was not that much before COVID-19 but when the pandemic struck you could see that a large number of people went for online banking and it even reflected in the statistics at the end of 2020. Right now, I would say online business has become part of us and it has come to stay. For a year, the NGX did not open their trading floor but did transactions virtually and they performed well by closing at 50 per cent in 2020. So, we cannot do away with technology and it is simply a case of adopting this technology. Online banking fraud is perpetrated everywhere in the world as it is a phenomenon that needs much time to be tackled.”
What should be done to reduce it?
He said: “The banks have to keep spending money to protect their systems because these hackers or fraudsters on a daily basis try as much as possible to break into their system as well as their customers’ mobile applications too. For example, Apple is always one step ahead of the hackers and that is why, with an iPad, you do not need an antivirus, because they keep on spending money for protection of their systems, and so the banks have to spend money daily to protect their systems.
“Banks also have to keep up with the awareness to their customers about fraud. They have to keep drumming it into the ears of their customers via SMS or emails. For the customers, they also have to be very careful and alert about their passwords and even create a level of security around their phones.”
However, stakeholders in the organised private sector and the organised labour have attributed the rising incidence of cybercrime in banking sector to the growing poverty rate, rising unresolved corruption cases and high unemployment bedevilling the country and other societal problems.
Speaking at different fora, they were all unanimous that the rising trend of online banking fraud/cybercrime calls for urgent attention as it poses threats to the reputational image of the country, organization or individual, with antecedent monetary/time loss, psychological and emotional losses.
Director-general of the Nigeria Employers Consultative Association (NECA), Timothy Olawale, raised the alarm that there is an urgent need to address the causes in order to stem the tide.
“It is a known fact that one of the biggest challenges confronting the country, besides insecurity, is corruption. It has triggered higher poverty and unemployment and significantly contributed to the surge in cybercrimes.
“The desperation for survival for many Nigerian youths is tough. Most are unemployed and can barely afford to feed themselves. The misappropriation of public funds that could have created jobs and other economic opportunities by corrupt politicians is the real problem here.
“On the growth in poverty rate in the country, data from the World Bank Poverty and Shared Prosperity Report shows that Nigeria’s poverty level has further increased in the wake of the COVID-19 pandemic.
“More specifically, 79 million Nigerians live in extreme poverty, accounting for 20 per cent of the people living in poverty in sub-Saharan Africa. COVID-19 and its associated economic crisis are enabling factors of the high poverty headcount,” he said.
The NECA boss noted that data from COVID-19 phone surveys in Nigeria also suggests that about 85 per cent of households experienced higher food prices, with half reducing their food consumption as a coping strategy.
On the dangers posed by online banking fraud to the economy, Olawale put the annual financial loss to cybercrime at N250 billion ($649 million) in 2017 and N288 billion ($800 million) in 2018.
Also commenting, president of the Association of Senior Staff of Banks Insurance and Financial Institutions (ASSBIFI), Oyinkan Olasanoye, opined that the increase in banking fraud was a societal problem.
Olasanoye, deputy president of the Trade Union Congress (TUC), said there was incremental decay in core national values such as ethics, morals and integrity of average Nigerians: “Unfortunately, the issues of underemployment, unemployment and casualisation and early lay-offs of professionals without adequate compensation and social security in an economy without necessary infrastructures put our security in the hands of active, knowledgeable but frustrated young Nigerians,” she said.
Also in a recent report, the Consumer Awareness and Financial Enlightenment Initiative projected a $6 trillion loss to cyber crime by 2030.
“We believe that cybercrime poses a great risk to the economy, hence, the need to institute an effective risk management system and enhancement of the capacity to carry out forensic investigation to tackle it. As a result, private sector innovativeness and talent should be fostered in way that creates new opportunities for young people,” it said.
For his part, Anthony Abakpa, president of the National Union of Banks Insurance and Financial Institutions (NUBIFIE), argued that businesses flourish where there is absolute peace and good environment, good governance, noting that, if there are no such assurances, businesses are bound to shrink with time and the impact on the economy could be quite devastating.
“The business community will suffer if the issue is not addressed. Loss of jobs and general insecurity of life and property are some of the likely consequences,” he said.
In proffering solutions to the menace, these stakeholders said that government, banks’ management and individual customers have roles to play.
According to NECA director-general, government should utilise the policy landscape to support the private sector and enforce population control measures to address issues of poverty and corruption.
He said: “As canvassed by the Buhari administration in its campaign strategy to stem corruption, there is need to act decisively on the subject beyond the rhetoric.
“We are, therefore, calling for stronger synergy between the executive and the judiciary in addressing delays in prosecution of fraud cases across the country. We suggest a period of not more than six months for conclusion of all corruption-related cases.
“Furthermore, we suggest a review of our laws on the concept of plea bargain, especially in corruption-related cases. Government needs to show more political will in prosecuting offenders devoid of any political affiliations. We believe that we have all necessary laws in the land to address corruption, but enforcement of it is paramount.”
Olawale also advised that authorities should provide friendlier business environment for businesses to thrive. This, he said, would attract investors into the economy and create jobs for the teeming youths to stem the tide of increasing cybercrime in all forms.
“Also, individuals, businesses need to be in tune with changing technological development in order to protect their systems from undesirable element in the guise of internet fraudsters”, he said.
He equally noted that collaborative efforts of governments, corporate entities and the citizenry could play a vital role in checking cybercrimes, stressing that cyberspace is a challenging environment that is fast and continuously evolving.
“Hence, the challenge is for those charged with the responsibility of security in various quarters to be abreast of developments in the cyber world. The economic vitality and national security largely depend on a stable, safe and resilient cyberspace,” he emphasised.
Olasanoye said that the solution is to put in place an enabling environment with infrastructural facilities, social amenities, job creation opportunities, food security and mental re-orientation.
In the same vein, Abakpa believed that banks must put up a strong security Tech infrastructure that will make it difficult for fraudsters to penetrate their platform, without which he warned that fraud would continue unabated.
“Bank should fortify their Information Technology platform and have perfect IT system upgrade time to time in order to be above the fraudsters,” he said.
The banks, he also reasoned, should sensitise their customers on how to secure their online transactions whether ATM transactions, POS or Web transactions, stating that such are very important and not negotiable
He stated: “Banks Management should also inform their customers on the need to secure their PIN Code at all times, as well as offer them protection 24 hours.”
The Labour leader also stated that as part of safeguarding against fraud in the bank, management need to take adequate care of their staff whether core staff or outsourced staff.
“They should motivate them, give them incentive package. And they should stop discrimination between core staff and outsourced staff, let there be equal treatment and value,” he said.
Abakpa maintained that government should make a law that will deter fraudsters and punish offenders appropriately.
As for the PwC Chief Economist, Andrew Nervin, online banking fraud is on the increase because criminals perceive it as a relatively easy way to steal money and circumvent people to part with their bank details in dubious circumstances.
Hear him: “I think this will continue as long as we have a gap in the banking system to some extent. Money should be traced when it’s being moved from one account to the other. Also, the younger generation is internet savvy; they understand and are more reluctant to giving out their details or information than older people.
Hopefully, if younger people are more digitally aware of the online banking fraud, they will be able to reduce fraud.
“Educating the consumers is key, particular the younger people who understand the workings of the internet. . They understand the security issues to better protect themselves against falling prey to fraudsters .The other issue is making sure that the banking system involves the players who professionally trace the movement of money from one account to the other and be able to access and follow it up.
Staying with the professional guidelines will help to reduce fraud in the banking system.
In his remarks, Mr Chidi Ajaegbu, CEO, Heritage Capital Market Ltd, “unemployment rate is increasing by the day. A World Bank recent report clearly stated that over 50 percent of people who are 30 years are unemployed. So if you have that statistic, you can imagine, they have to eat or make a living. So people delve into all sorts of things to make a living. Online banking fraud is not left out. Government should create employment for the young people and get them engaged in profitable businesses or jobs. I think this will to an extent reduce the online fraud
Reacting to the ugly trend of online banking fraud, the National President of All Farmers Association of Nigeria (AFAN), Mr. Kabiru Ibrahim, said it poses great danger to the economy and the business community. He described it as a global challenge which has taken a more dangerous dimension in Nigeria owing to the cankerworm of corruption eating deep into its fabric.
Ibrahim, who stated that online banking fraud is the price humanity has to pay for Information Technology said it can be solved if “we do a lot more in developing ways of safeguarding accounts and ensuring that online banking transactions are foolproof.”
Also commenting, Mr. Emmanuel Ijewere, Vice President, Nigeria Agribusiness Group (NABG), said online banking fraud is a worldwide challenge that has become worse in Nigeria due to the collusion of some banks’ staff with external perpetrators of the crime.
According to him, “when it comes to online banking fraud, all Nigerian banks have very good systems they have put in place that are difficult to breach unless someone in the bank is involved. So banks have to take the responsibility of vetting their staff. The checks and balances shouldn’t be only for the outsider attacking the banks but should also be for those inside the banks compromising their security.”
Speaking on possible solution to the menace, Ijewere said online banking fraud can never be completely wiped out but could be mitigated. He however, advised that while banks do their part by putting appropriate checks and balances in place, the individual operator in the economy should be extra careful and should, “re-orientate himself that we have moved away from those days when we had cheque books and nobody could get access to them. Today, your phone is your cheque book and you cannot afford to be careless.”
Another respondent, Dr. Victor Iyama, National President of Federation of Agricultural Commodities Association of Nigeria (FACAN), traced the root cause of online banking fraud to greed and the get rich quick syndrome that has taken hold on a huge percentage of the populace.
He said the desire to make quick money without working for it is among major reasons online banking fraud thrives.
Iyama, who stated that online banking fraud has devastating effect on the economy and business community, said the only solution to the problem is to shun it completely.
“The only option, which is difficult though but a realistic option, is to stay out of the whole thing called online banking unless there is a law that can hold government or the banks liable for losses suffered by customers through online banking fraud.
A situation where you say you are practicing cashless economy and they will take my money and you are not liable is not acceptable. Of course, a cashless economy is better but can we afford it? In saner societies, if you lose money through online banking, they will investigate it but here nobody cares. If a customer suffers any loss through online banking fraud, the bank should pay the owner, after all, the monies are insured. They can then trace the fraud, get the culprit(s), recover the money and jail them.”