Financial crimes, especially electronic fraud, constitute one of the greatest dangers to the Nigerian banking system. It is in that regard that we welcome the draft framework for a local watchlist for the banking industry being packaged by the Central Bank of Nigeria (CBN), in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS).
The watchlist, which is aimed at curbing the rising incidence of crimes in the financial system, is contained in a circular entitled: “Exposure draft of the proposed framework on watchlist for the Nigerian banking system”.
Director of Banking Supervision at the CBN, Mrs. Tokunboh Martins, has explained that the watchlist will help to reduce the rising wave of fraud, forgeries and other unethical practices in the banks and engender public confidence that is required for a sound financial system.
The watchlist, according to the CBN Director, will serve as a database of bank customers identified by their Bank Verification Numbers (BVNs) who have been involved in confirmed fraudulent activities. It will be managed by NIBSS. Among the stakeholders who will be involved in the operation of the watchlist are the CBN, Bankers Committee, Banks and Other Financial Institutions and bank customers.
Responsibilities will be assigned to each stakeholder. Among the fraudulent transactions listed in the draft framework are forgery, compromise, complicity, fraudulent duplicate enrolment and any fraudulent infraction, without the monetary amount involved. Also on the list are “confirmed successful and unsuccessful fraud attempts within the range of N1 million to N50 million and above”.
This, indeed, is a timely initiative, especially at this critical time that the banking industry is recording heavy losses as a result of e-fraud. Statistics from the apex bank show that the sector lost N203 billion between 2000 and 2014 to financial crimes. In 2013 alone, there were 855 e-fraud cases, with the banks reporting a loss of N19.15bn. We urge the cooperation of all the stakeholders so that fraudulent activities and other infractions can be brought to the barest minimum in our banking system.
Enforcement of the proposed sanctions on fraudsters is necessary to achieve the aims stipulated in the CBN guidelines. The banks and their customers have a crucial role to play in the success of the scheme by reporting actual and attempted fraudulent transactions in the operation of any bank account.
All hands must, therefore, be on deck. It is worrisome that e-fraud and other forms of financial crimes have become sophisticated. Fraudsters now sometimes beat all known processes for safeguarding customers’ accounts and the financial data of the banks.
In this era of globalisation, it is important that the banks constantly update their software, so that they will not be vulnerable to fraudsters. A security assessment of Nigerian banks, sometime ago, found that hackers easily penetrated the banks’ platforms.
A few years ago, the websites of about 15 commercial banks were broken into by hackers who extracted customers’ personal and financial information with the intent to fraudulently withdraw money from their accounts. About N3.2bn of customers’ money is reportedly lost every year through fraudulent Internet and Automated Teller Machine (ATM) transactions.
In addition to the planned watchlist, the CBN should expedite work on completing the e-fraud risk information centre. Considering the vital role of the banking system in the economy and the current high incidence of financial crimes, the earlier the watchlist comes into effect, the better for the banking sector.