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Fidelity Bank And 3 Others Banks Fraud And Forgery Losses Double Amid E-Payment Surge



The combined amount of money lost by four listed Nigerian banks to fraudulent activities more than doubled last year amid a surge in e-payment transactions.

The latest financial statements of FCMB Group Plc, Fidelity Bank Plc, Guaranty Trust Holding Company Plc, and Access Holdings Plc show that they lost a combined N 9.34 billion to fraud and forgery, up from N4.36 billion in 2022.

During the year under review, the banks recorded 27,873 cases related to fraudulent transfers/withdrawals/reactivation of accounts, cash theft/suppression/pilferage/dry posting, electronic fraud/ Unstructured Supplementary Service Data, fraudulent cash lodgement, and electronic fraud/cybersecurity, among others.

“These numbers are underreported as these financial institutions experience a significant amount than what was stated in their financials,” said a bank official who declined to be identified.

“We can only account for what was reported to us at the time the fraud took place; these fraudsters over time have developed various tactics that have caused loss of money to most individuals,” he added.

According to the Nigeria Interbank Settlement Scheme, the number of times NIBSS instant payment and Point-of-Sale terminals were used increased by 75.96 per cent to 11.05 billion in 2023 from 6.28 billion in 2022.

A recent report, titled ‘Global Financial Stability Report, April 2024’, by the International Monetary Fund (IMF) disclosed that financial institutions lost $12 billion to cyberattacks globally over the last 20 years.

It said of the $12 billion, financial institutions have incurred a loss of $2.5 billion since 2020.

The IMF highlighted that the financial sector is highly vulnerable to cyber risks and noted that approximately one-fifth of cyber incidents in the past two decades have impacted the financial industry. Banks are identified as the primary targets, followed by insurers and asset managers.

“Financial institutions in advanced economies, particularly in the United States, have been more exposed to cyber incidents than firms in emerging and developing economies,” it said.

“A cyber incident at a financial institution or a country’s critical infrastructure could generate macro-financial stability risks through three key channels: loss of confidence, lack of substitutes for the services rendered, and interconnectedness,” the Washington-based lender added.

Wema Bank recently said it removed and suspended about seven fintech partners from its payment gateway platform over fraudulent activities. The bank lost N685 billion to fraud and forgery last year

There have been recent increases in fraudulent inflows into some wallet accounts operated by some of its fintech partners using its third-party wallet accounts resulting in the N685 million amount lost to fraud to 1,195 case incidents in 2023, according to a statement by the bank.

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To mitigate further risks, it launched an anti-fraud campaign to protect its customers and other Nigerians against fraudulent activities perpetrated by some wallet accounts and fintech partners.

“Every bank one way or the other is trying to reduce the amount lost to fraud and its repetitive occurrence, however, all we can do is to keep educating these people on how best to protect themselves from future occurrence,” the bank official said.

Peter Ehizogie, customer Solution central lead, West Africa during the 2024 Mastercard fraud and cyber resilience forum disclosed that fraudsters use two main methods to perpetuate victims’ accounts, which include authorised scams i.e romance, and impersonation which occur when a fraudster impersonates a trusted individual, thereby tricking the customers into redirecting funds into the fraudster’s account.

Secondly, unauthorised account takeover, i.e. phishing, and malware. In this case, fraudsters use sophisticated phishing and malware to take over customers’ accounts.

According to him, these fraudsters carry out their attackers through BIN manipulation,i.e using customers’ card pins to penetrate their accounts, point of sale card testing, authorisation manipulation, and automated teller machines through cashout/PoS/card not present (CNP)/refunds.

“An issuer or an acquirer in the payment space may not be aware of these attacks when they occur which is why no matter how little an attack may be such should not be ignored. Also, the human factors can truly be a major problem, the question every organisation should ask is if they are truly prepared,” Ehizogie said.

The latest report on Frauds and Forgeries in Nigeria Banks by the Financial Institutions Training Centre (FITC) in the second quarter of 2023 revealed that 24 Nigeria banks lost a total of N5.79 billion to fraud activities representing a 1,125.03 percent increase in losses compared with the N472 million lost in Q1 2023.

The FITC report said mobile fraud, computer web fraud, and PoS-related fraud were the three most prevalent types of fraud that took place during the period.

The report said: “In Q2 2023, there was a 6.40 per cent decrease in outsider involvement in fraud cases, with the number dropping from 12,351 cases in the previous quarter into 11,561 cases.

“However, staff involvement in fraud increased by 22.22 percent, rising from 72 cases in Q1 2023 to 88 cases in Q2 2023. Conversely, the number of terminated appointments related to fraudulent activities decreased by 26.67 percent, going from 15 cases in Q1 2023 to 11 cases in Q2 2023,”

A source who pleaded anonymity said, “Fraud is capable of eroding confidence in banks. The sources of the fraud need to be thoroughly investigated so that the perpetrators can be brought to justice. The scale of losses indicates that the affected banks have laxity in their risk management framework.

“The losses caused by the fraud will erode the profit of banks and impair their balance sheets. If there were a contravention of regulations which caused the systemic failure that facilitated the fraud, the regulators need to apply sanctions,” the source added.