Festus Akanbi
Imagine this scenario that took place in the Nigerian banking industry recently. A company chief executive, who was on a business trip abroad handed down a duly signed cheque to his supposedly trustworthy driver to enable the latter withdraw certain amount of money for the servicing of the car. Immediately his boss was airborne, the driver, in connivance with some criminally minded accomplices, embarked on a mission to defraud the Abuja-bound chief executive.
The first stage was to forge the signature of the owner of the cheque. The next stage was to block their victim’s mobile telephone, an exercise which was made possible because the driver was able to provide five regular numbers on the phone as requested by the service providers.
Immediately the line was blocked, a forged cheque was presented to the bank and when a call was put across to confirm the cheque, one of the fraudsters answered in affirmative and within few minutes, N5million was withdrawn.
The unsuspecting account holder disembarked in Abuja to find his phone blocked. He was able to unlock the phone the following day upon his arrival in Lagos. He got the shock of his life when he received an alert informing him of a withdrawal of N5million.
He couldn’t pin the fraud on the bank because he was told that a call was put to his phone and there was a confirmation before the money was released.
At the end of the day, the driver and his accomplices were apprehended but the money could not be fully recovered.
This was one of the pathetic stories of fraud cases narrated by Mr.Ibrahim Shazali, of the Bank Fraud Section of the Economic and Financial Crimes Commission (EFCC) at a workshop on development of E-Banking, Mobile Payment System and Deposit Insurance in Nigeria at a seminar organized by the Nigerian Deposit Insurance Corporation (NDIC) for business editors and financial reporters under the aegis of the Financial Correspondents Association of Nigeria (FICAN).
They were stories that drew tears as participants were confronted with analyses of rip-offs in the banking industry over the years, largely due to the rising activities of cyber criminals who are latching on to loopholes in electronic payment system in the country.
However, the reported cases of electronic fraud in the country according to the Nigeria Inter-Bank Settlement System Plc (NIBSS) rose to 916, with attempted value of N4, 810, 262, 266 and a loss of N3, 812, 865, 900 from the month of January to September 2014. This figure represents cases of fraud committed by criminals in collaboration with bank staff, as evidence within the banking system has shown that electronic fraud are done in collaboration with the banks, cyber criminals and in some cases with personnel in the telecom sector.
Electronic Payment System The prevalence of high electronic crimes has many devastating consequences on the banking industry and economy as a whole; disruption of business processes, reduction in share prices, loss of reputation and trust, reduction in employee morale and deterioration of relationship between banks and regulators are a few.
According to the crime commission’s officials, the adoption of electronic payment system has come with its own pain as depositors and banks are daily attacked by cyber criminals with the corresponding loss of huge amount of deposits.
For instance, he noted that Nigeria has experienced a remarkable increased adoption of electronic transactions with volume and value accounting for 86 per cent and 82 per cent of all transactions respectively in 2014, up from mere 6 per cent in 2013.
Shazali said that while these figures are highly encouraging as it shows that Nigerians are increasingly embracing cashless transactions, it also serves as a pointer to the urgency required in developing rigorous standards for the monitoring and security of electronic banking transactions in Nigeria.
Speaking on the topic “Fraud: Financial, Economic and Social Cost”, at the fifth annual fraud conference organised by the Electronic Payment Providers Association of Nigeria (Eppan) in Lagos, Mr. Osioke Ojior, chief risk officer (NIBSS), said fraud perpetrated electronically has reached a great dimension, and that banks should start to adopt measures to curtail this trend.
Preparing for Cyber Attacks “With an average of N80 billion worth of daily transactions, it would be very remiss of Nigerian banks and authorities not to anticipate and adequately prepare for the huge risks that accompany electronic transactions. As technology advances, more and more financial institutions are utilizing technological platforms in a bid to remain competitive and enhance flexibility; this however also makes them highly vulnerable to fraudulent activities,” the EFCC official said.
The reality today is the fact that as technology explodes, so also does the occurrence and sophistication of fraud. As banks rely more on technology, they increasingly have to make huge amount of sensitive personal data readily available to customers, clients, vendors and employees through various platforms particularly those which face the most risk of compromise, namely mobile apps and cloud savers. This inadvertently opens them up to more attacks from cyber criminals, who take advantage of social media platforms and the increased connectivity of data.
Pre-emptive Strikes The EFCC chief argued that productive investigation of electronic transactions requires much more than regular monitoring through internal audits but rather aggressive, pre-emptive measures. This is where he believes the services of forensic auditors are needed.
With the advent of big data, forensic auditors are increasingly being utilized to develop scientific models, which can predict the possibility or existence of fraud in banking activities. Analysts, however, regretted that Nigerian forensic auditors continue to suffer from lack of statutory backing and professional recognition.
Despite the fact that all major financial institutions and regulatory bodies should have forensic accounting units, the Nigerian Companies and Allied Matters Act, 2004 still does not require auditors to include forensic accounting methods in their audit services. Shazali noted that as a result of this laissez-faire attitude, our banks, and by extension, our economy remains an unguarded target for internal and external adversaries who are taking advantage of this loophole.
Banking industry watchers insisted that it is not enough for banks to churn out electronic banking products, but that efforts should be intensified to pre-empt attacks from fraudsters. This, they believe could be done by putting in place corporate controls such as internal audits, rotation of personnel and physical and IT security procedures must be coupled with intensified fraud risk mitigation, assessment and management. In addition, corporate culture must be one in which personal integrity and ethics are consistently emphasized and visibly rewarded.
Banks are also enjoined to put in place whistle blowing policies and procedures in a way that will ensure that whistle blowers are not victimized or shamed for doing the right thing.
With the recent Bank Verification number exercise, hopes are bright some of these bank fraudsters would soon be cornered.
A number of acts exist to assist in the process of litigation against fraudulent financial activities such as the Independent Corrupt Practices Commission (ICPC) Act 2000; Economic and Financial Crimes Commission (EFCC) Act 2007; Fiscal Responsibility Act 2007, and the Money Laundering (Prohibition) Act 2011, as amended.
The Cybercrime Act 2015, which has been successfully passed into law by the Senate to regulate e-commerce and prosecute offenders, is a good development as it has strengthened the law for the trial of cybercrime offenders more than the use of the Evidence Act, Section 84 (1) of the constitution.
In order to enjoy the full benefits of electronic payment system in Nigeria, there is need for a robust collaboration between all the stakeholders including depositors, banks, service providers and all the regulatory authorities to ensure that the banking industry is made unsafe for criminally-minded individuals and groups who are currently threatening the process.