The Financial Institutions Training Centre (FITC) has released its Q2 2024 Fraud and Forgeries Report, revealing a staggering N42.6 billion loss by Nigerian banks over the three months from April to June this year. This amount marks a dramatic surge in fraudulent activities, surpassing the total fraud losses recorded for the entire year of 2023, which stood at N9.4 billion. The data highlights an 8,993% increase in losses compared to the N468.4 million reported in Q1 2024 and a 637% rise from the N5.7 billion loss in Q2 2023.
The FITC report identifies ‘miscellaneous and other fraud’ as the predominant type of fraud, accounting for 96.46% of the total losses, or N41.14 billion. This category includes various types of fraud that do not fit neatly into other classifications. In addition, losses from fraudulent withdrawals and computer/web fraud amounted to approximately N781.2 million and N400.7 million, respectively.
Analysis of Fraud Channels and Trends
The FITC report details a staggering 1,784% increase in the total amount involved in fraud cases, which soared from N2.9 billion in Q1 2024 to approximately N56.3 billion in Q2 2024. The report also reveals significant shifts in the methods and channels used for fraudulent activities:
- ATM and Online Fraud: Card fraud saw a notable decrease of 47.66%, falling from 21,469 cases in Q1 to 11,237 in Q2. Conversely, fraudulent activities involving cheques and cash increased, with cheques rising by 36.67% and cash by 9.09%.
- Fraud Channel Performance: The data indicates a dramatic rise in losses through various channels:
- Bank Branches: Losses related to bank branches surged by an extraordinary 31,497%, from N133.9 million in Q1 to N42.2 billion in Q2.
- Computer/Web Fraud: Losses from computer and web fraud increased by 1,560%, from N24 million to N400.8 million.
- Mobile Fraud: In contrast, mobile fraud recorded a decline of 59%, falling from N216.4 million to N88.7 million.
Recommendations for Strengthening Security
In response to the alarming increase in fraud, FITC advises banks to enhance their monitoring and auditing procedures. Key recommendations include:
- AI-Driven Tools: Banks should implement AI-driven tools that flag unusual entries or patterns to facilitate continuous and automated monitoring systems capable of detecting anomalies.
- Regular Audits: Conducting unannounced internal audits focused on settlement processes can help identify and address irregularities promptly.
- Strengthening Access Controls: Banks should limit access to settlement files to a small, vetted group of authorized personnel. Multi-factor authentication (MFA) and role-based access controls (RBAC) are also recommended to reduce the risk of unauthorized changes.
Sector Implications and Analyst Views
The FITC report’s findings underscore a severe threat to the Central Bank of Nigeria’s (CBN) banking inclusion policy. The substantial rise in fraud losses is raising concerns about the security of banking platforms. Analysts attribute the surge to several factors, including insider abuses and potential supervisory laxity by the CBN. Some suggest that the CBN’s focus on broader economic goals, like increasing foreign direct investments (FDIs) and achieving a $1 trillion economy, may be diverting attention from essential regulatory duties.
The FITC’s data, derived from reports submitted by 28 deposit money institutions, shows a concerning trend. In April alone, 26 reports were submitted, with 27 reports each in May and June. The implications of these findings are profound, highlighting a need for urgent action to safeguard Nigeria’s banking sector against escalating fraudulent threats.
