Nigerian financial sector sees 49 bankers dismissed as fraud wave hits hard

Joy Agwunobi

Nigerian banks are currently struggling  with an escalating crisis as fraud cases continue to rise across the sector. The growing trend of fraudulent activities, especially from within the banks, is not an isolated issue but part of a wider problem affecting the financial industry.

According to a report by the Financial Institutions Training Centre (FITC), between April and June 2024, 49 bank employees were dismissed for their involvement in fraud, marking a 40 per cent  increase from the 35 employees laid off in the first quarter.

The increase in internal misconduct highlights weaknesses within the system, raising concerns about the overall integrity of financial institutions. The FITC report pointed out that both insiders and external actors are taking advantage of these vulnerabilities, creating an urgent need for banks to implement stricter controls and preventative measures to safeguard their operations.

The FITC report highlighted that a total of 58 bank employees were implicated in over 11,500 fraud cases during the second quarter, representing a 23 per cent  jump in insider involvement from the previous quarter.

In addition, fraud involving external actors also saw an increase. This is as cases involving non-employees climbed by 5.2 per cent, from 10,397 in the first quarter to 10,938 in the second quarter of 2024.

According to FITC, the financial losses associated with these fraudulent activities have been on the increase which calls for immediate action to mitigate the risks associated with these losses. The report noted that Nigerian banks lost ₦42.6 billion to fraud in the second quarter alone, a 900% increase compared to the N468.4 million lost in the first quarter. The report noted that the amount lost in Q2 2024 exceeds the total losses for the entire year of 2023, when the sector lost N9.4 billion.

In terms of fraud types, the report revealed that miscellaneous and other fraud accounted for the largest portion of the losses, making up 96.46 per cent  of the total amount lost, with a value of  N41.14 billion. Fraudulent withdrawals and web-based fraud followed, totalling ₦781.2 million and N400.7 million, respectively.

As banks struggle to combat this growing problem, FITC issued several recommendations aimed at curbing the trend, particularly insider threats. One of the key recommendations was to limit access to sensitive settlement files, restricting this to a vetted group of employees with the proper security clearance.

Additionally, FITC advises the adoption of multi-factor authentication (MFA) and role-based access control (RBAC) systems to minimise unauthorised changes to settlement files.

FITC further emphasised the importance of continuous fraud prevention training for all bank employees. According to the report, the implementation of multi-factor authentication (MFA) and role-based access controls (RBAC) can aid the reduction of the risk of unauthorised changes to settlement files.

The report also  highlighted the importance of banks ramping up fraud prevention training for all their staff, emphasising the need to focus on the latest fraud techniques and warning signs noting particular attention should be given to high-risk areas such as card-related and online fraud, which are expanding rapidly.