Nigerian banks lose N472m to fraud activities in Q1 2023, says FITC

By Cynthia Ezekwe.

The Financial Institutions Training Centre (FITC), in its recent report on fraud and forgeries in the Nigerian Banking System  disclosed  that fraudulent activities in Africa’s largest economy resulted in a loss of N472 million during the first quarter of 2023.

The  innovation-led and technology-driven organisation, noted that the amount reflects a significant decrease from the N3.18 billion reported in the fourth quarter of 2022, representing an 85 per cent loss reduction.

The review of the frauds and  forgeries cases in the first quarter of 2023 disclosed that  a total of 12,553 cases were reported as against 14,609 cases recorded in the previous quarter, which  shows a 14.07 per cent decrease.

The numbers in Q1 2023 show that mobile fraud, computer/web fraud and POS-related fraud were the top three fraud activities with the highest number of occurrences, which  is consistent with the trend from the previous quarter.

According to the data, there was a 79.44 per cent decrease in the total amount involved in fraud cases in Q1 2023 compared to the previous quarter. The sum decreased from N12.58 billion to N2.59 billion.

A further breakdown of the report shows that there was a decrease of 8.08 per cent from 13,436 cases in Q4 2022 to 12,351 cases in Q1 2023.

“For Q1 2023 under review, an analysis of the magnitude-based ranking of fraud categories show that Mobile Fraud has the highest-ranking which accounts for N1.1 billion (42.72 per cent), and this is followed by the Computer/Web fraud category at N646 million (24.99 per cent). This was followed by POS Fraud at N450 million (17.41 per cent) and fraudulent withdrawals at N139 million (5.36 per cent),’’ the report noted.

Also, data from the total amount lost to frauds in the first quarter of 2023 reveal that mobile fraud accounts for 34.07 per cent at N161 million followed by computer/web fraud accounting for 27.69 per cent at N130 million and Fraudulent withdrawals representing 24.72 per cent at N116 million.

The FITC report further pointed out that  fraud activities were performed using a range of channels, including ATMs, web, and mobile banking platforms, including the USSD & e-Naira channel, bank branches, and POS (Point of Sale) terminals.

The fraud  and forgery report pointed out that the ATM channel recorded a 38.61 per cent decrease from 404 cases in Q4 2022 to 248 cases in Q1 2023.

Similarly, mobile and web channels recorded 9.78 per cent and 17.81 per cent decrease in the number of cases respectively. On the other hand, POS fraud increased by 19.51 per cent in Q1 2023 bringing the figures to 1985 cases from 1661 cases in the previous quarter.

“With regards to the volume of money involved, an increase was recorded in Mobile and POS fraud amounts. The amount involved in mobile fraud increased by 17.85 per cent from N938 million to N1.1 billion while POS fraud amount involved increased from N241 million to N450 million representing an 86.73 per cent increase. On the other hand, there was a decrease in the amount involved in computer/web, ATM and bank branch frauds with Computer/web fraud recording a significant decrease of 96.90 per cent from N10.6 billion to N646 million,’’ FITC report noted.

“With regards to fraud instruments in Q1 2023, the highest instruments used for the fraud was cash and card while there was low frequency of usage of cheques in the fraud activities,’’ the report added.

An analysis of the amount lost through the various instruments of fraud in the first quarter of 2023 revealed that there was a significant decrease of 90.21 per cent in the amount lost through card fraud from N3.03 billion in Q4 2023 to N296 million in Q1 2023. Also, there was an increase of 35.89 per cent was noted for cash fraud from N120 million in the previous quarter to N163 million in Q1 2023.

For the amount lost by payment channel, the analysis shows that there was an increase in the amount lost to fraud for the ATM channel and Bank Branch channels.

The amount lost via the ATM channel increased from N949 million to N1.6 billion (68.51per cent ) while the amount lost in bank branches increased by 43.86 per cent from 119.95 million to N172.56 million. On the other hand, the amount lost via the web channel decreased by 95.38 per cent with a value of N130.8 million from N2.83 billion in the previous quarter. Similarly, mobile and POS fraud channels decreased by 15.76 per cent and 43.86 per cent respectively,’’ FITC pointed out.

The report noted that there was a  decrease across  board in the number of cases for all instruments of transactions. Cash fraud decreased by 7.28 per cent to 140 from 151 cases. Card frauds decreased from 11,566 cases to 9,817 cases (15.12 per cent). In like manner, cheque frauds decreased by 60.87 per cent from 29 cases to 9 cases.

For the amount involved in cash fraud, there was a decrease of 20.96 per cent, from N397 million to N313 million. Likewise, a decrease was recorded in the amount involved for cheque and card frauds. Cheque fraud showed a significant decline of 82.22 per cent as the amount involved dropped from  N193 million to N34 million. For card fraud, there was a 82.92 per cent increase bringing the figure from N11.8 billion to N2.02 billion.

An analysis of the amount lost through the various instruments of fraud in the first quarter of 2023 revealed that there was a significant decrease of 90.21 per cent in the amount lost through card fraud from N3.03 billion in Q4 2023 to N296 million in Q1 2023. Also, there was an increase of 35.89 per cent was noted for cash fraud from N120 million in the previous quarter to N163 million in Q1 2023.

Although there has been a decrease in the recorded cases of fraud, the prevailing incidents of fraudulent activities remain a significant concern, and FITC recommends that it is  crucial for Nigerian banks to establish robust internal control systems that can effectively detect and prevent fraudulent activities.

According to the Financial Institutions Training Centre, such systems can help to safeguard the interests of both the banks and their customers and promote trust in the banking sector.

“These systems also include implementing adequate segregation of duties, regularly reviewing and reconciling transactions, and limiting access to sensitive data,’’ it added.

FITC also recommends that banks should invest in modern fraud detection technologies that can identify and flag suspicious transactions and patterns, such as machine learning algorithms and artificial intelligence (AI) tools.

It further pointed out that regular risk assessments can help identify potential vulnerabilities and threats to the banking system. This should include identifying emerging trends in fraud and updating risk management strategies accordingly.

“For an effective risk assessment procedure, there is a need to equip teams with risk assessment training programmes and refresher programmes such as those offered by FITC,” the institution noted.

It further pointed out that it is  crucial for Nigerian banks to collaborate closely with law enforcement agencies to investigate and prosecute cases of fraud, adding that it  entails sharing information on fraudulent activities, promptly reporting incidents, and providing assistance in investigations.

“By collaborating with law enforcement agencies, banks can help to bring fraudsters to justice and deter other potential offenders. This, in turn, can promote a safer and more secure banking environment for all stakeholders,’’ FITC added.