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Bank Fraud: Crack Down on Insider Fraud

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Nigerian commercial banks witnessed a concerning trend in the first quarter of 2024, with a staggering 288% increase in employee terminations due to fraud compared to the previous quarter, according to a recent report by the Financial Institutions Training Centre (FITC).

This jump, from nine dismissals in Q4 2023 to 35 in Q1 2024, highlights a potential vulnerability within the banking system.

Overall Fraud Declines

Despite the concerning rise in insider fraud, the report offers some positive news. Overall fraud losses for banks in Q1 2024 witnessed a significant decline of 77.62% compared to Q4 2023. The total amount lost to fraud dropped from N2.09 billion to N468.42 million, representing a substantial improvement. Additionally, the total value involved in fraudulent activities decreased by 56.73%, falling from N6.91 billion to N2.99 billion.

Decline in Reported Cases

The number of reported fraud cases also saw a positive downward trend. Banks reported 11,472 cases in Q1 2024, which is a 7.52% decrease compared to the 12,405 cases reported in Q4 2023. This indicates some success in banks’ efforts to combat fraud.

Outsider Involvement Persists

While insider fraud saw a significant rise in terminations, the overall number of staff-related fraud cases actually decreased by 12.96% (from 54 to 47 cases). This suggests that banks might be catching employee misconduct more effectively. However, the report also reveals a slight increase (0.45%) in outsider involvement in fraud cases, rising from 10,350 cases to 10,397 cases.

AI Led Solutions

The FITC commended the decline in fraud activities and losses but urged banks to remain vigilant. They emphasized the need for continuous improvement in fraud control measures.

“Banks should prioritize the adoption of advanced fraud detection technologies like Artificial Intelligence (AI), Machine Learning (ML), and advanced analytics,” stated the FITC report. These technologies can help identify suspicious patterns and anomalies in transactions, allowing for proactive fraud detection.

Related: Nigerian Banks Score Big Win Against Financial Fraud: Losses Plummet 77% in Q1 2024

The report acknowledged the potential of emerging technologies but cautioned banks to ensure their implementation aligns with regulatory standards and ethical considerations. Transparency in decision-making processes remains crucial when utilizing these tools.

If You Ask Me

The rise in insider fraud terminations highlights the need for a multi-pronged approach. Banks must invest in robust internal controls, employee training, and advanced detection technologies. However, it’s equally important to strike a balance between security and customer experience. The implementation of new technologies should not create unnecessary friction or delays for legitimate customers.

By prioritizing vigilance, ethical technology adoption, and a customer-centric approach, Nigerian banks can build a more robust defense against fraud, protecting both their financial interests and the trust of their customers.

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