In a stark indication of the growing prevalence of financial fraud in Nigeria, deposit money banks have terminated the employment of 49 employees for their involvement in fraudulent activities. The revelation comes in the wake of a recent report by the Financial Institutions Training Centre (FITC) for the second quarter of 2024.
The FITC report, which provides a comprehensive analysis of fraud and forgeries within the Nigerian banking sector, highlights a disturbing trend of increasing insider involvement in fraudulent schemes. According to the data, 58 bank workers were implicated in the 11,532 cases of fraud reported during the period under review. This represents a substantial increase of 23% compared to the 47 cases of insider involvement recorded in the first quarter of 2024.
Insider Involvement on the Rise
The report underscores the growing vulnerability of banks to internal threats, as employees are increasingly exploited by fraudsters to perpetrate illicit activities. This trend is particularly alarming given the crucial role bank staff play in safeguarding sensitive customer information and financial transactions.
Financial Losses Mount
In addition to the human cost, the financial impact of fraud on Nigerian banks has been substantial. The total losses incurred by the banks due to fraud in the second quarter of 2024 soared to a staggering N42.6 billion, representing a 9,000% increase compared to the N468.4 million recorded in the previous quarter. This alarming figure also marks a 637% increase when compared to the N5.7 billion loss recorded in the second quarter of 2023.
Surpassing Annual Losses
The magnitude of the losses incurred in Q2 2024 alone is particularly noteworthy, as it surpasses the total amount lost to fraud by the banks throughout the entire year 2023. According to FITC’s data, the banks suffered a total loss of N9.4 billion due to fraud in 2023.
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Miscellaneous Fraud Accounts for Majority of Losses
The FITC report further reveals that the most significant source of fraud-related losses for Nigerian banks is categorized as “miscellaneous and other fraud.” This category accounted for a substantial 96.46% of the total losses incurred during the period, amounting to N41.14 billion.
Fraudulent withdrawals and computer/web fraud were also identified as significant contributors to the overall losses, accounting for approximately N781.2 million and N400.7 million, respectively.
FITC Urges Banks to Strengthen Security Measures
In light of the escalating threat of fraud, the FITC has issued a series of recommendations to Nigerian banks aimed at mitigating the risks and safeguarding their operations. The Centre emphasizes the importance of leveraging technology to enhance security measures and minimize the occurrence of fraudulent activities.
Specifically, the FITC advises banks to strengthen their access controls by limiting access to settlement files to only authorized personnel with appropriate clearance and regular training in the latest security protocols. The implementation of multi-factor authentication (MFA) and role-based access controls (RBAC) are also recommended to reduce the risk of unauthorized changes to settlement files.
Furthermore, the Centre urges banks to intensify fraud prevention training for all employees, focusing on the latest fraud tactics and key warning signs, particularly in rapidly growing areas such as card-related and web-based fraud.
By adopting these measures, Nigerian banks can significantly improve their resilience against the growing threat of fraud and protect the interests of their customers.
