The rise of fraudulent activity in Nigeria’s financial system, especially among the unbanked, underserved, and middle-class populations, has alarmed the Economic and Financial Crimes Commission (EFCC).
The EFCC made this announcement in a statement. During a recent meeting with stakeholders in Abuja, EFCC Chairman Ola Olukoyede emphasised these worries.
He ascribed this tendency to some fintech companies’ carelessness in putting strong Know Your Customer (KYC) procedures in place.
Olukoyede pointed out that a lot of fintech companies disregard stringent KYC regulations, especially when onboarding clients for tier-one accounts. He emphasised that this carelessness leaves gaps that scammers take advantage of.
“Olukoyede observed that there was a high level of poor internal control by fintechs at the level of the unbanked, the under-served and the middle-class population spectrum,” read the statement.
” There’s quite a whole lot of fraud that goes around that particular level, so the issue of KYC (Know Your Customer) is very important, especially because of the issue of how fintechs open tier-one accounts, sometimes without attention to KYC. And people take advantage of this and are quick to commit fraud through this negligence,” Olukoyede highlighted.
The chairman of the EFCC emphasised how crucial it is for fintech businesses to review their onboarding procedures in order to close any gaps that scammers might take advantage of.
Cooperation with the EFCC
Olukoyede urged greater collaboration between fintech operators and the EFCC, emphasizing the role that fintech companies play in fighting fraud.
He underlined that businesses need to react quickly to regulatory inquiries and view themselves as partners in the battle against corruption.
“Increasing your level of collaboration with the EFCC would mean seeing yourselves as stakeholders in the fight against corruption. We would like you to respond to us when we make inquiries and requests,” he went on to add.
The EFCC emphasized the value of cooperation in the fight against financial crimes and stated its readiness to work with Moniepoint to address fraud-related issues.
“On our end, we are open to whatever you want us to do. We appreciate that you have come here today to seek a stronger connection and partnership.
“When we have stakeholders come in and want to be part of what we are doing, majorly stakeholders like you, it gives us joy because we know that no one man can fight corruption alone. The partnership you seek indicates that you wish to strengthen your system and be able to implement more internal controls.”
“You want to be able to put in place things that will mitigate those weaknesses that will lead to fraud within your system, that’s what we do. Our core mandate is the enforcement and investigation of economic and financial crimes. So, we’re glad and wish to collaborate with you,” he concluded.
What To Note
Nigerian banks suffered a sharp increase in fraud, losing N42.6 billion between April and June 2024, more than the N9.4 billion lost in 2023, according to the Financial Institutions Training Centre (FITC).
- This is a 637% increase from Q2 2023 and an 8,993% increase from Q1 2024.
- The majority of the fraud, which accounted for 96.46% of the loss, was classified as miscellaneous fraud, which includes computer/web fraud and fraudulent withdrawals.
- While computer/web fraud climbed by 1,560%, bank branch fraud increased by 31,497%. In Q2 2024, the total amount involved in fraud charges increased from N2.9 billion in Q1 to N56.3 billion, a 1,784% increase.
- Tayo Ogunlade, Chief Technology Officer at Onafriq, stated in an interview that the quick uptake of digital platforms and the vulnerabilities they present are the main causes of the increase in fraud in Nigeria’s financial sector.
Organizations can neglect security when they innovate to satisfy increasing demand, especially during onboarding.
