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Electronic fraud

By Osaze Omoragbon

In the last few years, advances in information and communication technology (ICT) have changed the face of banking services. The pace of change has been nothing but revolutionary, bringing about quicker and convenient banking services to the doorstep of customers while attracting more. This has been supported by recent innovation in banking software and infrastructure that has spurned the introduction of a wide range of products and services. Indeed, the youthfulness of the continent is providing the needed platform for these services to thrive. Developing countries including Nigeria are reaping the benefits of electronic banking, even as they are yet to fully tap its mobile platforms.

Portable and flexible mobile and internet banking services have demystified banking; making more services accessible to many people. The synergy between the telecoms companies and banks makes it even more attractive and efficient. Indeed, Africa’s mobile money market is huge, topping $61 billion in 2012, greater than the amount of money sent via mobile in Europe and North America combined. Experts believe the future of electronic banking is bright. Adeyinka Adedeji, head of Electronic Banking Division, United Bank for Africa (UBA) believes it is an important channel to deepen financial inclusion.

However, this change has come at a price; a paradox. Recent figures and experiences show rising usage of electronic banking coexisting with rising cases of IT-aided fraud just as banks underplay the problem due to the need to protect their image. Central Bank figures show increase in cases of fraud and forgery in 2012 compared to 2011. In 2012, 4,527 cases of fraud and forgery involving N14.8billion and $1.6million were reported in the industry compared with 2,527 cases involving N29.5billion in 2011. With this trend, consumers are worried that they bear the brunt of inefficient electronic services on a daily basis. From poor connectivity which mars ATM and  Point-of- Sale (PoS) transactions to faulty machines that traps ATM cards, consumers are apprehensive over the efficiency of electronic banking services in Nigeria. “Something should be done about electronic fraud before it wrecks the cashless policy,” says Beatrice Akinyemi who runs an online boutique in Lagos.

Inside Job

Analysts are worried that most electronic frauds are perpetrated by unscrupulous staff in connivance with their accomplices who are not employees of the bank. Even the CBN acknowledges. The apex bank stated in its 2012 annual report that  “the cases of fraud were perpetrated mostly by outsiders and some bank staff, through such means as pilfering, theft, suppression and conversion of customer deposits, illegal funds transfer and fraudulent ATM withdrawals.” Observers agree that despite the improvement in ICT, electronic fraud is on the rise. Many believe that bank frauds could be contained to the barest minimum but for the connivance of some staff.

Ms Bibian Adejumo detests electronic banking since she realized that huge sums of money were withdrawn from her bank account without her knowledge. She was shocked when told on inquiry that the money was withdrawn through ATM because she never received alert to that effect even though she subscribed for the service and is being charged for it. “I have never disclosed my ATM PIN to anyone, so I wonder how this could happen without some help from someone inside,” she said.

For Moses Obanor, receiving a fraudulent e-mail within minutes of depositing huge sums of money in his bank account baffled him. According to him, an e-mail purportedly sent from the bank to confirm details of his transactions which would have him reveal details of the cheque he paid into his account after few minutes made him believe insiders were involved. “How did these people know I just paid in money with cheque,” he queried.

But Timothy Izuchukwu was not that lucky. The unsuspecting Izuchukwu fell for the pranks by fraudsters who asked him to update his internet banking transactions. Unknowingly, he updated his transaction details on a fake bank website and within minutes he received alert from his bank informing him of transactions on his account. He quickly informed his bank of the fraud and the account was suspended.

Some staff of an old generation bank were recently arrested for their involvement in an ATM robbery. Their offence was loading the ATM in excess of approved limit on a weekend that coincided with a public holiday. The suspects, according to police report, informed their accomplices after loading the ATM and they swooped on the machines; in the process the bank lost about N11 million to the robbers. Interestingly, a component of the bank security system that would have signaled the law enforcement agents was disconnected which gave the police clue of inside collaboration.

Hackers on the prowl

Though hackers are on the prowl, customers believe that they receive substantial help from the disgruntled banks’ staff who usually get a share of every successful operation. Several fraudulent e-mails are sent daily to bank customers with the hope that some will fall prey. Some fraudulent e-mails are purportedly sent from banks which most recipients have no accounts. Ignorance on the part of bank IT users is also a reason for the increasing case of fraud. Banks have continually warned their customers not to divulge their PIN codes as well as details of their accounts to strangers. “No matter how little the detail, skillful hackers can do damage with such information,” says a banker who declined to be named. More worrisome are hackers that specialize in cloning ATM cards of unsuspecting customers. Recently, the police in Lagos smashed a syndicate that specialized in ATM cloning, recovering several cloned ATM cards as well as sophisticated card cloning machines.

Poor internal and regulatory surveillance as well as audit of IT infrastructure in banks have been attributed to the upsurge in fraud. Though the apex bank established the Nigeria Electronic Fraud Forum (NEFF) to proactively manage electronic fraud attempts and limit losses, efficient legislation is lacking in the war against cyber fraud. For example, cyber evidence is still not tenable in Nigerian law courts.

With electronic banking set to rise, many believe the war against cyber fraud has just begun. In 2012, over 113,000 PoS were deployed just as mobile electronic platforms and PoS account for less than five percent of electronic transactions. Moreso, the Consumer Protection Department of the CBN is daily inundated with complaints of electronic fraud from bank customers who are seeking redress.


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