Only 20% of Nigerian bank employees implicated in fraudulent activities were dismissed in 2023, indicating a lenient stance towards internal malpractices.
An analysis of reports on fraud and forgeries in Nigerian banks from FITCS revealed that out of 270 bank staff members involved in various acts of fraud last year, just 54 faced terminations of employment. This marks a slight decrease from the 22% termination rate recorded in 2022.
The reports by FITCS highlight a concerning laxity in the enforcement of strict punitive measures against fraud within Nigerian banks, raising questions about the commitment of financial institutions to combating corruption and ensuring integrity in their operations.
52% reduction in reported cases
While instances of reported bank fraud have dramatically decreased by 52% from 101,801 cases in 2022 to 48,703 in 2023, the Nigerian banking industry’s internal handling of fraud shows a persistent trend of leniency towards erring staff members.
Also, the total amount reported plummeted by 47% to N24.4 billion in 2023 from N45.6 billion in 2022.
On the other hand, despite fewer cases, the actual amount lost to fraud remained virtually unchanged with a marginal increase of 0.16%, standing at N9.53 billion in 2023 and N9.51 billion in 2022.
This stability in losses suggests that while the number of fraud attempts may have declined, the severity or success rate of fraud has not significantly improved.
External vs. Internal Threats
The data noted a 47% reduction in outsider involvement in fraudulent activities, from 87,678 cases in 2022 to 46,226 in 2023. This suggests that improved security measures and fraud prevention strategies might be taking effect.
However, insider (staff) involvement decreased only slightly by 5%, from 283 implicated staff in 2022 to 270 in 2023. Despite the dip, the relative consistency in insider complicity highlights ongoing vulnerabilities within the banks’ internal systems and controls.
Of the 270 bank staff involved in fraud in 2023, a mere 20% faced dismissal, amounting to 54 terminated appointments, an 11% decrease from the 61 terminations in 2022.
This decrease in terminations, even as the number of involved staff members declined, points to a perplexing trend of banks showing restraint in firing fraudulent staff.
While there are positive signs of decreasing fraud cases, the banking sector faces ongoing challenges in dealing with the aftermath of fraud internally.
The data from FITCS underscores a need for a strategic overhaul in handling staff involved in fraudulent activities to restore and maintain public trust in Nigeria’s financial institutions.
What You Should Know
- The FITCS analysis indicates that the types of fraud perpetrated involve a range of unethical practices from embezzlement, and unauthorized use of customer funds, to sophisticated cyber fraud. The data suggests a need for stronger surveillance systems and more rigorous internal controls within banks.
- Fraud involving bank staff includes tellering fraud, forged cheques with forged signatures, foreign exchange fraud, fraudulent loans, and fraudulent withdrawals, among others.
- The ongoing leniency towards employees involved in fraud poses significant risks not only to the operational integrity of banks but also impacts customer confidence and the overall perception of the banking industry in Nigeria.
Recommendations for banks
FITC advised banks to strengthen their digital infrastructure to curb the issue of fraud in the banking sector.
It said:
- “Nigerian banks must heavily invest in upgrading and fortifying their digital infrastructure. This involves implementing cutting-edge cybersecurity measures, robust identity verification systems, and real-time transaction monitoring. Regular security audits and penetration testing are essential for promptly identifying and addressing system vulnerabilities.
- “Furthermore, banks should prioritize customer and employee education to raise awareness about prevalent fraud schemes and promote effective prevention practices. Collaborating closely with law enforcement agencies is crucial to enhancing the capacity for investigating and prosecuting fraud cases. Swift response to fraud incidents and asset recovery serves as a powerful deterrent to potential fraudsters.
- “Regulatory compliance should be a top priority, requiring banks to stay current with evolving regulations related to fraud prevention and data security. Compliance not only ensures adherence to legal standards but also demonstrates a commitment to safeguarding customers’ financial assets. Following these recommendations will empower Nigerian commercial and merchant banks to better protect themselves and their customers against fraud and forgeries in the current situation.”
In a recent statement, the Nigeria Deposit Insurance Corporation (NDIC) stated that it is committed to ensuring that those who contribute to the failure of banks are properly investigated and prosecuted.
The Managing Director and Chief Executive of the NDIC, Mr. Bello Hassan, noted that the NDIC plays a critical role in combatting financial crimes within the banking sector through its mandate, which includes bank supervision and liquidation of licensed banks.
He stressed that the main aim is to protect depositors’ funds and ensure the stability of the financial system, adding that a total number of 10 high-profile cases referred to the Commission are currently under investigation.
