The Economic and Financial Crimes Commission (EFCC) has raised concerns about increasing fraudulent activities in Nigeria’s financial sector, particularly within the unbanked, under-served, and middle-class populations.
This was disclosed in a statement by the EFCC, Ola Olukoyede, the EFCC Chairman, highlighted these concerns during a recent engagement with stakeholders in Abuja.
He attributed this trend to negligence by some fintech companies in implementing robust Know Your Customer (KYC) protocols.
Olukoyede noted that many fintech firms fail to adhere to strict KYC guidelines, particularly when onboarding customers for tier-one accounts. He highlighted that this negligence creates vulnerabilities that fraudsters exploit.
“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,” the statement read.
” 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 stated.
The EFCC chairman stressed the importance of fintech companies revisiting their onboarding processes to prevent loopholes that fraudsters exploit.
Collaboration with EFCC
Highlighting the role of fintech firms in combating fraud, Olukoyede called for increased cooperation between fintech operators and the EFCC.
He emphasized that companies must see themselves as stakeholders in the fight against corruption and respond promptly to regulatory requests.
“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 stated.
The EFCC expressed its willingness to partner with Moniepoint in addressing fraud-related challenges, emphasizing the importance of collaboration in combating financial crimes.
“On our part, we are open to whatever it is that you want us to do. We value it that you are here today to seek a stronger tie and collaboration.
“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 collaboration you seek tells us that you want to strengthen your system; you want to be able to create 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 stated.
What you should know
The Financial Institutions Training Centre (FITC) reported that Nigerian banks experienced a significant surge in fraud, losing N42.6 billion between April and June 2024, surpassing the N9.4 billion lost in all of 2023.
- This represents an 8,993% increase from Q1 2024 and a 637% rise from Q2 2023.
- The majority of the fraud, accounting for 96.46% of the loss, was categorized as miscellaneous fraud, including fraudulent withdrawals and computer/web fraud.
- Fraud through bank branches increased by 31,497%, while computer/web fraud grew by 1,560%. The total amount involved in fraud cases skyrocketed by 1,784%, from N2.9 billion in Q1 to N56.3 billion in Q2 2024.
- In an interview with Nairametrics, Tayo Ogunlade, Chief Technology Officer at Onafriq, highlighted that the rise in fraud in Nigeria’s financial sector is driven by the rapid adoption of digital platforms and the vulnerabilities associated with them.
As organizations innovate to meet growing demand, they sometimes overlook security, particularly during onboarding.
