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Fraud: CBN Tightens Noose On Banks

Posted: Jun 15, 2015 at 12:02 am   /   by   /   comments (0)

By Sola Alabadan and Bamidele Ogunwusi (Lagos)

Against the backdrop of growing fraud cases in the country in recent years, the Central Bank of Nigeria (CBN), at the weekend, ordered all banks and e-payment platforms in the country, to set up and staff a functioning Fraud Desk before July 1, as part of efforts to combat fraudulent activities in the industry.

CBNNigerian banks reportedly lost a total of N199 billion to electronic related fraud between 2000 and 2014, mostly due to inappropriate and reckless management of customers’ data. Between 2013 and last year, the rate of bank fraud cases rose to 80 per cent from just three per cent.

The CBN, in a circular to all Deposit Money Banks (DMBs), switches and payment service providers, signed by its Director, Banking and Payments Systems Department, Dipo Fatokun, the apex bank warned that failure to comply would attract appropriate sanctions.
The CBN has already established the Nigeria Electronic Fraud Forum (NeFF) as part of its effort to combat fraudulent activities in the banking industry, particularly those associated with increased use of electronic payment systems.
Fatokun explained that the establishment of the new industry desk followed submissions to the NeFF and consultation with the deposit money banks as well as electronic payments service providers.

The new desk, Fatokun said, would set up effective mechanisms for receiving and responding promptly to fraud alerts, to help manage and reduce electronic payments fraud in the country’s banking industry.
According to the CBN, staff of the desks must be trained on emerging fraud trends on various electronic payments channels, the circular stated.

The desk is to provide, among other services, support to customers on electronic fraud with a minimum of 10 dedicated phone lines, manned and available at all times, to handle calls directed from contact centre for fraud alerts and complaints.
The desk will also log on all customer fraud alerts and complaints and redirect them to the appropriate authorities in line with internally predefined path, while preparing and submitting reports regularly to the Nigeria Inter-bank Settlement System (NIBSS) on fraud information.

In addition, the desk would have the responsibility to sensitise customers on e-fraud and fraud desk services as well as manage/resolve all intra-bank issues by leveraging an enterprise fraud management system.
Under the new arrangement, the NIBSS would be responsible for coordinating the industry as provider of electronic platform for all the fraud desks across all banks, mobile money operators, switches and payments service providers to log frauds.

The NIBSS will also maintain direct and dedicated lines and email contacts of all stakeholders for the purpose of exchanging information and coordinating industry response to fraud attempts and incidents.
It will also ensure that DMBs receive enhanced e-fraud portal/instant payment platform, with capabilities for banks to initiate ‘block’ and’ hold funds’ electronic messages from a bank’s fraud desk to the other, while providing operational rules for effective fraud desk coordination.

Besides, all interbank transactions on all electronic channels are expected to be passed through the central anti-fraud solution in NIBSS, which shall have access to each bank record of fraudulent transactions and provide monthly reports to the CBN.
All banks are expected to implement across all electronic channels an enterprise fraud monitoring system that would ensure behavioural monitoring, patterns and hold/block controls on transactions suspected to be fraudulent.

A total of 1,461 cases of fraud were reported in 2014, of which attempted fraud estimated at N7 billion was recorded, leading to actual loss value of over N6 billion.

Internet and ATMs remain the most popular channels for e-fraud while Point of Sales, PoS terminals has been discovered to be the preferred channel of cash out for fraudsters.

Of the reported cases, only 41 perpetrators were apprehended while 1,420 others escaped.