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Wednesday, October 4, 2023

Surge in Fraud Cases Rocks Nigerian Banks, Fueling Concerns Over Insider Involvement

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LAGOS, Nigeria — Nigerian deposit money banks are grappling with a staggering increase in fraud cases and financial losses, as revealed in a report by the Financial Institutions Training Centre, FITC, for the second quarter of 2023.

The losses, involving N9.75 billion, are up by 276.98% from the first quarter, ringing alarm bells throughout the industry.

The total losses from these fraud cases amounted to N5.79 billion, a shocking 1,125% increase from the N472 million lost in Q1 2023.

Particularly alarming is the significant spike in insider involvement, with staff-related fraud incidents increasing by 22.2%.

FITC, owned by the Banker’s Committee comprising the Central Bank of Nigeria, CBN, Nigeria Deposit Insurance Corporation, NDIC, and all licensed banks, highlighted that most losses came from fraudulent loans.

They accounted for 94.35% of the total loss, followed by mobile fraud at 3.39%.

“Banks were liable for the losses incurred and had to refund customers. This is an issue that requires immediate attention and mitigation,” the report stated.

Olusoji Oluwole, President of the Association of Senior Staff of Banks, Insurance Institutions, ASSBIFI, attributed the uptick in staff-related fraud to the casualization of workers.

“These classes of workers without a clear career path, job security, or even pension have become potential risks which are already crystallizing,” he told journalists on Thursday, August 24, 2023.

Analysts warn that this surge in fraud could seriously erode public confidence in the nation’s banking sector.

David Adonri, Executive Vice Chairman of High Cap Depositors Securities Limited, stated, “The scale of losses indicates that the affected banks have laxity in their risk management framework.”

Banking experts have called for immediate reforms.

Tajudeen Olayinka, CEO of Wyoming Capital and Partners, said that regulators should “improve supervision and direct affected institutions to put measures in place to safeguard the assets of the company.”

ASSIBIFI’s Senior Assistant Secretary General, Anthony Emeh, suggested a multipronged approach: “Adopt strong information technology systems, ensure strict reporting systems, and employ Artificial Intelligence in banking activities.”

As the banking sector grapples with this crisis, all eyes are on the Central Bank and other financial authorities to spearhead reforms that will restore trust and bolster risk management systems.

With billions at stake, and the increasing involvement of insiders in fraudulent activities, the urgency for comprehensive action has never been higher.

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