The Nigeria Inter-Bank Settlement System has revealed that Lagos, Rivers States and the Federal Capital Territory led the financial fraud count in 2023.
This was disclosed in its Annual Fraud Landscape (January to December 2023) published on its website on Monday.
The report indicated that Ogun and Kaduna States were also hotbeds for financial fraud in the country.
In terms of fraud count and actual loss recorded in the year, Lagos recorded the highest values, indicating 48 per cent and 49 per cent, respectively.
The report stated that financial institutions lost about N17.67bn to fraud in 2023.
Lagos did not make significant progress in the fight against financial fraud, as the number of recorded cases worsened to 46,224 last year from 45,952 in 2022.
Meanwhile, it succeeded in cutting down the value of loss from fraud by 12 per cent to N8.7bn, compared to N9.9bn in the prior year.
In Abuja, the fraud count was only reduced by 26 to 4,548, while the value of money stolen soared by 73.17 per cent to N994m from N574m in 2022.
Rivers State also recorded a decline to 3,285 in fraud count from 3,785, with the actual loss value decreasing to N433m from N319m.
Ogun State also remained in the top 10 fraud count list, although it recorded a decline from 3,410 to 2,867 while Kaduna State’s fraud count decreased slightly to 2766 from 2,893.
While most states in the top 10 list recorded a decline, Lagos and Kano States saw an increase in fraud count, with the latter’s fraud count increasing from 1,888 to 2,168.
In terms of actual loss value, Cross River had the highest increase, as it surged by 2,202 per cent to N1.04bn from N45m in 2022.
The amount lost to fraud also went up significantly in Anambra State from N257m to N864m.
An ICT expert and Senior Partner of e86 Limited, Olugbenga Odeyemi, commenting on the report, said, “The economic situation of the country is bound to tempt more people to go into crime. To reduce fraud in the financial sector, technology is not the only solution that is required. Improving the welfare of the citizens will go a long way toward reducing crime.
“While it is important for banks to continue to review the security of their financial platforms by conducting frequent penetration tests, it is also important for banks to educate their customers. The more enlightened the customers are, the less susceptible they will be.”
Sharing his experience, Odeyemi revealed that he had received several OTP requests from scammers that he did not initiate.
“In the last few weeks, I’ve received several OTP requests that I didn’t initiate, and the fraudsters who must have initiated the transaction called to get the OTP, but because I’m well informed, I simply declined the calls.
“One of the key cyber security principles is to transparently report security incidents. When this is done properly, it improves the overall confidence in the system,” he said.
He added that financial institutions which are not complying with CBN directives on reporting fraud are not only “breaching CBN directives, they were also not conforming to global cyber security best practices.”
“Law enforcement should be key on the agenda of all regulatory agencies; this is the only way we get to ensure transparency and accountability within the system.”
According to the NIBSS, losses via Internet banking increased by 325 per cent in 2023, largely due to a N2.4bn internal fraud on corporate accounts reported by a Deposit Money Bank.
A total of 80,658 individuals were reported to have been defrauded during the period under review, with the highest percentage of defrauded individuals residing in Lagos (23 per cent), followed by Rivers (six per cent), Abuja (five per cent), Ogun and Oyo (5 per cent).
According to the report, the total fraud count decreased by six per cent to 95,620, while actual losses from fraud increased by 23 per cent in 2023.
The highest number of frauds was recorded in May with 11,716, followed by February with 9,492.
However, October saw the highest actual loss in 2023 at N3.7bn, followed by January with N2.7bn.
According to the data submitted to NIBSS by financial institutions via the Industry Fraud Reporting Portal, the mobile channel remains the preferred means for fraud, as it increased by five per cent compared to the previous year.
It was also reported that the web and POS channels were the most exploited payment channels by fraudsters last year.
The count of web fraud decreased by 38 per cent and ATM fraud recorded a 64 per cent reduction.
The mobile channel was the most profitable channel for fraudsters in 2023 with a fraud interest index of 34 per cent.
It was followed by Internet banking and POS with 33.99 per cent and 26.37 per cent, respectively.
The fraud interest index shows the channels with the best return on interest for fraudsters.
In the year under review, individuals aged 40 and above remained the primary targets of fraudsters, which NIBSS said signified a persistent focus on the targeting strategy of fraudsters.
“This sustained trend emphasises the enduring appeal of the demographic group as potential victims, reinforcing the need for continuous efforts to educate and protect individuals in this category from fraudulent activities,” it stated.
In 2023, 80,658 customers fell for the gimmicks of fraudsters, four per cent less than 84,130 customers recorded in the previous year.
“This decline, though apparent, does not diminish the severity of the issue, urging the financial industry to remain vigilant, enhance security measures and collaboratively address the tenacious challenges posed by fraud. Some regulations need thorough examination, modification, and reinforcement to reduce the potential for fraud and enhance the chances of successful recuperation,” the report maintained.
Meanwhile, the United States of America was number one on the list of foreign countries where Nigerian banks’ customers were defrauded.
The United States recorded the highest threat in January 2023 with 87 and a total count of 486 with an actual loss value of N79.90m, followed by the United Kingdom and Ireland.
These cases were majorly perpetrated through social engineering.
Interpol describes social engineering fraud as scams used by criminals to exploit a person’s trust to obtain money directly or confidential information to enable a subsequent crime.
In 2023, financial institutions reported a total attempted fraud value of N19.7bn with 17.67bn total loss and a total count of 95,620 with commercial banks accounting for 92 per cent amounting to 88,112 and other financial institutions with eight per cent (7509).
The NIBSS also revealed that compliance with reporting fraud for 2023 was below 50 per cent as only 60 out of the 163 institutions profiled in 2023 reported.
This resulted in an overall compliance rate of 37 per cent.
Recall that the Central Bank of Nigeria had directed financial institutions to set up Industry Fraud Desks to ensure reporting of fraud incidents and non-compliance is a breach of the apex bank circular.
