The Nigerian banking sector has experienced a significant rise in fraudulent activities, despite a decline in the number of bank staff implicated in such cases.
According to The PUNCH, this is contained in a recent report by the Financial Institutions Training Centre.
The report, which covers the first half of 2024, found that 105 bank employees were involved in fraud, marking a 34.38% decrease from the 160 staff-related fraud cases recorded in the same period in 2023.
However, the total value of fraud linked to bank employees surged by a staggering 380%, rising from N12.33 billion in the first half of 2023 to N59.2 billion in 2024.
The financial losses from these fraudulent activities also skyrocketed, with banks losing N43.07 billion in the first half of 2024, a 588% increase compared to the N6.26 billion lost in the same period last year.
The report suggests that 72.75% of the total amount involved in fraud cases this year resulted in financial loss.
The rise in fraud among bank employees has occurred despite a growing trend of job terminations within the industry.
In the first half of 2024, 84 employees were dismissed due to fraud, representing a 223% increase from the 26 dismissals in the same period of 2023.
FITC noted that the high rate of dismissals likely contributed to the decrease in staff involvement in fraud.
While fraud among bank staff has declined, outsider involvement remains prevalent, accounting for 92.74% of the total fraud cases.
A total of 21,335 fraud cases involving outsiders were reported in the first half of this year, a slight drop from the 23,912 cases reported in the same period of 2023.
The FITC report highlighted the main channels through which fraud occurred, with bank branches, web-based platforms, and ATMs being the top avenues.
Fraud through bank branches accounted for the largest financial losses, with N55.01 billion lost in the first half of 2024, a 646% increase from N7.37 billion recorded last year.
Web-based fraud followed, with N1.87 billion lost, while ATM-related fraud accounted for N43.1 million.
The report also underscored the sharp rise in personnel expenses across the banking sector. Despite the increase in fraudulent activities, the wage bills of many banks have surged, reflecting growing operational costs amid high inflation.
Among the leading banks, Access Holdings recorded the highest wage bill of N151.5 billion in the first half of 2024, a 145% jump from N61.9 billion in the previous year.
First Bank followed closely with N134.2 billion, while UBA and Zenith Bank also saw significant increases in their wage expenses.
In response to the rising fraud threat, FITC emphasized the need for enhanced staff training and stronger fraud detection systems.
The report recommended that banks invest in advanced technologies, including Artificial Intelligence and Machine Learning, to detect and prevent fraudulent transactions in real-time.
“The improvement of staff training and awareness is paramount. Banks must intensify fraud prevention training for all employees, focusing on the latest fraud tactics and warning signs, especially in areas like card-related and web-based fraud,” FITC stated.
Additionally, the report called for tighter access controls within bank branches and urged financial institutions to conduct regular audits and continuous monitoring of operations, particularly in high-risk areas such as settlement processes.
Multi-factor authentication and restricted access to sensitive data were also recommended to mitigate insider threats.
ICT expert and senior partner at e86 Limited, Olugbenga Odeyemi, pointed out that many fraud cases stem from internal vulnerabilities within banks.
“Some of the hacking and fraud cases we’ve seen are not necessarily due to the lack of security on the banks’ platforms, but often because of poverty, greed, and a lack of customer education,” Odeyemi said.
He further emphasized the need for banks to invest in employee welfare and tighten internal processes, particularly in hiring.
Similarly, cybersecurity researcher Madumere Chukwuka from King’s College London noted that some financial institutions have failed to keep up with evolving cyber threats.
“Insider threats remain a significant issue. No matter how advanced the technology, human involvement in banking processes often presents a weak link,” Chukwuka said.
As Nigerian banks continue to grapple with economic challenges and growing operational costs, addressing the root causes of fraud—both internally and externally—will be critical to maintaining the stability of the sector.
