Report: Over 100 Bankers Involved In N59bn Fraud

The Nigerian banking sector is facing against fraudulent activities despite the rising economic challenges, according to findings by The PUNCH.

An analysis of the reports on “Fraud and Forgeries in Nigerian Banks’’ by the Financial Institutions Training Centre in the first six months of this year showed that at least 105 bank staff were involved in fraudulent activities.

However, this was a 34.38 per cent decrease from the 160 staff-implicated cases in the same period last year.

Despite the drop in staff involvement, the total amount linked to these fraud cases surged by 380.13 per cent, rising from N12.33bn between January and June 2023 to N59.2bn in the same period this year.

The PUNCH further observed that about 72.75 per cent of the total amount involved in fraud was lost this year.

The total financial loss resulting from these fraudulent activities also increased significantly, reaching N43.07bn in H1 2024, compared to N6.26bn in H1 2023, representing an increase of 588.02 per cent.

The PUNCH further observed that the increase in the number of cases in which bank staff lost their jobs due to fraud likely led to a general reduction in the cases involving bank employees.

The number of bank staff terminations due to fraud increased, with 84 staff dismissed in H1 2024, a rise of 223.08 per cent from the 26 terminations recorded in H1 2023.

This likely means that about 80 per cent of cases involving bank staff led to termination of employment in the first six months of this year.

Meanwhile, outsider involvement in fraud cases saw a slight decline, falling by 10.78 per cent, with 21,335 cases reported in H1 2024, down from 23,912 in the same period of 2023.

The PUNCH observed that outsiders were involved in 92.74 per cent of bank fraud cases between January and June 2024.

It was further observed that fraudulent activities in the Nigerian banking sector remained prevalent through various channels.

The top three channels through which fraud occurred were web-based fraud, ATM fraud, and fraud involving bank branches.

In H1 2024, fraud via bank branches led by a significant margin, involving a total of N55.01bn, representing the largest channel of fraud losses. This was an increase of 646.4% from N7.37bn lost to fraud at bank branches in the same period of last year.

Web-based fraud followed, with N1.87bn. The ATM-related fraud was up to N43.1m in the period under review.

The high rate of fraud among bank employees occurred despite an increase in the wage and salary expenses of some banks in the country amidst high inflation.

The PUNCH observed that the total personnel expenses of 10 banks surged by 96 per cent in the first half of 2024, reaching N615.8bn, up from N314.4bn incurred in H1 2023.

This sharp increase in personnel costs further reflects the growing operational expenses within the sector.

Among the banks, Access Holdings recorded the highest wage bill of N151.5bn, representing a 145 per cent rise from N61.9bn in H1 2023

First Bank followed closely with N134.2bn in personnel expenses, marking a 110 per cent year-on-year increase from N63.9bn in the same period last year.

UBA saw its wage bill grow by 92 per cent to N126.6bn in H1 2024, compared to N65.9bn in H1 2023.

Zenith Bank also recorded a significant increase, with its wage expenses climbing 64 per cent to N63.5bn, up from N38.6bn a year earlier.

Stanbic IBTC’s wage bill stood at N40.6bn for the period, up by 44 per cent from N28.2bn in H1 2023.

GT Bank’s personnel expenses almost doubled, jumping by 98 per cent to N39.3bn in H1 2024, from N19.9bn in H1 2023.

FCMB Group also saw a notable rise in its wage bill, increasing by 74 per cent to N26.6bn from N15.2bn reported in H1 2023.

Wema Bank’s wage expenses rose by 77 per cent, reaching N15.6bn, up from N8.8bn in the previous year.

Similarly, Sterling Bank’s wage bill grew by 41 per cent to N12.5bn, compared to N8.9bn in H1 2023.

Jaiz Bank also reported a significant 78 per cent increase in its personnel expenses, which stood at N5.5bn, up from N3.1bn in H1 2023.

This sharp rise in wage and salary expenses across the banking sector highlights the increased cost pressures faced by these institutions as they expand their operations.

However, despite this increase, fraud among employees persists as the rising costs of living continue to bite hard.

One of the recommendations by FITC in its report on bank fraud is the need to enhance staff training and awareness.

It emphasised that “the improvement of staff training and awareness is paramount. Intensifying fraud prevention training for all bank employees, with a focus on the latest fraud tactics and key warning signs, especially in rapidly growing areas like card-related and web-based fraud should be a top priority.”

The FITC also emphasised the need for Nigerian banks to enhance their fraud detection systems by leveraging advanced technologies such as Artificial Intelligence and Machine Learning.

These tools, FITC notes, are crucial for identifying suspicious patterns and preventing fraudulent transactions in real-time.

Also, the report called for tighter access controls, particularly within bank branches, which have emerged as a significant channel for fraud.

FITC suggested implementing multi-factor authentication and restricting access to sensitive data and systems to authorised personnel only.

In response to the increasing fraud threats, some Nigerian banks have ramped up technology investments as part of their capital-raising efforts.

GTBank plans to invest N98.50bn (26.6 per cent of its capital raise proceeds) in technology upgrades, focusing on core banking applications, hardware infrastructure, and network architecture.

Access Holdings plans to allocate 20 per cent of its N343.09bn rights issue to network infrastructure and cybersecurity, with N68.62bn earmarked for those efforts.

Zenith Bank is dedicating 20 per cent of its N99.27bn proceeds to technology, including N8.93bn for hardware and N2.98bn for cybersecurity.

Fidelity Bank is investing N19.01bn towards IT infrastructure, with N9.03bn focused on cybersecurity upgrades.

FITC also highlighted the importance of regular audits and continuous monitoring of banking operations, particularly in high-risk areas such as settlement processes.

Banks are encouraged to conduct unannounced internal audits to detect potential anomalies and improve staff training on fraud prevention.

ICT expert and Senior Partner of e86 Limited, Olugbenga Odeyemi, said several fraud cases needed insiders from banks.

He said, “Some of the hacking and fraud cases that we’ve seen, happened not because of the lack of security on the banks’ electronic platforms, but because of poverty, greed, and sometimes the lack of education on the part of the customers.

“Other than asking banks to invest more in the security of their platforms, it’s equally important that banks spend more resources on educating their customers.

“That said, several fraud cases couldn’t have happened without the help of insiders in some of the banks. I think Nigerian banks should spend more money on the welfare of their staff while making appropriate changes to their internal processes, starting from their hiring processes.”

Cybersecurity researcher Madumere Chukwuka from King’s College London earlier told The PUNCH that certain financial institutions have not kept up with evolving cyber threats, making them prime targets for fraudsters.

He said that many fraud cases originated internally, with bank employees exploiting gaps in internal controls and auditing systems.

“Insider threats remain a significant issue. No matter how advanced the technology, human involvement in banking processes is often a weak link,” he noted.

He noted that despite considerable investments in cybersecurity, banks were not fully integrating or utilising available tools, adding that the complexity of fraud schemes, such as inserting fictitious amounts into settlements, made it harder for banks to detect fraud in real-time.

SOURCE: The PUNCH