As NDIC Reports N2.37bn Fraud in Banking Sector…


Banks take the blame for the 56.3 per cent increase in the sector’s financial fraud, amounting to N2.37 billion, as reported by the Nigeria Deposit Insurance Corporation (NDIC), reports Bamidele Famoofo

At the end of the financial year 2017, Nigeria Deposit Insurance Corporation (NDIC) says losses arising from fraudulent cases in the banking sector increased by 56.3 per cent to 26,132 in 2017 from 16,751 reported cases in the previous year.

“The amount involved in the fraudulent activities documented increased by N3.33 billion from the N8.68 billion reported in 2016 to N12.01 billion in 2017 or 38 per cent, while expected or actual loss slightly decreased by N24.42 million or 1.03 per cent from N2.39 billion in 2016 to N2.37 billion in 2017,” NDIC reported.

Meanwhile, the corporation pointed an accusing finger at the banks for failure to file returns reporting their officials involved in the fraudulent practices throughout 2017 to the regulatory authorities as the number of staff involved in the malpractice grew from 231 in 2016 to 320 in 2017.

Statutorily, Deposit Money Banks (DMBs) otherwise known as commercial banks are required to report to regulatory authorities on cases of frauds perpetrated by staff. “Sections 35 and 36 of the NDIC Act No. 16 of 2006 (as amended) require all Deposit Money Banks (DMBs) to submit monthly information/returns on forgeries and other forms of fraud to the corporation”, a statement from the corporation disclosed. 

Online Banking/ATM

Financial frauds perpetrated through online banking and ATM/card-related activities were most pronounced in 2017 as it constituted about 93 per cent of total fraud accounted for in the review year.   According to  NDIC, the volume of fraud in this segment accounted for N1.51 billion or 63.66 per cent loss in the industry in 2017. 

The report also documented other miscellaneous crimes such as fraudulent transfers/withdrawals, cash suppression, unauthorised credits, fraudulent conversion of cheques, diversion of customer deposits, diversion of bank charges, presentation of forged or stolen cheques, among others.

Internal Collaboration

The 22 licensed commercial banks and four merchant banks, which rendered 286 returns on dismissed/terminated staff as a result of fraud and forgeries during the year under review, showed that out of the 26,182 fraud cases reported by the 26 licensed banks, 320 cases were attributable to internal collaboration by bank staff.

The NDIC report revealed that a total of 320 bank employees had their appointments either terminated or were summarily dismissed in 2017, as against 231 in 2016. “That represented an increase of 38.53 percent in the total number of fraud cases reported in 2017. However, the losses arising from the reported cases decreased from N760 million in 2016 to N682 million or about 11.43 percent in 2017.”



According to a financial analyst, who does not want his name to be mentioned, shareholders are the ultimate losers anytime any bank record losses due to fraudulent activities, which may arise from either internal or external sources.

“Since shareholders are part owners of the business, they pay for the shortcomings of the managers of the business, which may be in form of loose internal control that leads to fraud. Without mincing words, the penalty, in most cases is cut in dividend at the end of the financial year as all losses arising from fraud must be fully provided for,” he said.


The Head of Communications and Public Affairs Unit of NDIC, Mr. Mohammed Ibrahim, said there were plans to investigate banks, which disregarded the Act of the NDIC on submission of monthly reports on forgeries and other forms of fraud.

“This followed the discovery from the corporation’s most recent report on its off-site supervision of the DMBs that the number of fraud cases attributed to internal abuse by staff of banks increased from 231 in 2016 to 320 in 2017, or 38.53 percent above the figure reported for the previous year”, Ibrahim said.

The NDIC spokesman noted that the report relied on a total of 286 responses received from 26 banks during the period under review.

Ibrahim shed more light on the outcome of the off-site supervision: “The 286 responses received from banks in 2017 cited 26,182 cases of fraud and forgeries which is 56.3 percent higher compared to 16,751 cases reported in 2016.

“The corporation urges banks to implement additional internal control measures coupled with observance good corporate governance principles to check frauds. 

“Despite the Fidelity Insurance Cover taken by banks to address fraud perpetrated by staff, there is still need for the banks to further enhance their internal control and security measures, as the rising trend of e-Channels (Online banking & Card-related) fraud and forgeries in the Industry remains a serious cause for concern to the Corporation” Ibrahim added.


In its report titled ‘Top Five Fraud Trends in Nigeria’s Commercial Banks in 2016 ‘, KPMG, a foremost accounting firm submitted that “The complexity and reliance on technology by modern enterprises as well as the increasing ease of access to the internet by all and sundry, have created more opportunities for fraud and other forms of exploitation, especially on the internet and other electronic platforms”.

In curbing growing crimes perpetrated in the Nigerian cyberspace, especially in the financial industry, KPMG suggested that stakeholders must look beyond technology issue alone.

“Erroneously, some organisations perceive cyber-crime / e-fraud as a technology issue only, and therefore look only at technology to reduce the menace of cyber criminals. Rather, curbing the activities of cyber criminals, e-fraudsters as well as traditional fraudsters involve dealing with People, Process and Technology issues”, KPMG disclosed.

On People, KPMG said continuous awareness for employees, vendors, customers and business partners, appropriate training for employees on fraud identification, prevention and detection techniques, commensurate due diligence for employees, vendors, customers (KYC), and business partners, etc are necessary to nip the menace in the bud.

Process-wise, it says there is a need to develop, implement and monitor information security policy and procedures, incident response plan, security-focused disposal process, etc. In terms of Technology, the report recommends the deployment of appropriate technology such as network segmentation, up-to-date anti-virus and patches, multi-layered authentication, layered security approach comprising both intrusion prevention and intrusion detection systems, transaction monitoring and data analytics tools, among others.



On its part, the Central Bank of Nigeria (CBN) has implemented a number of initiatives in tackling the issue of cybercrime / e-fraud specifically, and fraud in general.

The initiatives include: Implementation of a two-factor authentication for internal banking processes which started in January 2014; Review of operations of the NIBSS’ Instant Payment (NIP) System and other e-Payment options with similar features; Establishment of industry fraud desk; Introduction of the Bank Verification (BVN); and Deployment of the Central Anti-Fraud Solution.


Raising the game

“Further to the above, it is imperative to mention that fraudsters and cybercriminals are raising their game in the cloud and Internet of Things (IoT)”, KPMG lamented.  

It observed that this was in response to the pace at which businesses and consumers were moving to the cloud, because of its cost effectiveness, as well as “almost stress-free” lives enjoyed by consumers as a result of IoT, gaining mileage.

“To securely prevent prevalence of fraud on cloud infrastructure and hacks into consumer devices in 2017 and beyond, organisations need to demand adequate security from the cloud infrastructure and service providers as well as demand that manufacturers of IoT devices improve security on central servers, rather than individual devices”, KPMG suggested.