The Economic and Financial Crimes Commission (EFCC) expresses concern over rising fraudulent activities within Nigeria’s financial sector, particularly impacting the unbanked, underserved, and middle-class populations.
Lapses in KYC Processes by Fintechs
EFCC Chairman Ola Olukoyede attributes the spike in fraud cases to lapses in the Know Your Customer (KYC) protocols of some financial technology (fintech) companies. Speaking at a stakeholder engagement in Abuja, Olukoyede highlights the failure of some fintech firms to enforce robust KYC measures during customer onboarding, especially for tier-one accounts.
“There is widespread fraud targeting the unbanked and middle-class segments due to poor KYC implementation. Fintech companies need to focus on closing these loopholes to prevent exploitation,” Olukoyede says.
He calls on fintech firms to strengthen their internal processes to block vulnerabilities that fraudsters frequently exploit.
Strengthening Partnerships with EFCC
The EFCC emphasizes the need for collaboration between fintech operators and regulatory bodies to combat financial crimes effectively. Olukoyede urges fintech companies to recognize their role as critical stakeholders in curbing corruption and to respond swiftly to inquiries from regulatory agencies.
“Collaborating with the EFCC shows your commitment to addressing systemic vulnerabilities and reducing fraud risks. Together, we can develop stronger internal controls to secure the financial system,” he states.
The EFCC reiterates its readiness to partner with fintech companies in resolving fraud-related challenges and improving their security frameworks.
Escalating Fraud Statistics
Data reveals a significant increase in fraudulent activities in Nigeria’s financial sector:
- Banks lose N42.6 billion between April and June 2024, a dramatic rise compared to N9.4 billion reported for the entirety of 2023.
- Fraud-related losses increase by 8,993% from the first quarter of 2024 and by 637% compared to the second quarter of 2023.
- Miscellaneous fraud, including unauthorized withdrawals and online scams, accounts for 96.46% of total losses.
- Incidents involving fraud through bank branches surge by 31,497%, while cases of computer and web-based fraud grow by 1,560%.
Addressing Systemic Weaknesses
The EFCC warns that the rapid adoption of digital platforms without corresponding security upgrades exposes significant vulnerabilities. Many organizations prioritize innovation while neglecting robust onboarding and security measures, making their systems susceptible to fraud.
The EFCC underscores the urgency of addressing these gaps to protect Nigeria’s financial infrastructure and maintain public confidence in the system.
