The massive payments infrastructure provider Interswitch is facing financial danger after losing a staggering ₦30 billion, or around $40 million, to a chargeback fraud operation that took advantage of system flaws.
Court records that TechCabal was able to get provide notification of the development to the general public. The firm has formally reported the fraudulent behavior to Nigeria’s anti-money laundering body, the Economic and Financial Crimes Commission (EFCC), and is presently exploring legal options to recover the lost assets.
A variety of current and former Interswitch workers were reportedly implicated in the scheme, which entailed them filing and receiving bogus chargebacks from merchants using their insider knowledge of the company’s systems. Reversals of payments occur when a client challenges a transaction; these are known as chargebacks.
The fraud dates back several years, and the perpetrators are believed to have used a variety of methods to exploit the vulnerabilities in Interswitch’s system. For example, they may have used stolen merchant credentials to file fraudulent chargebacks, or they may have manipulated the system to make it appear that legitimate transactions were fraudulent.
Interswitch has filed a motion at the courts on the suspected bank accounts involved in the fraud, and it has requested that 54 banks place restrictions on hundreds of suspected bank accounts until the investigation and recovery process is complete.
The chargeback fraud scandal underscores the growing challenge of fraud in Nigeria’s financial services industry. So far, Interswitch has recovered a little over ₦10 billion. Naira Devaluation Deepens Economic Crisis in Nigeria
Interswitch is currently investigating the fraud and taking steps to recover the lost funds. The company has also implemented additional security measures to prevent similar incidents from happening in the future.
