Fraudsters are exploiting loopholes in Nigeria’s banking system, using Bank Verification Numbers (BVNs) illegally registered for minors to steal over N1 billion, according to a recent report by the Nigeria Inter-Bank Settlement System (NIBSS).
The report reveals a disturbing rise in financial fraud, with corrupt bank officials and agents illegally enrolling minors for BVNs and using them to open enterprise accounts for fraudulent transactions.
How the Fraud Works
NIBSS uncovers two major cases where fraudsters used BVNs registered for minors to execute financial crimes:
- In one case, a bank employee illegally registered a BVN for a minor and used it to open a business account. The fraudulent account received N495.3 million, which was swiftly withdrawn.
- In another instance, a compromised banking agent enrolled a minor’s BVN and opened an account under a bakery’s name. The account received N507 million, which was immediately transferred out before authorities could intervene.
Together, these two cases alone account for over N1.002 billion in losses, with investigations showing that the stolen funds were quickly moved through multiple accounts to evade detection.
The NIBSS report points to the involvement of some financial institution employees in facilitating these fraudulent activities.
- A bank staff is implicated in one case, while the agent involved in the second case is reported to law enforcement agencies for possible prosecution.
- Regulatory authorities are working with the affected bank to assess internal security lapses and enforce stricter verification measures to prevent further fraud.
Rising Fraud Cases in Nigeria
The report highlights a broader trend of financial fraud in Nigeria.
- While the number of reported fraud incidents declines by 31% between 2020 and 2024, financial losses due to fraud surge by 350% in the same period.
- Data shows that funds lost to fraud increase from N11.61 billion in 2020 to N52.26 billion in 2024, as fraudsters adopt more sophisticated tactics.
NIBSS attributes this rise to regulatory loopholes, weak identity verification processes, and corrupt financial service intermediaries.
Other Fraudulent Schemes Identified
The report also exposes other fraudulent practices:
- Identity theft of senior citizens: Fraudsters use stolen identities of elderly individuals to open bank accounts, with over N400 million funneled through such accounts.
- Corporate fraud: In July 2024, an oil and gas company is fraudulently registered using fake corporate documents. The account receives N335 million on its opening day, which is quickly moved to unlicensed Bureau De Change (BDC) operators before authorities intervene and recover the funds.
- Cryptocurrency-linked fraud: Fraudsters launder stolen funds through crypto transactions disguised as gift cards, making it difficult to trace the final beneficiaries.
Call for Stronger Regulations
In response, NIBSS calls for stricter fraud prevention measures, including:
- Real-time biometric validation for BVN registration to prevent fraudulent enrollments.
- An Enterprise Fraud Management System to detect and block suspicious transactions in real time.
- Permanent blacklisting of fraudulent BVNs to prevent further misuse.
- Mandatory profiling of all newly opened financial accounts within 24 hours to strengthen fraud detection.
Regulators are urged to enhance oversight and enforcement to safeguard Nigeria’s financial system from rising fraudulent activities.
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