By Emeka Okoroanyanwu
and Babajide Okeowo
Financial crimes have assumed a frightening dimension in Nigeria. No day passes in the country without cases of financial crimes being reported or hitting the headlines. Perpetrators of financial crime cut across all age group segments. The old, not so old, young, even children, men and women are all involved.
A recent report from the Central Bank of Nigeria, CBN, revealed that Nigerian banks lost a whopping N12. 06 billion in the first six months of 2018 to financial crime. Similarly, according to The Nigeria Deposit Insurance Corporation (NDIC), three million Nigerians lost over N18 billion to Ponzi schemes in recent times.
In the first half of 2018, Nigerian banks recorded 20,768 cases of financial crimes ranging from fraud and forgery, fraudulent ATM withdrawals, illegal funds transfer, pilfering of cash, stealing, suppression and conversion of customers’ deposits. The total amount lost to these cases amounted to a huge sum of N12.06 billion. This represents a sharp increase of almost N12billion compared to a sum of N0.78 billion suffered in the first half of 2017.
In the CBN economic report for the first half of 2018, released in November 2018, the reported fraud and forgery incidences were perpetrated by both bank staff and non-bank culprits. The report also showed that the number of fraud related cases increased by 4,006 compared to 16,762 cases involving N5.52 billion in 2017.
The Nigerian Inter-Bank Settlement System (NIBSS) also reported that the Nigerian banking industry lost the sum of N12.30 billion to various frauds between 2014 and 2017.
The amount was lost in 41,461 fraud cases between 2014 and 2017. Specifically, in 2014, the fraud volume stood at 1,461, 10,743 in 2015, 19,531 in 2016 and 25,043 in 2017.
The industry lost N6.22 billion in 2014 on attempted fraud value of N7.76 billion while the sum of N2.26 billion was lost in 2015 on attempted fraud value of N4.37 billion. Banks lost the sum of N2.19 billion in 2016 on attempted fraud value of N4.37 billion.
Financial crimes, as bad as it is knows no gender as it cuts across gender lines. For example, gender fraud analysis during the period showed that males accounted for 73 per cent, while females accounted for 23 per cent. More fraud cases were reported in 2017, with an increase of 28 per cent compared with 2016 but with less financial loss.
On financial fraud channel, the Automated Teller Machine (ATM) accounted for the highest fraud in 2017 with an actual loss of N497.64 million with a fraud volume of 9,823. Mobile phone fraud trailed with N347.65 million loss on 5,055 fraud volume, while across the counter transactions accounted for N259. 02 million loss in 314 fraud volume.
To buttress the menace of financial crime in the country, Vice President, Professor Yemi Osinbajo claimed during a recent outing that Nigeria loses about N197 billion on financial services fraud annually.
For instance, Nigeria was reported to be losing about $17 billion annually out of the illicit financial flow of about $80 billion out of Africa. According to a United Nations Conference on Illicit Financial Flow in New York, Africa is currently losing about $80 billion annually through Illicit Financial Flows (IFFs), with Nigeria accounting for $17 billion or 21 per cent of the figure.
Illicit financial flows are illegal movements of money or capital from one country to another through tax evasion, money laundering and smuggling, among others.
Similarly, the Economic and Financial Crimes Commission, EFCC recently lamented over the rising cases of cybercrime in the country. South East Zonal Head of the commission, Mr Usman Imam said that cases of cybercrime, popularly called ‘Yahoo Yahoo’ had become alarming in the country.
He said: “From investigations so far made, it is unfortunate that some parents are not only aware of their children’s involvements but even abet such terrible crime. “What is very worrisome is that most of the perpetrators of this crime are either students of institutions of higher learning, graduates, youth corps members or secondary school students learning from their elders. To think that these criminals are those who will in future take up the responsibility of leading this country must certainly send shivers down the spine of any right-thinking Nigerian,” Imam said.
The zonal head said that the commission had within the period under review seized some exotic cars from the suspected ‘Yahoo Yahoo boys’ being investigated. He wondered how a student would own a car worth about N10 million, adding that the commission had been inundated with such matters.
Imam called on Nigerian youths to toe the path of honesty, adding that anybody convicted of cybercrime would live with such stigma for the rest of his or her life. “I want to appeal to parents to take up their God-given responsibilities of monitoring their children or wards. The case of internet or cybercrime is very alarming,” he said.
Many Nigerians just two years ago lost millions of naira to the discredited Ponzi scheme, MavrodiMondial Movement (MMM). Over three million people were defrauded about ₦18 billion. Hardly had MMM closed shop that another pyramid scheme, Ultimate Cycler, reportedly started and registered 2,000 people every week until it shut down in December.
The latest scheme in town, which goes by the name “Loom”, is fast catching up among Nigerians. Unlike MMM, where there is a website and its founder (late Sergey Mavrodi) is well known, the promoters of Loom are elusive while the pyramid scheme operates through closed groups mainly on Facebook and Whatsapp.
The Securities and Exchange Commission (SEC) Acting Director-General, Mary Uduk has issued a warning to Nigerians to be warry of the new scam in town.
Why Financial Crime is on the rise
According to Osinbajo at a stakeholder’s forum on financial fraud using telecoms platform organised by the Nigerian Communications Commission, NCC in collaboration with the Central Bank of Nigeria, CBN, the positive developments in the nation’s telecom sector attract new dangers because fraudsters have also infiltrated the system to compromise telecom platforms, thus putting all these positive outlooks from mobile money and financial services at risk, leading to loss of the huge amount of money to fraudsters every day.
“The vulnerability of the financial sector to negative use of technology is timely because no one can dispute the relevance of telecom to improve financial services. Indeed, the use of telecom services has helped to reduce banks’ operating cost and customers’ satisfaction. Banks have obviously expanded their operational bases using these platform. This proliferation of alternative banking channels through which banking transactions have performed. In this regard, the Nigerian banking industry has simply aligned itself with the global trend. However, it is this financial service delivery and opportunity for inclusion that is now threatened by fraud. Today, we are grabbing with new methods of fraud, such as card swaps, customer identity theft, bank or customer base hack, BVN snatching and compromise of customer systems” he said.
On his part, Omotola Ariyo, a financial expert said the failure to identify rogue individuals in the financial sector and regulatory failures on the part of regulatory agencies are some of the reason why financial crime is on the rise.
“In order to address the failure of banks and associated problems, regulators have to tackle instances of financial crimes in the country, which largely boil down to internal collusions amongst staff.Efforts at strengthening Nigerian financial markets, implemented by the CBN, SEC and the Nigerian Stock Exchange, NSE, should not be hampered by rogue individuals. Failure to identify them will sometimes be an example of regulatory failure” he said.
Another financial expert, EbehiIyoha opined that economic uncertainty and greed are reasons why financial crimes are on the rise.
“The common denominator for all groups is economic uncertainty. Entrepreneurs in Nigeria worry about the survival of their businesses and workers face uncertainty over their salaries being paid on time, or even paid at all. And these fears are not unreasonable; many businesses shut down last year, and over 21 million people were unemployed as at June 2018. With their livelihoods already at risk, people look more willing to try their luck with Ponzi schemes as a potentially more lucrative bet” she said.
Popular musician and Lawyer, Folarin Falana, a.k.a Falz said financial fraud is on the rise in the country because the present government has not done enough to combat it. He is worried that cybercrime has gradually become a fallback means of livelihood for Nigerian youths.
He said the government needs to do more to put an end to the crime which has tarnished the country’s image abroad.
“I think the government through their law enforcement agencies are supposed to come in and clamp down on people perpetrating such acts and make sure that people face consequences for their actions; because if they do face consequences, that could be a deterrent to other people thinking about committing such acts. So far, the government hasn’t done enough but it appears from recent activities that they want to do more. So let’s hope that they will do more,” he said.
Innovation is the key to addressing the menace
Many have suggested a strict clampdown on perpetrators of the crime. According to Osinbajo in an earlier interview, the way forward is to continue to innovate.
“We can’t out of risk of fraudsters stop innovation. We must continue to innovate. There are elderly people who do not have ATM cards. They cannot associate with the risks associated with ATM cards. We must build confidence in the market to be able to bring in people who want to be within the platform” he said.
‘‘One of the issues to resolve is who should take the responsibility when fraud is committed. Sometimes you have four players: customers, bank, telecom, mobile service provider and nobody wants to take responsibility. Historical, innovations have always brought progress and development to mankind but in the wake, it has always come to the dark side. ‘‘The anticipation and unanticipated consequences of any invention are always available for evil-minded to exploit to the detriment of the society. Nigeria has like otherwise has inevitable embrace the digital world through the use of telecommunications. However, the tread off for greater efficiency and versatility in this new world is the increased negative application of innovation for criminal disposition. Without telecommunication, the originator of fake news has no capacity to spread falsehood so rapidly to such a wide-spread audience without being quickly nipped in the bud” he said.
On his part, Ariyo advised that the regulatory agencies should be more adept at managing information and interpreting it.
“Once regulation becomes adept at managing information and interpreting it, it has to consider macroeconomic trends and patterns. This is because, ensuring the stability of a bank, thereby protecting its depositors and shareholders, cannot be guaranteed by looking at the activities of that institution alone. In other words, vigilant surveillance has to be applied on a blanket basis, as patterns and trends need to be considered where they can hamper efforts at making Nigeria investor friendly” he added.