Banks Urged to Tighten Controls to Combat Fraud

July 5, 20190training


Banks Urged to Tighten Controls to Combat Fraud

July 5, 2019 0training

In order to address the incidence of electronic fraud in Nigeria’s banking sector, financial institutions have been advised to tighten their controls and risk management systems. H. Pierson Associates, a consulting firm with specialization in Risk Management, Advisory and Talent Management Consulting gave the advice in a recent report.


The Central Bank of Nigeria (CBN) recently revealed that commercial banks in the country lost a total of N12.06 billion to fraud and forgeries in the first six months of 2018. The CBN stated this in its ‘Draft 2018 Half Year Economic Report.’


According to the report, there were 20,768 reported cases of fraud and forgery (attempted and successful), valued at N19.77 billion in the review period, compared with 16,762 cases, involving N5.52 billion and US$ 0.12 million in the corresponding period of 2017.
The report stated that the actual loss by banks to fraud and forgery, however, amounted to N12.06 billion, compared with the N0.78 billion and US$0.03 million, suffered in the first half of 2017.


The reported fraud and forgery incidences were said to have been perpetrated by both bank staff and non-bank culprits. The cases involved armed robbery attacks, fraudulent ATM withdrawals, draft defalcation, illegal funds transfers, pilfering of cash, stealing, suppression and conversion of customers’ deposits.


  1. Pierson Associates, in its reaction to the report, stressed the need for improved corporate governance in institutions.


Furthermore, the consulting firm advised that staff quality control at recruitment and other soft considerations such as ethics, character, competence, among others, should be properly evaluated at the point of recruitment.


In addition, the firm stated that banks must intensify fraud awareness and education by ensuring that their staff and customers are always abreast with cyber-security issues. “Banks must also deepen their firm-wide cyber-security awareness and operational risk culture through quality training. There is also need for the adoption of appropriate fraud risk management technology, effective internal controls frameworks, including multi-layered security structures, segregation of duties across board, as well as traditional cross-checks of unusual payments with customers”. The consulting firm also called for the deployment of advanced risk-based internal audit.


According to the Director, Consumer Protection, CBN, Mr S. K. Salam-Alade, “the high incidence of fraud is usually as a result of weak security infrastructure in financial institutions and insufficient internal controls”.

Furthermore, he had attributed the development to the naivety of the average bank customer. “Apart from the huge financial loss to consumers, financial institutions, and the economy, online fraud also damages the financial system’s reputation, increases the risk of participating in its offerings. This, threatens the attainment of the financial inclusion target of 20 per cent inclusion by 2020,” the CBN Director said.


To combat the problem, he advised financial institutions to invest in the latest security technology solutions and effective communication of anti-fraud measures.




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