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NDIC: Banks Lost N7.19bn to Fraud, N4.97bn to Digital Banking in 2021 - THISDAY

MARCH 18, 2023

BY  James Emejo in Abuja

The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that the value of fraud and forgery perpetrated in Deposit Money Banks (DMBs) rose by 34.9 per cent to N7.19 billion in 2021 compared to N5.33 billion in 2020.

This was contained in the NDIC 2021 Annual Report, which was seen by THISDAY.

According to the NDIC, the number of fraud cases in the banking sector also increased by 44.8 per cent to 211,713 incidences in 2021 compared to 146,183 cases recorded in the preceding year.

The corporation noted that during the review year, a total of 365 bank staff were involved in fraud and forgery cases, compared with 474 in 2020, indicating a 4-year gradual decline.

According to the report, temporary staff constituted

the largest perpetrators of insider-related frauds and forgeries, representing 57.53 per cent of the total reported cases while permanent staff accounted for the balance of 42.47 per cent in the review year.

While observing that the DMBs continue to engage temporary staff as a cost-saving measure in conducting their business, the NDIC said it had continued to direct the banks’ management to prioritize security measures, including comprehensive background checks, to minimize the incidences of fraud and forgeries committed by dishonest staff within that cadre.

The NDIC said the first quarter of 2021 recorded the highest number of reported fraud cases with 73,578 incidences, while the biggest actual loss of N2.32 billion was recorded in the third quarter of 2021.

According to the NDIC, in the review period, fraud perpetrated across the counter stood at N1.13 billion while internet banking fraud amounted to N1.83 billion as well as mobile banking fraud stood at N1.26 billion.

The corporation noted that the channels and instruments through which frauds and forgeries are perpetrated have gradually evolved to include digital and web-based platforms, such as e-commerce, PoS, and mobile banking.

“Electronic (or digital banking) channels accounted for 187,870 cases or 88.74 per cent of total fraud cases, with an actual loss of N4.97 billion representing 69.10 per cent of total industry losses for 2021, compared with all other channels, which accounted for 23,843 cases with an actual loss of N2.23 billion or 31.02 per cent of the total industry losses.

“ATM/card-related fraud had the highest frequency, accounting for 25.43 per cent of total fraud cases, followed by mobile banking and web-based fraud cases with 22.75 per cent and 16.56 per cent, respectively. Across the counter frauds contributed the least with 0.38 per cent, while other non-electronic channels accounted for 1.70 per cent in 2021, “NDIC said.

NDIC added, “The increasing use of digital channels, which spiked due to the lockdown measures that were introduced to counteract the spread of the COVID-19 pandemic has aptly been noted.

“The increasing reliance on electronic platforms for carrying out transactions may have contributed immensely to the rise in frauds and forgeries cases via these channels.

“In this regard, the NDIC/CBN have introduced targeted policy and examination/investigations to ensure that the DMBs strengthen their internal control processes through strong risk management practices to prevent loss of funds and maintain customer confidence in the financial sector.”

The NDIC also stated that only 10 DMBs maintained adequate Fidelity Insurance Coverage of 15 per cent, as stipulated by the NDIC, adding that the cover of the remaining 21 banks was below the threshold, with the corporation directing them to ensure that full coverage was maintained as required.

“The coverage represented a decrease in the level of compliance from 44.83 per cent at end December 2020 to 32.26 per cent in 2021. The fidelity bond cover is a type of insurance that protects an employer against losses caused by employees through dishonest practices.

“Section 33 of the NDIC Act 2006, mandates all insured institutions to purchase fidelity insurance coverage to mitigate the impact of these potential losses on financial institutions.

“The minimum required cover must not be less than 15 per cent of the institution’s paid-up capital as at December 31 of the preceding year, “it added.

The report among other things stated that six banks had 320 foreign branches/subsidiaries, compared with 304 reported in 2020.

Access Bank, the report said had the highest number of foreign branches, accounting for 157 (49.06 per cent) of the total overseas branches, followed by Guaranty Trust Bank with 110 (34.37 per cent) and Zenith Bank with 48 (15 per cent).

It added that Keystone Bank and United Bank for Africa (UBA) maintained 2 (0.63 per cent) foreign branches each, while Union Bank had one foreign branch during the year.


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