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Tuesday, 12 November 2013
CBN repositions policy as banks lose N159bn to electronic fraud
Worried about the spate of electronic fraud in the nation’s financial services industry, amplified by Nigeria’s gradual transition into a cashless economy, the Central Bank of Nigeria (CBN) has disclosed plans to reposition Payments System Policy and Oversight Office in order to be more responsive to challenges and realities of today.
The apex bank is also looking to evolve appropriate policies and regulation to proactively tackle electronic fraud in the country. Available statistics show that Nigerian banks have lost a whooping N159 billion to electronic fraud between 2000 and first quarter (Q1) of 2013.
Speaking at the 4th Annual Payment System and Fraud Conference organised by the Electronic Payment Providers Association of Nigeria (E-PPAN) in Lagos, weekend, Tunde Lemo, deputy governor, operations, CBN, said the cashless economy scheme has continued to make appreciable progress within the context of the peculiarity of Nigerian business environment. According to the CBN Director, electronic fraud has become a significant snag the success of the cashless initiative, further adding that the apex bank is constantly devising innovative ways of curbing the menace.
Christabel Onyejekwe, executive director, business development, Nigerian Inter-Bank Settlements Systems, (NIBSS) plc, said the huge losses to e-fraud is a deterrent to improving the consumer confidence and adoption of Nigeria’s cashless strategies. Onyejekwe, quoted recent research data on e-fraud in Nigeria by the Financial Institutions Training Centre ( FITC).
Analysing the annual e-fraud trend in the banking industry since 2000 till date, Onyejekwe, in an interview, said that the figure stood at N1.65 billion in 2000; N3.12 billion in 2001; N8.20 billion in 2002, but declined to N5.13 billion in 2003 while in 2004, the figure moved up to N89.43 billion.
Also, in 2005 and 2006, the electronic fraud dropped to N6.76 billion and N2.74 billion losses to the banks while in 2007, the figure spiralled to N8.51 billion. The year 2008, according to her, marked a watershed in the trend of e-fraud, as Nigerian financial institutions recorded the highest losses to the tune of N34.50 billion.
The successful switch from magnetic stripe cards for Automated Teller Machines (ATM) in 2009 to a more secure Chip and PIN cards led to a drastic reduction in e-fraud to the tune of N21.72 billion with a further decline to N14.96 billion in the preceding year (2010).
Lemo further explained that infrastructural bottlenecks in the scheme are being tackled head on while federal government’s reforms in both power and telecommunication sectors will indeed ensure long term sustainability of the project.
Lemo, however, noted that the menace of fraud threat had assumed a frightening dimension globally overtaking drug trafficking as the largest revenue earner for organised crime not only in Nigeria but globally. “I am excited by progress made in Nigeria in combatting the menace, especially success made with Chip+PIN technology and two-factor authentication.
“But recent information gives course for concern. Recently, I learnt that such threats as Man-in-the-Browser (MITB) attacks, which I learnt is capable of defying such tested countermeasures as SSL/PKI two/three factor authentication and One Time Password once thought to be the Holy Grail antidote to electronic payments and/or online banking fraud threats.
“We used to derive comfort that when transacting online over an https-based website, we were secured, but now what was hitherto a forte for online financial services and e-commerce has been corrupted with https based attack.”
Trustee, E-PPAN, Adedotun Sulaiman, said, although new and emerging e-payment methods were good for the market, they present new risks capable of eroding trust and confidence within the payment system.