Safeguarding Customers’ Deposit From Fraud

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As technology continues to advance, particularly in the financial industry, fraudsters remain unrelenting in attempting to break through the several level of security to gain access into the accounts of unsuspecting bank customers.

This had led to the refusal of some customers to embrace technology and make use of the various alternative channels provided by their financial institutions such a the mobile and Internet based platforms.

Despite this, the use of electronic channels have over the years continued to grow as the volume of banking transactions done via electronic channels had continued to be in the upswing with the value of transactions done via instant payments and point of sale almost doubling.

This has led to increased attempts to defraud bank customers as the fraudsters continue to send phishing mails and text messages to lure the unsuspecting bank customers to divulge their security details. Their attempts have ranged from false messages threatening to block customers accounts to updating of Internet banking details to the Bank Verification Number (BVN) amongst others.

However, in spite of the rising the volume of transactions and attempted fraud on the electronic banking channels in the past year, the value of actual loss to fraud has declined substantially. Last year, the CBN reports that the value of electronic payment transaction rose from N27.56 trillion to N51.8 trillion in 2016, indicating 88 per cent increase.

In 2014, the volume of electronic transactions had risen by 43.4 per cent to 162.59 million from 113.42 million while the value rose to N48.93 trillion from N43.85 trillion in 2014, an increase of 11.6 per cent. While the volume of attempted fraud had risen by 635 per cent in 2015, the attempted value and actual loss had dropped by 43.6 and 63.7 per cents respectively.

According to CBN Director, Banking and Payment System, ‘Dipo Fatokun, the value of attempted fraud in 2015 had dropped to N4.37 billion compared to the 2014 value of N7.75 billion. The value of actual loss to fraud likewise dropped to N2.25 billion in 2015 as against N6.21 billion lost to fraud in 2014.

Fatokun explained that the decline in fraud was as a result of the Bank Verification Number, the two way authentication factor as well as the beefed up security features on the electronic payment channels

“This reduction showed that fraud was better curbed and more effective measures were taken to combat fraudsters in 2015,” he stated, adding that the feat had been achievable due to the memorandum of understanding signed by members which has facilitated industry collaboration.

To curb the rising level of electronic fraud, the Central Bank of Nigeria had taken various steps one of which is the establishment of the Nigeria Electronic Fraud Forum (NeFF). Fatokun noted that the adoption of the e-payment channels as a preferred channel of payment increased the incidence of electronic fraud, thus heightening the incidence of fraud.

This he said had led to the creation of NeFF which consists of all relevant stakeholders to actively and proactively react to this challenge to safeguard integrity of the e-payment channels. The deliberations of the forum has led to the release by the Central Bank of Nigeria of three industry defining circulars that include: two-factor authentication for internal banking processes, regulation of card-present fraud in non-EMV environment, and the creation of fraud desk for effective e-fraud control.

Asides this, he said NeFF has concluded plans to establish a replica of the South African Banking Risk Information Centre(SABRIC) in Nigeria, noting that establishment of the centre in Nigeria will further help in combating electronic fraud and build confidence in Nigeria’s payment landscape. According to him, members has been constituted to a harmonized committee that have written a report on the establishment of the institution.

“All the aforementioned testifies to how proactive our forum has been in responding to contemporary issues in the payment system security. As we know that payment system is a huge part of our lives, there is need to always be ahead of parties whose interest lies in subverting the system to perpetrate fraud,” he said.

Another tool put in place by the apex bank to combat electronic fraud in the Nigeria banking sphere is the Bank Verification Number (BVN) which will ensure that every bank customer is identifiable and transactions can be traced. The BVN is an addition to the Know Your Customer requirement which ensures that the bank knows who is who. Also the BVN will ensure that accounts used for fraudulent purposes are identified and blacklisted.

Although the deadline for compliance for Nigerian banks’ customers in diaspora had been extended till January 2016, the deadline for local customers have since expired and anyone without a BVN will not be able to make withdrawals.

Asides this, Nigeria had moved from the old swipe debit and credit cards to the more secured chip and pin cards. However, with this upgraded and more secured cards, the rate of fraud still persists which had prompted the Central Bank of Nigeria (CBN) a couple of years back to direct banks to increased the level of security on cards.

The apex bank had directed that banks in the country to get Payment Card Industry-Data Security Standard (PCI-DSS) certification to improve cardholders’ security and privacy, in line with international standards. PCIDSS is a framework used to prevent, detect and appropriate security incidents in payment operations among banks.

The PCIDSS is a process used by the United States authorities to protect cardholders’ accounts, privacy and security, which is set by the United States-based Payment Card Industry Standard Security Council (PCI-SSC), a body, saddled with the responsibility of ensuring safe and secure payment card data.

The scheme was designed to protect cardholders’ debit, and cash card transactions; it is also meant to protect personal information of the cardholder embedded, which will pave way for a successful and fraud free cashless economy.

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