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Cybercrime in the Nigerian Banking Sector: Customer Protection

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Electronic fraud in the Nigerian banking industry is a topical issue to customers who are often left in a helpless and irrecoverable position in the event of electronic/ online theft.

The ongoing trend of cybercrime has become a major challenge because the complexity and reliance on technology has created new opportunities for fraudulent activities and other forms of exploitation, especially on the internet and other electronic platforms.

A report by the Nigerian Electronic Fraud Forum shows that Nigeria is losing about 2.19 Billion to electronic payment fraud annually. Sequel to the emergence of the cashless policy established in 2012 as a means of reducing the volume of cash in circulation, there was an emergence and adoption of various e-payment channels such as Point of Sales (POS), ATM, Web/Online banking to mention a few.

Consequently, with advancements in electronic payment processing, an upsurge of electronic fraud has been witnessed. This is as a result of the transfer of risk to these electronic channels.

This digital journey is plagued with land mines represented by electronic fraud and there has been a global shift on security policy to a more cyber centric position.

The warfare of banking security has changed from what was conventional to a constantly changing strategy in response to the rapid developments in payment technology. It has therefore become necessary to review and strengthen existing rules and enact new modalities in mitigating this problem.

The Evolution of Cybercrime

The last few decades have seen technology and computer systems become integral to the daily functioning of businesses, governments, and individuals so much so that they have become second nature, and a lot of trust has been placed in these systems. As a result, more and more important and valuable data is being stored and processed digitally.

However, this exponential growth in the tech industry has brought about the rise of Cyber Crime which is now an industry unto itself. As more computers, servers and mobile devices are flooded with valuable data, cyber criminals device new methods to access to these systems, and consequently the data in them, in order to gain some form of profit. The global cybercrime industry is currently estimated to be worth about half-trillion US dollars ($500,000,000,000) annually.

While it has been around even before the existence of the internet, cybercrime has become more sophisticated and has rapidly evolved with the internet itself. Earlier instances of cybercrime being committed involved simple hacks and theft of data in the early 70s.

These days, cyber-attacks are much more established and include some of the following:

  1. Cyber-extortion – criminals threaten to close down internet-based businesses if protection money is not paid
  2. Information theft – criminals infiltrate a computer network with the purpose of obtaining information relating to the users (individuals or businesses)
  3. Fraud – fraud has many guises on the internet, from the famous e-mails promising millions in advance fees to the sale of unmarketable quality goods
  4. Identity theft – criminals steal their victims’ identity and then transact, usually via the Internet in the name of the victim. This usually includes an element of credit card fraud
  5. Phishing – criminals obtain financial information, such as or credit card details, by sending what look like authentic messages to the recipient informing them they need to comply with certain procedures to reactivate their account. Once the information has been obtained, the criminal then defrauds the victim.

Cybercrime in the Nigerian Banking Sector

Cyber-crime has tarnished Nigeria’s international reputation for the past couple of decades – from advance fee fraud (popularly known as 419), to the diversion of funds from individual and business accounts by using dubious methods such as phishing.

The exponential increase in internet and mobile phone penetration, coupled with the Central Bank of Nigeria’s drive towards a cashless economy has contributed to the growth of cybercrime within the Nigerian banking industry.

The means of transacting business has evolved from the traditional barter-based society into cash, issuance of cheques, then cards, and is now moving into the digital frontier of virtual wallets and mobile platforms. As such, the converging forces of technology have tremendously altered manual systems of delivering banking services and have subsequently paved way for electronic delivery platforms in recent time. Heli (2006) confirmed this assertion when he held that the use of electronic means of payment has increased at the expense of paper-based payment instruments. He further disclosed that in some countries, payment cards have replaced cheques, and Internet banking has become a popular means of paying invoices. Nigeria is not an exception; we have had a share of this revolution.

Whereas, at some point in the history of payments, one could only pay with cash, we now have a plethora of alternatives namely: Online payment services (Paypal…..), Electronic Bills Payment (Internet Banking), Wire Transfer (local or international), Direct Credit (initiated by payer), Direct Debit (initiated by payee), Debit Cards, Credit Cards, and good old Cheques.

With the adoption of these new technological evolutions which are aggressively driving business innovation and growth in Nigeria, it is at the same time exposing the country to new and emerging threats. These criminals have found yet another means to increase their nefarious ways of fleecing innocent victims of their money. The consequences of these criminal activities are numerous and can be devastating to the victims of such crimes. These can involve one or more of the following: the painful loss of monies, the socio-economic impact of erosion of confidence in the national payments system and the psychological trauma the victim faces. A research by Weizmann Institute scientists reveals that financial loss can lead to irrational behavior and may also have implications for traumatic stress disorder.

While payment providers are making tremendous efforts to block these fraudsters, there is still need to protect consumers who represent the weakest link of the payment chain. Between 2000 and 2013, banks in the country according to The Central Bank of Nigeria lost ₦159 billion to electronic frauds and cybercrime.

According to NIBSS, the reported frauds for the year 2017 stood at ₦4 Billion Naira and ₦1.63 Billion for attempted fraud value and actual loss value respectively. The decrease of 24% in actual loss value due to perpetrated fraud was a lot higher than the recorded 2.65% decrease recorded in 2016. Again, this was made possible due to effective collaborations which exist among the various institutions in the fight against the menace called fraud.

The trends in the figures below, obtained from NIBSS Annual Fraud Landscape 2017 shows that although the fraud value may have reduced in 2017, but the significant increase in volume of attacks depicts the enormous threat of e-fraud. It is against this backdrop that as e-fraudsters continuously develop new schemes to perpetrate e-fraud, the consumers and users of the system must be protected..

Policies (Gboyega)

The continued innovation and expansion of the e-payment channels in the country especially since the introduction of the cashless policy by the CBN in January 1, 2018 has made cyber security continuously difficult in the Nigerian banking industry, thus incidents of attempted fraud and actual fraud are on the increase in the country with attacks such as phishing, identity theft, skimming, malware, ransomware and so on.

According to KPMG’s recent report during the Pan African Cyber Security Conference, it was noted that the level of cyber risk in Nigeria is moving from moderate to high without even experiencing medium, as level of technology adoption in Nigeria is very high.

As the country continues to experience rapid technological advancement, cyber fraud is becoming more sophisticated and can be committed more effortlessly and remotely from any part of the world by perpetrators hacking into a victim’s’ computer.

It is the aim of this document to probe the policies of the government/regulators and financial institutions for the protection of the both corporate and individual customers in Nigeria.

Government Policy, Legislation and Law

It is the statutory duty of the government to make policies and laws to protect the citizens and their assets. Hence, the following actions have been taken by the Nigerian government in terms of cyber security:

Enactment of Nigerian Cybercrime Act 2015

The Nigerian Cybercrime Act 2015 was signed into law on May 15, 2015 to serve as a legal framework that criminalizes fraudulent online actions, prescribing funding, punishment and creating legal procedure for investigation, protection and enforcement.

In line with the act, the CBN on July 1, 2018 commenced the collection of 0.005% levy on electronic transactions for the National Cybersecurity fund.

Establishment of Industry Fraud Desk

The CBN through a circular released on June 11, 2015 established the National Electronic Fraud Forum (NeFF) to proffer solution towards addressing fraud arising from the increased adoption of e-payment solutions in the Nigerian banking industry.

All Deposit Money Banks, Switches and Mobile Money Operators are directed to establish dedicated fraud desk manned by trained personnel in their respective organisations to provide support to customers on matters relating to e-fraud with the capabilities of blocking or placing no debit restriction on account on the receipt of fraud complaint, with their activities coordinated by the Nigeria Inter-Bank Settlement System.

Corporate Policy (Financial Institutions)

Financial institutions owe their customers a duty of care, which includes of deposited funds. Therefore, banks have invested a lot in the integrity of e-payment solutions. Some the investments so far includes:

Recruitment of trained and certified security professionals within the bank to give ready technical support in-house.

Introduction of whistle blower platform to enable stakeholders including staff report unethical or unprofessional conduct of employees without revealing the identity of the complainant

Security awareness campaign to enlighten customers of their roles in the fight against e-fraud such as scam emails requesting for customer’s security details, need to install anti-virus, anti-malware on computer systems

Investment in cyber security software such as anti-phishing solution, authentication factors e.g. Token and One Time Password and so on.

Regulations (Doyin)

The Nigerian Situation in relation to cyber activities concentrates efforts and attention on E-government services, payment platforms for e-Commerce, ATM Machines, Electronic Activities of the NSE, Cashless banking services and Nigerian Electronic Identification system which include among others, the INEC card reader system.

Since the loss suffered by consumers and investors creates serious credibility and image problems, many countries develop strategies for preventing, detecting and containing the threats associated with cybercrime. While it is acknowledged that greed is a major factor motivating most victims, what about the image created for many who never respond?

How is the nation fighting cybercrime? It’s interesting that there is quite a lot of talk about fighting cybercrime. But what are the efforts? And how effective are they? Since there is an awareness of the menace it poses to society, what have been the sincere and meaningful efforts to fight cybercrime?

The significance of cyber legislation cannot be overemphasized in our contemporary Nigerian society. As outlined below, the imperativeness of cyber legislation in Nigeria could be viewed from the following perspectives:

  • Establishment of Legal and Regulatory Framework
  • Establishment of Institutional Framework for coordination and implementation;
  • Standards and Regulations;
  • Capacity Building
  • Compliance & Enforcement;
  • Emergency Response & Readiness;
  • Public enlightenment
  • International Cooperation and Institutional Framework

Offences and penalties

From the foregoing analysis, what is central to this section is to outline the rudiments of the cyber-criminal offences and what obtains as regards to penalties and punishment which include among others:

  • Offences against critical national information infrastructure
  • Unlawful access to a computer
  • Registration of cybercafé
  • System interference
  • Intercepting electronic messages, emails, electronic money transfers
  • Willful misdirection of electronic messages
  • Unlawful interceptions
  • Computer related fraud
  • Theft of electronic devices
  • Unauthorized modification of computer system, network data and system interference
  • Electronic signature
  • Cyber terrorism
  • Fraudulent issuance of e-instruction
  • Reporting of cyber threats
  • Identity theft and impersonation
  • Child pornography and related offences
  • Cyber stalking
  • Cyber squatting
  • Racists and xenophobic offences
  • Attempt, conspiracy, aiding and abetting
  • Importation and fabrication of e-tools
  • Breach of confidence by service providers
  • Manipulation of ATM/POS Terminals
  • Employees responsibility
  • Phishing, spamming and spreading of computer virus
  • Electronic card related fraud
  • Use of fraudulent device or attached e-mails and websites

The creation of these offences and penalties then leaves the question of enforcement and successes achieved in this regard. While challenges exist internationally, Nigeria is confronted with peculiar challenges. These include:

  • The unending cyber battles (supremacy disagreements) among law enforcement, intelligence and security agencies;
  • Lack of integration between the public and private sector in fighting against cybercrime.
  • Inadequacy in the policy option that deals with the issues of surveillance
  • Glaring lack of harmonized policies and laws

All these make enforcement and prosecution, herculean tasks.

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