Emmanuel Ochayi
The Economic and Financial Crimes Commission (EFCC) has sounded an alarm over the rise in fraudulent activities within Nigeria’s financial sector. According to EFCC Chairman Ola Olukoyede, negligence by some fintech companies in adhering to Know Your Customer (KYC) protocols is fuelling financial crimes, particularly among the unbanked, under-served, and middle-class populations.
KYC Gaps and Fraud Vulnerabilities
During a stakeholder engagement in Abuja, Olukoyede criticised fintech firms for their lax internal controls, especially when onboarding customers for tier-one accounts. He noted that these accounts often bypass rigorous KYC checks, creating loopholes that fraudsters exploit.
Join our WhatsApp Channel“There’s a significant level of fraud targeting the unbanked and middle-class spectrum. Fintech companies must pay close attention to KYC compliance, especially in the way tier-one accounts are opened,” he said.
The EFCC emphasised that fintech negligence not only undermines trust in digital finance but also exposes millions to financial crimes.
EFCC’s Call for Collaboration with Fintech Firms
Olukoyede stressed the need for fintech companies to work closely with the EFCC to combat fraud. He urged operators to view themselves as key stakeholders in the fight against corruption and to respond promptly to regulatory inquiries.
“Increasing your collaboration with the EFCC shows commitment to tackling corruption. We value partnerships that strengthen internal controls and prevent fraud,” Olukoyede stated.
The EFCC also expressed its readiness to collaborate with firms like Moniepoint, a leading digital payment provider, to address fraud challenges.
“When stakeholders proactively engage with us, it indicates their intent to create robust systems that mitigate vulnerabilities. Fighting corruption requires collective effort, and the EFCC is open to building stronger ties with the fintech sector,” he added.
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Shocking Rise in Financial Fraud
Recent reports from the Financial Institutions Training Centre (FITC) reveal a troubling surge in financial fraud in Nigeria. Between April and June 2024, banks lost N42.6 billion to fraudulent activities—an 8,993% increase compared to Q1 2024.
- Fraud Categories: The majority of losses (96.46%) were from miscellaneous fraud, including unauthorised withdrawals and online scams.
- Branch and Digital Fraud: Fraud through bank branches spiked by 31,497%, while computer and web-related fraud grew by 1,560%.
- Rising Risks: The total amount involved in fraud cases surged from N2.9 billion in Q1 to N56.3 billion in Q2 2024, underscoring the sector’s growing vulnerability.
Experts Weigh In
Tayo Ogunlade, Chief Technology Officer at Onafriq, explained that the rapid adoption of digital platforms has outpaced the implementation of robust security measures.
“As demand for digital services grows, organisations sometimes prioritise speed over security, particularly during customer onboarding. This oversight creates opportunities for fraudsters,” Ogunlade noted.
The Way Forward for Fintech and EFCC
The EFCC has urged fintech firms to revisit their onboarding processes, ensure compliance with KYC requirements, and invest in advanced security measures.
“Strong internal controls and effective collaboration are essential to curbing financial fraud. Fintech operators must view security as an integral part of their business strategy,” Olukoyede stated.
The EFCC reaffirmed its commitment to partnering with stakeholders to restore confidence in Nigeria’s financial systems.
What This Means for Nigerians
For the unbanked and middle-class populations, fintech platforms provide critical access to financial services. However, without stringent security protocols, these platforms can become a gateway for fraudsters.
By addressing these challenges, fintech firms can not only safeguard their customers but also contribute to a more secure and inclusive financial ecosystem.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
