The Nigerian fintech sector is booming, but so is fraud. When FinTech companies are involved, it’s becoming difficult to resolve cases without involving the Central Bank of Nigeria (CBN).
According to a report by BusinessDay, a Nigerian business newspaper, some fintech companies have been reluctant to cooperate with banks and regulators in investigating and recovering funds lost to fraudsters. This gives the fraudsters more time to move the money and makes it harder to trace.
The report cites several cases of fraud involving fintech companies in the past year, amounting to over N14 billion ($34 million). Some of the cases include:
- Access Bank: N2 billion fraud
- Fidelity Bank: N2 billion fraud in over three cases
- Shago: N800 million fraud on airtime and bill payment
- Flutterwave: N2 billion fraud
- FCMB: N2 billion fraud
In many of these cases, hackers could access the banks’ systems with the help of insiders. They then exploited the banks’ interbank services to move the money out through fintech platforms.
The report also suggests that some fintech companies may prioritize profits over security measures or have aggressive shareholder expectations that may compromise compliance. Another factor contributing to the problem is the concept of the mule, a person who is used to cash out stolen funds or move them through legitimate financial channels.
The CBN is aware of the problem and is working on new regulations to address it. In January 2021, the CBN published its Framework for Regulatory Sandbox Operations in Nigeria and set up a regulatory sandbox to allow fintechs to conduct live tests of new innovative products and services under a controlled environment before being launched publicly.
The CBN also issued the Operational Guidelines for Open Banking in Nigeria 2023, which aim to establish a framework for standardizing open banking practices in the Nigerian financial industry and simplifying the process of information sharing between participants.
However, in the meantime, commercial banks and fintech companies need to implement strong security measures and cooperate to investigate and resolve fraud cases. The report also urges the government and the industry to work together to ensure the safety and benefits of fintech for Nigerians.
The Nigerian fintech sector has much potential to drive financial inclusion, innovation, and growth. But it also faces many challenges and risks from fraudsters who exploit its vulnerabilities. By working together, all stakeholders can ensure that fintech remains a force for good in Nigeria.
Source: BusinessDay
