Four years into the cashless policy in Nigeria, Automated Teller Machine-related frauds are fast becoming a major threat to the success of the programme,
Mr. Bamidele Delight, an engineer, was relaxing in his living room around 10pm on October 19, 2014, when he started receiving a series of debit alerts on his telephone.
Delight, who had never travelled out of the country, was later told by his bank that somebody far away in Houston, the United States, was using a debit card to withdraw dollars from his account.
A total of N149,000 was withdrawn from his account that night by an unknown person in the USA. The bank has since launched an investigation into the card fraud case.
There is a story of another bank customer, Mrs. Enitan Bankole who also received a number of debit alerts on a day she never made any withdrawal from her bank account. Before she could call the customer care department of her bank to launch a complaint, a total of N120,000 had been withdrawn from her account with a debit card by unknown person in Atlanta, the USA. Her bank commenced an investigation into the matter but the case is still pending.
Another customer, Mr. Shola Adeleke, suddenly discovered a total of N150,000 had been withdrawn from his bank account. He rushed to his bank and was told that an unknown person had used a cloned debit card to withdraw the money from his account in Chicago. Adeleke threatened a court action. The bank officials were said to have quietly reimbursed him.
Having realised the benefits of a cashless society as in advanced economies, the Central Bank of Nigeria recently launched programmes such as financial inclusion, cashless Nigeria and biometric registration of all bank customers.
Experts have noted the cashless Nigeria project rolled out by the CBN has in the last three and a half years made some giant strides.
According to them, modern ways of paying for goods and services, which were hitherto impossible, have now become a reality today.
Citizens now go to shopping malls, eateries and supermarkets with only their payment cards in their pockets. This is a card revolution in a country where cash was the only means of payment five years ago.
Unofficial figures from MasterCard, Visa and other payment companies show that there are about 35 million to 40 million debit cards currently in circulation in the country, all issued by Nigerian banks.
The scope of the cards has gone beyond the nation’s borders as the ATM cards are now being used overseas to make payment for goods and services.
The era of Nigerians shopping overseas with large cash or foreign payment cards is fast fading away.
However, there are mounting fears that the ATM fraudsters may scuttle the process and erode the gains recorded in the cashless policy especially in the area of electronic payment.
This, according to experts, may derail the efforts of the government to push Nigeria towards a cashless economy.
In June this year, a Lagos-based journalist had discovered that her token, which she often used for online banking transactions, was no longer working. After a few weeks, she reported the matter at one of the branches of her bank. She was asked to fill a form, which she did.
The following day, someone who claimed to be an employee of the bank called and told her that the bank was working on her request and that she needed to provide some details on her account, including her password, which was no longer working. She obliged and the call ended.
A few minutes later, she got two alerts that funds had been transferred from her account to two accounts in different banks. A total of N279,000 in her account was transferred to those accounts. The journalist returned to the bank to lodge the complaint and the lender referred her case to its Fraud and Investigation Unit. The matter is still being investigated and she has yet to get any refund and neither have the fraudsters been apprehended.
Investigations by our correspondent revealed that many banks had been silently reimbursing customers that are coming with cases of unknown persons using cloned debit cards to withdraw money from their accounts.
Some banks said they had discovered that almost all the customers involved had their money withdrawn by unknown persons from the ATM in the US cities.
At a special meeting on electronic fraud recently organised by Access Bank Plc at its head office in Lagos, several bank officials complained of being tired of using customer funds to reimburse other customers with cases of cloned debit cards.
“How long are we going to keep using customers’ deposits to settle other customers with cases of cloned cards?” a bank official queried.
The Director, Banking and Payment System of the CBN, Mr. Dipo Fatokun, who was represented by a deputy director at the bank at the event, said that banks had to put in measures to strengthen their internal controls, adding that card fraudsters were out to rip bank and their customers of millions of naira if care was not taken.
He said, “From the findings we did at the CBN, we discovered that most of these cloned cards were used in Atlanta USA. We found out that Nigerian ATM cards were being cloned and used in the US, especially in Atlanta. In fact, we discovered that the machine they use in cloning this card can be bought in Ikeja for few thousands of naira.”
He added, “We really need to strengthen our internal controls as banks. I know of a bank that tells their customers to inform them whenever they are travelling out of the country. Otherwise, once they notice any withdrawal from outside the country, they will quickly block it. That is commendable.”
Experts believe electronic payment platforms provide a cost-effective way to improve financial inclusion in Nigeria and Africa in general.
Nigerian banks, for example, working with the Nigeria Interbank Settlement Scheme, have commenced a consumer awareness campaign on the benefits of electronic payment platforms, with the aim of increasing their acceptance.
The Managing Director, Ecobank Nigeria, Mr. Jibril Aku, said, “In Nigeria, increased urbanisation, a growing labour force and the rise of online shopping are fuelling demand for more convenient payments.
“Using electronic payments to penetrate the country’s unbanked population of nearly 80 million also represents a market with huge, untapped potential.”
Aku said this when Ecobank and MasterCard signed an agreement for the issuance of debit cards to the bank’s customers in Nigeria. The deal would see MasterCard deploy its payment solutions in 28 sub-Saharan African nations.
The Division President, sub-Saharan Africa, MasterCard, Daniel Monehin, said, “We envisage a world beyond cash in Nigeria and Africa, where consumers can enjoy the security, efficiency and convenience of electronic payments. Our vision can only become a reality through collaborations with key industry stakeholders, such as the Ecobank Group. Working together with governments, financial institutions, merchants and businesses, we will be able to help modernise the payment industry in Africa.”
The collaboration came at a time MasterCard was working in partnership with governments and financial institutions around the world to broaden usage and acceptance of electronic payments, promoting their benefits relative to cash transactions.
Today, over 85 per cent of retail payments globally are still carried out with cash or cheque, with the percentage being much higher in Africa. However, the combination of a rapidly expanding middle class and steadily improving financial literacy, supported by robust technology, is increasing the appetite for card usage in Africa, providing opportunities for the advancement of a cashless society across the continent.
However, analysts insist that the spate of electronic fraud could threaten the cashless initiative as many bank customers are already weary of using electronic payment systems.
Already Delight, whose ATM card was cloned by a fraudster to withdraw from his bank account, has asked the bank for a refund of the money.
His lawyer had written a letter to the bank entitled, ‘Fraudulent debit of the account of Bamidele Delight’ demanding a refund.
The letter read, “We write as solicitors to Bamidele Delight herein after referred to as ‘our client’. We are constrained to write this letter to you because all efforts made by our client to resolve the captioned issues amicably with his branch in Ikorodu, Lagos have failed. On the 13th day of October 2014 at about 10.19pm, our client started receiving alerts on his phone to the fact that the sums totalling N149, 000.00 (one hundred and forty nine thousand naira) were withdrawn in several tranches from his account in Houston, Texas.
“The ATM card issued to our client before this incident had never been used outside the country. It is a naira denominated card. Our client therefore wonders how his naira-denominated card was accessed and used to withdraw dollars in far away Houston. The Friday before this event, our client conducted some transaction at his branch which must have reflected in his account and should have tipped off your IT department that something was fishy. Of course, this will not be the first time incidents like this have happened from our investigation and our client’s funds having been entrusted to your bank; our client is owed a duty of care by your bank; plain and simple! The night this incident occurred, our client called your bank to lodge a complaint and followed up with diverse official interactions with several official channels in your bank but nothing has been done.
“To this end, we have taken cognisance of the fact that similar unfortunate occurrences have been suffered by other customers of your bank in the past and this should have made your bank to be more careful. Therefore, should our client’s stolen funds and the fraudulent debit of our client’s account not be reversed within 72 hours from the receipt of this letter, we will have no choice than to commence a class action against your organisation.”
The case, however, is still on between the bank and the customer in question.
Experts, have, however, said the CBN and banks need to devise innovative ways to check the ugly trend.
The Managing partner DigitalEncode, Mr. Adewale Obadare, said e-fraud could be reduced if banks adopted modern technology and increase their internal financial control system.
He, however, noted that the CBN had major roles to play in mitigating electronic frauds.
The Chairman, Chartered Institute of Bankers of Nigeria, Lagos State Branch, Mr. Abolade Agbola, emphasised the need for the CBN to fast track the biometric registration of bank customers as a way of checking electronic fraud.
He said, “There is no justification for it; and what that will do is that people will limit the amount of money or specify the kind of account they expose to online money transaction. And I think the CBN is also insisting that when this issue has happened, it must be resolved speedily so that confidence will not be lost. And that is one of the reasons why banks will keep on changing their software to make it safer; and, of course, that is also one of the reasons the issue of national identity card needs to be fast-tracked, which is at the government level.
“We must have an identity card that identifies the human being with the face, and which will guide every transaction in the society. And that is why the political will to do that must also be there. Every fraud can be traced because the greatest way to check fraud is to know that you can be caught and the system has a lot of checks either through your finger or your face or your contact address. When you see the fraud that happens and the trillions of transactions that take place daily, then I think the banks have to take the technology ahead; take the staffing ahead and create a future for the employees so that they can know that they have a future in the organisation; and that they can build a future. This is because people commit fraud when they have short-term view of the future.”
The President, Institute of Chartered Accountants of Nigeria, Mr. Chidi Ajaegbu, said the CBN had achieved a lot in the cashless drive but there was a need to continue to build public confidence in the electronic means of payments.
He said, “If we are striving to become a 24-hour economy, then we must have the necessary controls in place to build people’s confidence in the cashless policy we are driving. And part of this is making sure that people believe that their liquid assets and details are secure. It is the key to the 24-hour economy we are driving towards.
“What they do in other jurisdictions is that when they notice any perceived infraction, they descend on it heavily. And I think this is one of the things we need to adopt here. We should let people know that you can do every other thing but we can’t let you mess around with our cashless system. It is going to go a long way to help our economy.”
The Vice-President, West Africa, MascterCard, Mrs. Omokehinde Ojomuyide, said inadequate infrastructure, manifesting as poor Internet services and related challenges, are among the factors threatening the cashless drive.
She, however, stressed that the policy had also led to the growth of e-commerce in the country.
The General Manager, Visa West Africa, Mr. Ade Ashaye, noted that the type of card used in the United States might be prone to fraud.
He, however, said the development could be mitigated with the help of new technology.
He said, “What we have found with fraud (in my experience) is that a card is not fraudulent in one transaction. If a card is cloned, it is used, may be up to five times, until somebody raises the alarm. But the earlier you can identify that there is a problem, the better. You can quickly stop it.
“These are the kinds of investments in technology that Visa makes available to our banks and that make sure that we are able to quickly identify a fraud and prevent it.”
The CBN has recently introduced some measures to curb e-banking related frauds. They included an anti-skimming device to the ATMs and limiting the amount that could be transferred via electronic channels.
But from findings, there seems to be no foolproof measure yet against frauds involving the use of cloned Nigerian ATMs abroad.
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