CBN cracks down on fraud with new rules for transaction monitoring
February 20, 2024343 views0 comments
Business a.m
The Central Bank of Nigeria (CBN) has taken new measures to combat the growing threat of fraud in the country’s financial sector, requiring banks to implement automated transaction monitoring systems.
The apex bank, in a recent document titled “Revised Consumer Protection Regulations”, on its website, stipulates that banks must also test the suitability of their products with consumers before introducing them to the market. This is intended to ensure that products are designed with consumer protection in mind, and that potential risks and vulnerabilities are identified and addressed before a product is released.
To this end, the CBN’s proposed consumer protection regulations outline several specific measures that financial institutions must take to protect customers and prevent fraud. In addition to the automated transaction monitoring systems, the proposed regulations require banks to implement other advanced measures to protect consumers and prevent fraud. These include using multiple types of customer identification, such as biometrics, to verify identity and reduce the risk of fraud. In addition, banks are required to use multi-factor authentication for transactions, such as a combination of passwords, personal identification numbers (PINs), and one-time passwords (OTPs) to further protect customer accounts.
The central bank noted that the regulation was issued due to the significant transformations in the financial sector which exposes consumers to new challenges and risks. According to the CBN,safeguarding the interests and ensuring greater protection of consumers in the evolving financial services landscape necessitated the review of the 2019 consumer protection regulations.
The document partly read: “Pursuant to the object of CBN in Section 2 (d) of the Central Bank of Nigeria Act, 2007 and in exercise of the powers conferred by Section 30 of the Banks and Other Financial Institutions Act (BOFIA), 2020, the CBN hereby issues the revised Consumer Protection Regulations to give effect to the Principles contained in the Consumer Protection Framework for institutions licensed and/or regulated by the CBN, and reflect current realities of consumer protection practices, improve good consumer outcomes and access to financial services.”
The CBN also directed banks to educate and raise awareness of potential fraud threats or scams among their customers. This includes providing information on how to identify and avoid falling victim to these scams. In addition, banks will be required to establish and regularly communicate procedures for reporting incidents of fraud, theft, or loss of payment instruments and/or authentication information to customers.
The new regulation from the CBN comes at a time when Nigeria has seen a significant rise in the number of reported fraud cases. According to ‘’Reports of Fraud and Forgeries in Nigerian Banks’’ released by the Financial Institutions Training Centre, the first half of 2023 saw 24,232 reported cases of fraud, totaling N12.33 billion.
The Financial Institutions Training Centre (FITC) is a capacity-building and advisory institute for financial services professionals. FITC’s institutional members are drawn from the Nigerian banker’s committee, which includes the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), and all licensed banks in Nigeria.
FITC revealed that a total of 110 executives and junior staff members of banks in Nigeria were dismissed due to fraud-related offenses over the past two years. These offenses amounted to a total of N82 billion.
To effectively minimise the risk of fraudulent activities in Nigeria’s financial sector, the CBN the importance of educating and empowering customers with the knowledge they need to identify and avoid scams. This includes teaching customers about common scams and how to spot them, as well as encouraging them to report any suspicious activity to their bank. In addition, the CBN notes that simple and secure user interfaces for digital financial services can
According to the CBN, sensitising customers on fraud threats or scams and providing secure and simple user interfaces for digital financial services are crucial steps to minimise the risk of fraudulent activities.
The regulations highlight the importance of continuous efforts to enhance cybersecurity and protect consumers in an increasingly digital financial landscape.