Fraud has always been one of the biggest challenges confronting any online payment system. Increasing fraud rates around the world has impeded the growth of electronic payment by exposing merchants to substantial losses and unnerving security-conscious customers.
According to CBN, Automated Teller Machines (ATM) Fraud reduced by 98.50% over the last two years and since the implementation of the cashless Lagos policy began in April 1, 2012. The record drop in fraud notwithstanding, we are yet to confirm the possibility of a “trade-off” relationship between ATM frauds and Cybercrime in Nigeria.
Staggering Cybercrime Profile
Cyber Crimes Watch in 2011 reported that Nigeria ranked third in global internet crime after the United States and United Kingdom respectively. The Internet Crime Complaint Centre (IC3) had also placed Nigeria third in 2009 Cybercrime Complaints around the world, following closely after the United State and United Kingdom in the first and second positions respectively. In the same year, CBN reported that 70% of attempted or successful fraud/forgery cases in the Nigerian banking system were perpetrated via the electronic channels. The Economic and Financial Crimes Commission (EFCC) revealed that it had convicted over 288 persons over sundry Internet crimes as at April 2012.
Largest Illegal Industry in the World
Globally, the average annual financial loss occasioned by cybercrime is put at $388 billion involving about 431 million adults. According to Symantec research, the value of global cybercrime industry outweighs the hard drug market with a yearly activity of $288billion. The cybercrime activities dominant in Nigeria includes espionage, internet hacking, scam, extortion, fraud, impersonation, free ware, war dialling, Internet hoax, remote access tools, spyware, viruses and worms. The current 25% youth unemployment rate and weak legal system are major incentives propelling cybercrime in Nigeria.
Steady Migration from ATM to Web Fraud
It is somewhat hasty to evaluate the impact of the CBN’s cashless policy on cybercrime rate because the pilot phase of the programme just took off in Lagos with the plan of extending it to other major cities across the country by January 2013. However, we noted that the record drop in ATM fraud is in line with migration from the magnetic stripe-based payment tokens, to the Chip and Personal Identity Number -compliant channels and tokens, thereby recording over 90% drop in card-related fraud incidents. This also coincided with the period when banks across the country seem to have strengthened their IT control and security systems in readiness of the cashless policy. Our recent checks revealed a steady migration by fraud stars from ATM to internet fraud. And pending when the Apex bank will publish the cybercrime figures for 2012, we can only lend our voice to the campaign against financial crimes in the country.
Cashless Policy yet to Trickle Down
The cashless policy holds that the daily cumulative limits are N500,000 and N3million on free cash withdrawal and lodgement by individual and corporate customer respectively. Processing fee for withdrawal above the limit for an individual is 3% while corporate is 5%; also, the processing fee for lodgement for an individual is 2%, while that of corporate is 3%. For now, the impact of the cashless initiative is minimal as cash transactions still accounts for over 85% of total transactions in the country.
There is a daily average of 170 million transactions across several channels among the banks in Nigeria; yet with over 70 million unbanked people out of a population of 160 million, Nigeria is yet to scratch the surface of electronic banking. Infrastructure shortcoming such as power fluctuations, network downtime, unavailable Point-of-Sale (PoS) terminals and poor internet penetration has continued to impede the Cashless Lagos programme. In April, this year, there are only about 10,000 ATMs and 14,000 PoS terminals that are functional across the country. So far, we are yet to see the impact of the recent deployment of 65,000 PoS terminals by CBN across the country and the rollout of 100,000 PoS terminals by the Bankers Committee.
Cyber Crime Statistics details as below:
- 25% Cyber crime remains unresolved
- 75million Scam Emails are sent every day claiming 2,000 victims
- 73% of Americans have experienced some form of cyber crime and (65% globally) do the same.
- 10.5% of the world’s Hackers from the UK
- 66% of the world’s hackers are American
- 7.5% are Nigerian
- Brazil suffers more than any other country with 83% of the population having suffered from internet crime
Source: CyberCrimesWatch 2011 Report
- The Bankers’ Committee should move very fast in implementing the proposed shared database on customers’ identity, in other to check the incidence of fraud through multiple identities and strengthen security in the financial industry.
- National Assembly should expedite action on the Payment System Management Bill and the Financial System Ombudsman Bill.
- National Assembly should review the Evidence Act to give legal backing to regulations and guidelines in the payments sector
- Banks, telecom companies and regulators should continue to remind the public of the danger of responding to phony telephone text messages and calls informing them that they had won prizes in different forms. Bank customers who are not cautious of such messages from cyber fraudsters would likely fall victim.
- Banks should move away from discreetly dealing with insider related cases of frauds and cybercrime.
- NAME and SHAME strategy will arguably serve as a deterrent to other bank staff who are likely to perpetrate one form of fraud or the other in collusion with members of the public.