In a bid to curb financial fraud, the Central Bank of Nigeria (CBN) has directed the Nigeria Inter-Bank Settlement System (NIBSS) to debit the settlement accounts of commercial banks that receive fraudulent funds. The new measure, set to take effect in January 2025, aims to hold banks and fintechs accountable for lapses in their fraud detection systems.
According to sources familiar with the directive, banks that fail to adequately screen incoming transactions or detect fraudulent activity will face immediate debits once such cases are reported. This move is expected to push financial institutions to strengthen their Know Your Customer (KYC) protocols and due diligence processes, which the CBN has repeatedly emphasized as essential for protecting Nigeria’s financial system.
Adedeji Olowe, founder of Lendsqr, described the directive as a fundamental shift in responsibility. “What this means is that banks and fintechs are now responsible for the money that comes to them. This has always been the foundation of KYC, not just in Nigeria but in every financial jurisdiction in the world,” he said.
The policy has been unofficially in effect since December 2024, following a major fraud case in which a leading Nigerian bank lost ₦7 billion. NIBSS reportedly debited the settlement accounts of a fintech that received part of the stolen funds, without prior explanation. Two fintech executives, speaking anonymously, confirmed this move, highlighting the CBN’s growing scrutiny of fintechs over compliance issues.
Fraud remains a pressing issue in Nigeria’s financial sector. A report by the Financial Institutions Training Centre (FITC) revealed that Nigerian banks lost ₦42.6 billion to fraud in Q2 2024 alone. However, the actual figure may be higher, as many financial institutions avoid reporting fraud cases due to reputational risks. In 2023, only 60 out of 163 financial institutions disclosed fraud incidents, according to NIBSS.
With the new directive, banks are expected to implement more stringent transaction monitoring controls. At least two commercial banks have already tightened their surveillance of large and unusual transactions, sources familiar with the matter confirmed.
While neither the CBN nor NIBSS has officially commented on the directive, industry insiders believe its enforcement will be a major test of the regulator’s ability to reduce fraud and enhance financial security in Nigeria.
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