With nearly 58 million BVN issued, why is fraud rate still rising in the banking sector?

The Central Bank of Nigeria (CBN) has issued nearly 58 million BVNs (Bank Verification Numbers) to Nigerians as of July 3, 2023. This is according to the Nigeria Inter-Bank Settlement System (NIBBS). The recent numbers indicate a significant increase of 13.30% compared to the previous year. However, despite this substantial growth, there is still a concerning prevalence of fraud in the banking sector.

Technext reported, that Nigerian bank customers lost a total of N472 million to fraudsters in the first quarter of 2023 alone, with 12,553 cases of banking fraud being reported during that period, as disclosed by Financial Institutions Training Centre (FITC). Although the number of reported cases has decreased compared to the previous year, it remains a worrisome situation.

“For Q1 2023 under review, an analysis of the magnitude-based ranking of fraud categories shows that Mobile Fraud has the highest ranking which accounts for N1.1 billion (42.72%), and this is followed by the Computer/Web fraud category at N646 million (24.99%). This was followed by POS Fraud at N450 million (17.41%) and fraudulent withdrawals at N139 million (5.36%),” – the report stated.

The BVN system was introduced to address issues of identity theft and reduce exposure to fraud. By providing a unique identity that could be verified across the Nigerian banking industry, BVNs were intended to protect customers’ bank accounts from unauthorized access and enhance the industry’s ability to identify blacklisted customers.

Read also: How fraudsters hacked 1000 bank accounts using BVN-linked phone numbers

Why are bank fraud cases still rampant?

The Q1 2023 numbers reveal that of all the fraud activities, mobile fraud, computer/web fraud and POS-related fraud were the top three frauds with the highest number of occurrences. This is consistent with the trend from the previous quarter.

Also, staff involvement increased to 72 cases in Q1 2023 from 38 cases in Q4 2022, representing an 89.47 per cent increase. Also, there was a total of 124 unspecified cases and 6 collusion cases.

According to the NIBSS, the increasing incidents of compromise on conventional security systems (password and PIN), had increased the demand for greater security for access to sensitive or personal information in the banking system.

These are other ways fraudster get access to bank accounts linked to BVN

• Inside connivance: A significant portion of the information available to fraudsters is obtained through collaboration with bank staff and other insiders who have access to customer data. These individuals may compromise the security of customer information for personal gain or through bribery.

• Impersonation: Fraudsters often pose as customer service agents from banks and trick customers into providing personal information over the phone or online. Customers may unknowingly disclose their account details, passwords, or other sensitive information, falling victim to social engineering tactics.

• Careless handling of documents: Some customers carelessly display their bank tellers in public places, providing an opportunity for third parties to copy or photograph the details. This can lead to unauthorized access to their accounts or identity theft.

• Hacking into bank databases: Hackers target the databases of banks to gain unauthorized access and steal customer information. By exploiting vulnerabilities in the security systems or employing sophisticated hacking techniques, they can extract sensitive data.

• Insider involvement: Although unverified, it is possible that an insider may have willingly provided BVNs or other customer details to external individuals for fraudulent activities. Insider threats can significantly compromise the security of customer information.

• Faulty mobile apps: Fraudsters increasingly utilize compromised or fraudulent mobile applications to steal customer data from other phones. These malicious apps may mimic legitimate banking applications or exploit vulnerabilities in legitimate apps to gain access to sensitive information.

Read also: BVN is issued for life: CBN moves to correct fake news it put out in a 2015 FAQ

Safety measures

• Don’t download apps if you don’t trust them, especially apps that are not on the recognized stores.

• Do not share your bank information on untrusted mobile apps.

• Use just one account on all online sites and keep just a minimal amount of money in that account.

• Never disclose your personal account information like ATM number, ATM PIN, and BVN to anyone on the phone.

CBN’s resolve to end fraud cases

The CBN, through its Director, Risk Management Department, and Chief Risk Officer, Blaise Ijebor, noted that the CBN was working to remove accounts not linked to BVNs from the financial system.

 He said the objective is to “clean up the sector and reduce the growing incidence of fraud.”

This decision was motivated by the increasing compromise of conventional security systems such as passwords and PINs, which highlighted the need for enhanced security measures to protect sensitive or personal information in the banking system.

CBN has placed over 6,000 BVNs on a watch list for fraudulent transactions. Out of the total number of active customer accounts, 130.57 million are linked to BVNs. By threatening to close accounts without BVNs, the CBN intends to strengthen security measures and protect customers’ funds.