How Nigerians lost N13bn to telecom-based financial crimes in 4 years

The digital technology has come to revolutionise how we transact business and it changed Nigeria’s payment systems. However, it has also increased the number of perpetrators of e-fraud in the country. Perpetrators of e-fraud are no longer restricted to geographical boundaries as potential perpetrators could be in the Northern part of Nigeria and defraud a […]

The digital technology has come to revolutionise how we transact business and it changed Nigeria’s payment systems. However, it has also increased the number of perpetrators of e-fraud in the country. Perpetrators of e-fraud are no longer restricted to geographical boundaries as potential perpetrators could be in the Northern part of Nigeria and defraud a victim in the South and vice versa.

Between 2019 and January 2023, Nigerians, including the Executive Vice Chairman of the Nigerian Communications Commission (NCC) lost about N13 billion to financial crimes linked to the telecommunications industry.

The commission’s Director of Consumer Affairs, Dr Al-kasim Umar, said, “According to some reports, Nigerians have lost about N12.5 billion to financial crimes linked to the telecommunications industry in the past four (4) years. The Center for Strategic and International Studies (CSIS) estimated that $600 billion is lost to cybercrime each year, an increase from a 2014 study that put global losses at about $445 billion”. 

The NCC Consumer Affairs boss who said e-fraud poses a significant threat to Nigeria, added that it undermines the trust and confidence in the country’s digital platforms, hampers economic growth, and adversely impacts the lives of its citizens.

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Umar said the commission decried that daily, Nigerians are losing their hard-earned money to fraudsters, who are taking advantage of the vulnerabilities on their platforms to defraud them.

As such, he said eFraud poses a significant threat to the society, as it undermines the trust and confidence in our digital platforms, hampers economic growth, and adversely impacts the lives of our citizens.

He disclosed that as the regulatory authority responsible for overseeing the telecommunications industry, the NCC recognises its duty to safeguard the interests of consumers and protect the integrity of the digital ecosystem.

The Executive Vice Chairman of NCC, Prof Umar Garba Danbatta said e-fraud encompasses a wide range of malicious activities carried out via electronic means, including identity theft, phishing, hacking, and unauthorized access to personal and financial information, with the intention to defraud or take advantage of victims.

“ These criminal activities may not only cause significant financial losses but also erode consumer trust in the digital ecosystem. The NCC as the regulator of the communications sector has a crucial role to play in combatting e-fraud. We must establish comprehensive legal frameworks and standards that mandate sound security practices for telecom operators”, Prof Danbatta said. 

NCC boss loses $5000

Buttressing how painful the activities of eFraud could be, Danbatta said he recently lost $5000 of his legitimate earnings to cyber criminals, noting that the networks need to be kept safe for all. He urged the telecoms operators to upgrade and equip their networks with tools that will make them robust and secure from criminal attacks because of consumers.

According to him, an unsecured network put the personal data of Nigerians at risk, stressing that the idea of the type approval equipment policy of the NCC was due to the need to ensure that they don’t undermine the security and safety of Nigerians.

Non-Executive Director and Chief Executive Officer, FutureSoft, Nkemdilim Uwaje-Begho, said key challenges of eFraud, include evolving threat landscape; increased risk; lack of awareness; lack of collaboration and limited regulations.

Uwaje-Begho said to mitigate the threats, there was need to build consumer confidence in the digital economy; regulators must implement policies that facilitate collaboration; establishment of formal mechanism for information sharing; encouraging public-private partnerships within the telecoms industry as well as cross-sector to leverage expertise.

According to her, international cooperation and information sharing among countries can help curb eFraud; telecoms operators should implement multi-layered security measures; regular security audits, vulnerability assessments and timely software upgrades. She advised that there should be collaboration with cybersecurity experts and law enforcement agencies, saying that this can help curb eFraud.

Also speaking on the e-fraud, Prof. Kareem Olatoye of the Faculty of Law, Lagos State University (LASU), said the digital payment system is vulnerable to fraud and evidence of this abound everywhere, with cybercrimes such as cyberstalking, cybersquatting, phishing, among others, leading the pack.

Olatoye said the report had it that identity fraud global losses totaled $52 billion in 2021, but he said that there are a plethora of existing Nigerian laws having provisions capable of helping to mitigate fraud.

According to him, these include Cybercrime (Prohibition, Prevention) Act 2015; Central Bank of Nigeria Act; Economic and Financial Crime Commission Act 2004; Money Laundering (Prohibition) Act 2012; the Advanced Free Fraud and Other Fraud Related Offences Act 2006; the Communications Act 2003; Nigeria Deposit Insurance Corporation Act; Evidence Act 2011; Criminal Code Act 1990; the Penal Code 1990; Companies and Allied Matters Act 2020.

Others are the Constitution of the Federal Republic of Nigeria 1999; the Trademarks Act 2004; Anti-Corruption Act; Bank Employees, etc (Declaration of Asset) Act; National Drug Law Enforcement Agency Act and Special Tribunal (Miscellaneous Offences) Act.

The Law Professor said law could be used to proffer solutions, stressing that effective regulation is required. He said registration/licensing of e-payment platforms/the Fintechs and effectively regulating them; KYC requirement/supervision, S.37 cyber crime Act 2015.

Olatoye said data protection must be robust; stressing that S.6 NITDA Act enables regulating electronic data interchange.

Mitigating the impacts, the Law Professor recommended that there is a need for law mandating payment software developers/owners to ensure security of the payment system against hacking and other abuses that could result in financial loss to users. 

He said there should be digital payment risk insurance in Nigeria as seen in the USA, adding that online safety law is also required as seen the United Kingdom online safety bill (s.36), which imposes duty of care to offer protection where criminals impersonate to steal people’s personal data or break into bank accounts.

He said there is a need to place and enforce the legal burden on anyone carrying on business using Internet enabled platforms to take responsibility for the safety of customers making digital payments.

“Adequate punishment for cybercrime and effective implementation. Digital Infrastructure needs to be robust. Online policing /monitoring of financial transactions, international cooperation are needed,” he stressed.

To safeguard their customers, NCC urged telecom operators to invest in robust infrastructure, employ state-of-the-art security measures, and conduct regular audits to identify vulnerabilities and address them promptly.