Electronic banking fraud in Nigeria: how it’s done, and what can be done to stop it

By IMTFI Fellow Oludayo Tade, University of Ibadan, in The Conversation

Stefan Heunis/AFP via Getty Images

Six years ago, a cashless policy became fully operational in Nigeria. The aim was to encourage electronic transactions with a view to reducing the amount of physical cash in the economy. The logic was that this would minimise the risk of cash-related crimes.

But a major downside of the policy has been pervasive electronic banking fraud (e-fraud). Although the cashless banking system was designed to foster transparency, curb corruption and drive financial inclusion, it’s threatened by the growing perpetration of fraud.

About N15.5 billion was lost to bank fraud in 2018. About 60% of the fraud was perpetrated online owing to available internet-based and tech-rated banking services.

Our research investigated dimensions of electronic fraud in Nigeria. We found three: internal fraud carried out by banking staff; external fraud carried out by ordinary Nigerians; and collaboration between fraudsters and banking staff.

We found that inefficient supervision, non-performance of oversight by regional heads of banks, and poor follow-up on customers’ addresses (Know Your Customer) accounted for the fraud that took place.

Our study provides the banking industry, banking public and investors with critical pointers on how to reduce fraud.

Read more about the different types of fraud and recommendations in the full post here: https://theconversation.com/electronic-banking-fraud-in-nigeria-how-its-done-and-what-can-be-done-to-stop-it-141141

Access research publication: "Dimensions of Electronic Fraud and Governance of Trust in Nigeria’s Cashless Ecosystem" by Oludayo Tade and Oluwatosin Adeniyi in the International Journal of Offender Therapy and Comparative Criminology (IJO).

(Dis)Trust in Mobile Money in Ghana: Yesterday, Today, and Tomorrow

By IMTFI Fellow Vivian Dzokoto, Virginia Commonwealth University and John Kojo Aggrey, Louisiana State University

Yesterday: The Struggle to Gain a Foothold

In the early days of our IMTFI-funded fieldwork on Mobile Money (MM) in Ghana, MTN Mobile Money ads and billboards were out there. Yet, many interviewees either hadn't heard of MM at all; confused it with the e-zwich platform (a biometric smart card); or just didn't feel comfortable about the notion of converting physical cash to electronic value and keeping it on a mobile wallet on a cell phone. What was the discomfort about? For some, the apprehension concerned the non-materiality of the value. If one rolled up one’s cash and kept it in a bra, tied it in the corner of a cloth, or kept it in a repurposed plastic or tin container, one knew where it was at all times, and could access it easily. Intangible e-value was just too…. Intangible. For others, the concerns varied from utter disbelief that such technology could exist (it just seemed too good to be true), to suspicion that politicians must somehow be involved (and therefore it was something to be avoided). Additionally, interviewees from middle to upper income brackets thought that the technology would be hampered by the unreliability of the phone network (with statements like “right now, you need a backup for the backup”). Would the e-value get lost if the transaction was interrupted due to a spotty network? The variety of reasons indicated curiosity and a degree of skepticism about how the technology worked. It just didn’t seem trustworthy from the get go.  But that was in 2009. And 2010. And 2011. And 2012.

Money in the Cultural Context

It’s important to think about the context in which this technology was being launched and relentlessly promoted due to its success in Kenya. Traditional Ghanaian culture puts value on the form in which some payments are made. Apology pacifications may require a sheep, for example, and wedding bride prices come in the form of cash AND a variety of other goods. Yet nowhere has the form of money been more of an issue in contemporary Ghana than in the introduction of money technologies such as Mobile Money (MM). In a largely cash-driven society such as Ghana, getting people to switch from cash to cash-lite means of payments has been an ultra-marathon. While a host of obstacles such as poor infrastructure have been implicated in the failures of different card-based payment options in the early 2000s, trust and the lack thereof has played an important role in Ghanaian adoption rates of money technologies- in particular cell-phone based ones. At the onset, trust was hard to come by.

Today: The Wobbly Foothold

Fast forward a few years and Mobile Money has taken a foothold in the Ghanaian marketplace.  People recognized the convenience of the technology that enabled them to change local currency into electronic value, load it onto an electronic wallet, and use for spending, bill payment, savings, insurance, and remittances. Due to the doggedness of  Mobile Network Operators (MNOs), banking partners, agent networks, regulators and other stakeholders, trust in and use of Mobile Money grew, and grew, and grew some more, ….and then, sadly, ran into a brick wall. Criminals figured out how to exploit Mobile Money, and it was estimated that 50% of customers had been targeted. The criminal network included people from the inside. The modus operandi of the insiders was found to include (i) accessing the MM database of merchants without authorization and altering customer information; (ii) resetting the phone number assigned to the MM account, and then granting access to the new number to change the PIN  and (iii) acquisition of new SIM cards using a false identity, register for MM services. These provided cash outs access to customer and merchant accounts.

Additionally, some merchants were found to have overcharged for their services. Scammers have also been involved in defrauding MM subscribers using several tactics. First, the you-have-won-send-money-to-claim-your-prize scam, a financial crime also perpetrated via email. Once the subscriber sends the money, it is cashed out and the SIM card destroyed. Second, the problem-when-there-is-no-problem scam in which MM subscribers are informed that an amount of money transferred to them has been wrongfully sent as airtime or that there is a general problem with their account. Under the guise of “fixing the problem”, the “customer service” person on the phone takes the subscriber through steps which result in a money transfers to a scammer’s phone or code generation for an ATM withdrawal. Third is the related please-send-back-the-money-sent-to-you-by-mistake scam in which subscribers receive a call about an erroneous transfer meant for someone else. The subscribers motivated to do the right thing end up sending money from their account to these fraudsters. The fraudsters are getting craftier by the day, and so in a new development, subscribers simply receive a notification on their phone that an amount of money has been withdrawn from the MM account. These are withdrawals not authorized or carried out by the subscriber.


Deconstructing Mobile Money Crimes: Technology or Humans?

An MNO representative noted that problematic fraud was not due to a breach in MM platform itself, but due to nefarious human activity. The MNO staff involved were able to do so due to their access to the MM technology by virtue of the work they do with the telcos, and not because they are able to bypass the security systems in place. The fraudsters on their part, used their knowledge of the use of the MM technology to outwit people who are less versed in it and then defraud them.

This framing of the problem is consistent with perspectives about the misappropriation of tools in general and technology in particular for criminal purposes. Cars are not considered bad because some users chose to drive drunk or drag race on public streets, cryptocurrencies are not generally considered evil because bitcoin became the currency of choice in Silk Road and other dark websites, and the internet has not been dispensed with because websites are routinely (it seems) hacked. The question is, will Ghanaians (in a market where mobile money has entered but not dominated the payment space) care about the difference, or will they throw out the baby with the bathwater? Will consumers care that as one MNO representative put it, it’s about the "gullible consumer" and not a “system vulnerability issue”?

Elsewhere in the world, challenges to trust in particular systems and platforms have resulted in shock, but not necessarily in long-term decreases in their patronage. For example, people did not stop investing in the stock market because of Bernie Madoff or after the 2008 financial crisis. People across the world have not stopped using email despite threats to internet security, and it does not appear that people have stopped using Wi-Fi since the recent announcement by a Belgian researcher that Wi-Fi networks using the WPA2 protocol are vulnerable to hacking. However, each of these threats to consumer confidence have occurred in the context of products and platforms that had already successfully penetrated the market - not ones that are in a crucial growth phase as seems to be the case in Ghana. So the question remains: to what extent is trust in Mobile Money in Ghana impacted, and how will this affect subscription, active use, and growth of the user base?

Tomorrow: Finding its feet again, or will the other shoe drop?

Trust in Mobile Money in Ghana and its future patronage will be contingent upon a variety of factors including perceptions of how well the current investigations are going, perceptions of product safety, and perception of future customer vulnerability vis-à -vis the perceived benefits of having a mobile phone-based payment medium.

On the one hand, the fact that MNOs eventually went public to discuss the issue is encouraging, and a testament to their commitment to dealing with the problem. Hopefully it will warrant a few trust points. These “trust points” may further soar with MTN’s publicized sanctioning of a whopping 3,000 members of its agent network in a bid to curb their fraudulent activities, and release of information that contrasted targeted subscribers (up to 50%) with those successfully defrauded (less than 0.1%). Other concerted efforts to curtail the problem that have been discussed in recent weeks include a re-registration of SIM cards, changes in procedures related to agent activities to enhance privacy, industry-wide agent blacklisting, better and more accessible agent identification by consumers, and changes to features in the user interface to provide the consumer with additional control over cash outs, and text filtering to block out identified scam messages. In addition, MM subscribers have been reminded via text, automated messages and via the media to protect their PINs, and change them regularly. In other words, there have been movements at the levels of regulators, MNOs, and the consumer (education efforts) to minimize the likelihood of recurrence of such crimes. Will these corrections and structures boost or repair consumer confidence?

On the other hand, several challenges have been identified in the execution of investigations of crimes involving Mobile Money. In addition to the fact that some scammers have covered their tracks well enough to avoid being identified, there have been some reports of less-than-ideal cooperation from some MNOs. For example, representatives of the Ghana Police Service “expressed worry that managers of some mobile telecom operators do not give the necessary information to the police concerning suspects in mobile money fraud who work in the telcos”.  Additionally, some people who crossed paths with fraudsters are calling for a boycott of specific MNOs altogether in order to regain a sense of agency and the recognition that consumers need to protect themselves. Such calls emanate from the recognition that that there is limited recourse for a defrauded consumer since there is no guarantee of a refund from the MNOs.

So what will happen to Mobile Money in Ghana? Time - and the consumer – will tell. No matter the outcome, it will undoubtedly revolve around consumer trust.

Read their first blogpost, "Yet Another Cashlite Stumbling Block: 'Alarming' Fraud and Mobile Money Uptake in Ghana"

Yet Another Cashlite Stumbling Block: "Alarming" Fraud and Mobile Money Uptake in Ghana

By IMTFI Fellow Vivian Dzokoto, Virginia Commonwealth University and
John Kojo Aggrey, Louisiana State University

After a bunch of false starts, it seemed like Mobile Money in Ghana was finally on the up and up. CGAP declared that Ghana was finally on the “cusp” of progress on the mobile money front (Mckay, 2015). The Ghanaian Central Bank repealed Mobile Money guidelines which were deemed excessively restrictive, and replaced them with a bunch of guidelines that were considered more conducive to the scaling up of branchless banking initiatives (Blay, 2016). Mobile Money transaction volumes doubled from 266,246,537 in 2015 to 550,218,427 in 2016 (BOG, 2017).

Source: Ghanaweb.com

Ghanaian citizens such as Auntie Ama - who curiously still names current prices in the old currency that was redenominated in 2007 – now receives money from friends and relatives via Mobile Money, just like one of the 2009 MTN mobile money television ads had demonstrated she could. To the chagrin of the sometimes reluctant remitters, they can no longer use “I can’t come and see you” as an excuse anymore, since Auntie Ama herself reminds them that they can send her money via mobile. Tech-savvy Kweku Mensah has one of his bank accounts linked to his Mobile Money account which he uses to pay bills, and buy airtime for his girlfriends (who I am not sure know about each other). Last night he had pizza delivered. He paid for it using - you guessed it - mobile money. Even some Ghanaian churches – after some initial misgivings about the impersonality of it all - have developed online portals where people can send donations or tithes via mobile money (see for example https://www.centralgospel.com/ give/). Cash was certainly not on the way to extinction in Ghana, but Mobile Money, offered by Airtel, Glo, MTN, Tigo, and Vodafone was certainly becoming an increasingly important part of the payment ecosystem due to its convenience and accessibility....that is, when the agent was available and the network was functional.

Ghanaians, it seemed, after a loooong while of coaxing, had begun to move on to the mobile money bandwagon touted as a means to financial inclusion to the 60% of the population who for a variety of reasons were excluded from the formal financial sector because they did not or could not own a bank account. Branchless banking did make sense given the fact that Ghana had 110.8 times more branchless banking agents than bank branches. The ratio of agents to ATMs was an even more astounding ratio of 150:1 (International Monetary Fund Financial Access Survey, 2016). Plus, trust in the formal banking sector took a bit of a dive when customers of UT and Capital banks earlier this year awoke to the news that their banks had failed and had their licenses revoked, and were being taken over by Ghana Commercial Bank (Frimpong, 2017). Added to the stories and rumors over the years of a few errant supposed microfinance companies who disappeared with people’s deposits, mobile money - while not as secure as hiding money under the mattress - was beginning to look like it offered a pretty good degree of safety. You could, after all, call a mobile network operator and yell at them if something happened: they were after all first and foremost a communications company.

Mobile Money fraud had risen to an alarming degree

It was therefore jolting that Ghanaians woke up on October 23rd to the news not that another bank had failed, but rather that Mobile Money fraud had risen to an alarming degree. Customers were being defrauded of their money through a variety of ruses. According to the police, staff of the various mobile network operators were often “deeply involved”. The news about fraud in mobile money wasn’t exactly new: there had been horror stories circulating through the rumor mill; a few mentions in the press earlier on the year about the need to “wage war” on mobile money fraud; and reminders by MNO representatives to mobile money subscribers to refrain from sharing their Personal Identification Numbers (PINs). But the latest news report (Joy Online, 2017; Darko, 2017) is jarring:

• 50% of mobile money subscribers have been targeted; 
• The criminals have found ways to cover their tracks so well that the cybercrime division of the Ghana Police Service could solve only 10% of the crimes; and
• Mobile money was described as a “time-bomb waiting to explode, unless something drastic is done to curb the increasing fraud in the system”.

There goes the idea that mobile money is safe, perhaps safer than cash, and more convenient to access than the formal banking sector. There is nothing whatsoever convenient about being defrauded of money. There goes the idea that a transition to cashlessness can create a record of transactions and thus reduce fraud in Ghana. Fraudulent individuals found a way to take advantage of cashlessness based on their knowledge of the logistics of the Mobile Money platform, and did so without leaving much of a trail. There goes all the hard work that the mobile network operators, their banking partners, legislators, agents, and other stakeholders have invested in growing the mobile money market. It’s going to be much more difficult to market a product everyone knows has significant weaknesses. Mobile Money has lost that lovely feeling.

Hopefully, all is not lost. However, trust is important for adoption, growth, and sustainability of this payment form, and this trust has been badly broken by people from the inside. Sadly, the reality that these crimes are at least partly inside jobs are a reminder of the Ghanaian (Twi) proverb that states “if an animal will bite you, it is from your own cloth”. Adding salt to the wound is Uncle Attah who absolutely refused to use Mobile Money in the first place. He was suspicious that something could happen to the money once it wasn’t in physical form anymore by some “419” (fraudulent) person. He is now going round his neighborhood on an unofficial “I told you so” campaign. To him, it was, it is, and always shall be nothing but cash.

*Note: Some of the people referred to in this post are composites of people encountered in fieldwork, for others, names have been changed.

References
Blay, C. (Bank of Ghana). 2016.   “Mobile Financial Services in Ghana. Sub-regional Workshop on Mobile Money in West Africa.” 14th – 16th March 2016, Freetown Sierra Leone.

Bank of Ghana (BOG). 2017. “Payment systems statistics” https://www.bog.gov.gh/privatecontent/Payment%20Systems/PAYMENT%20SYSTEM%20STATISTICS_%20First%20Quarter%202017%20.pdf  Accessed October 23, 2017.

Darko, F. (2017). Mobile money fraud alarming -Staff of telcos deeply involved – Police. 23-10-2017. https://www.thefinderonline.com/news/item/10415-mobile-money-fraud-alarming-staff-of-telcos-deeply-involved-police.  Accessed October 23, 2017.

Frimpong, D. (2017). GCB takes over UT Bank and Capital as BoG withdraws licenses. Business Insider. 14.08.2017. http://www.pulse.com.gh/bi/bank-of-ghana-gcb-takes-over-ut-bank-and-capital-as-bog-withdraws-licenses-id7142183.html. Accessed October 23, 2017.

Joy Online (2017). Staff of telcos accomplices in mobile money fraud – Police. 23-10-2017. (https://www.myjoyonline.com/business/2017/October-23rd/staff-of-telcos-accomplices-in-mobile-money-fraud-police.php). Accessed October 23, 2017.

McKay, C. (2015). New Data Finds Mobile Money "On the Cusp" in Rwanda and Ghana. 15 December 2015.  Consultative Group to Assist the Poor (CGAP). http://www.cgap.org/blog/new-data-finds-mobile-money-cusp-rwanda-and-ghana. Accessed October 23, 2017.

International Monetary Fund Financial Access Survey, 2016. International Monetary Fund.

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Read Vivian Dzokoto's blogpost from the special PERSPECTIVES Series on Demonetization in India, "Before Money isn't Money Anymore...."

How Nigerian ATM fraud victims are swindled

REUTERS/Akintunde Akinleye

IMTFI Fellow Oludayo Tade, University of Ibadan in The Conversation

It has been three years since the Central Bank of Nigeria introduced the Cashless Nigeria Policy. Its aim was to encourage the use of electronic systems for all monetary transactions.

The policy has yielded benefits: it makes many transactions simpler and safer for more people. But there has been an increase in fraud in the banking and payment systems. These crimes are carried out using the information and communications technology that has flourished in Nigeria since the early 2000s. A 2013 report by the Nigerian Deposit Insurance Corporation identified 14 types of electronic fraud (e-fraud). Automated teller machine (ATM) fraud was in prime position. It accounted for just under 10% of the total value of funds lost to e-fraud and 46.3% of the reported number of cases. The agency’s 2015 report points to an increase in the incidence of ATM fraud in Nigeria.

Despite the apparent importance of e-fraud, little scholarly attention has been paid to understanding how it affects the functioning of the financial system and its impact on victims. That’s why my colleagues and I carried out a study to examine the experiences of ATM fraud victims in south-west Nigeria. We focused on what made a person more likely to be a victim and on the fraudsters’ tactics.

Study results

We found that a number of factors predisposed people to being victims of fraud. These include illiteracy, health problems and issues of vulnerability.
An elderly illiterate man who was interviewed said:

I was given an ATM card and nobody told me how to use it. Outside the bank I gave it to a young man at the ATM to help me withdraw cash. He did it and returned my card to me. After a few days I noticed money had left my account, which I promptly reported to my bank. At the bank I was told that the young man had swapped my card.

Our study also showed that close family members sometimes exploit people’s trust to defraud them. One middle-aged man gave his son his ATM card to draw N5,000 (USD $31.25) ahead of returning to school. He later discovered that his son had instead drawn N10,000 (USD $62.50). “If my son could do that to me while I was trying to help him, who can one trust?” he lamented.

When people are ill, they can be vulnerable to ATM fraud. They depend on others because they can’t get around. A “trusted” person may take advantage.

The story of a young man interviewed during our study helps illustrate this. He was ill and gave his ATM card to a friend to help him buy medication. He was later “shocked” to discover that his friend had drawn an extra N70,000 (USD $237.50) from his account.

The coercion factor

Of course, friends and relatives are not to blame for all ATM frauds. Some occur through coercion, particularly physical attacks and armed robbery at ATMs.

One young woman told us:

I wanted to make a withdrawal on a Sunday evening. The ATM on my street was not working so I had to look for another ATM a few streets away. Unfortunately I was robbed by an armed gang. They made me insert my ATM card to confirm the PIN number and balance. They went away with my ATM card and PIN. I couldn’t do anything until Monday, by which time my account had been drained of N200,000 (USD $1,250). They took my phone so I could not even alert the bank and block withdrawals.

The success of online fraud depends on offenders choosing easy victims.

Stemming the tide

Reducing ATM fraud depends on making people less vulnerable.

For example, anti-fraud education campaigns must use indigenous languages and consider that some bank customers can’t read. Banks must show their customers how their cards work and how to get help when in trouble. Security officers who are not bank staff should not be allowed to deal with customers.

ATM users should be taught to change their passwords sometimes. They must also be cautious about when and where they withdraw money to reduce the risk of attacks.


This article was originally published on The Conversation by Oludayo Tade, Lecturer of Criminology, Victimology, Deviance and Social Problems, University of Ibadan. 
Read the original article.

Read his recently published article with Oluwatosin Adeniyi in Payments Strategy & Systems, "Automated teller machine fraud in south-west Nigeria: Victim typologies, victimisation strategies and fraud prevention"

Cash is not a Crime - New IMTFI white paper finds efforts to curtail cash use hurts poor and does little to stop terrorism financing

Keeping Cash: Assessing the Arguments about 

Cash and Crime  - New study by IMTFI postdoctoral scholar Ursula Dalinghaus 

Because it can be used anonymously, and is generally thought to be untraceable, cash has long been linked to crime: think of the image of wads of unmarked bills in a suitcase being passed between disreputable conspirators plotting evil. And while it is also commonly thought that cash is one of the primary tools to finance terrorism, recent news on the use of online platforms to fund US terror shows otherwise. Recently, there have been calls to eliminate cash altogether in favor of electronic payments systems, or at least to eliminate high-denomination banknotes.

Ursula Dalinghaus
Photo by Frank Cancian, UCI

In a new white paper published online this week, however, Ursula Dalinghaus, a postdoctoral scholar at the Institute for Money, Technology & Financial Inclusion (IMTFI) at the University of California, Irvine, demonstrates there is little to no evidence to support the claim that eliminating high-denomination banknotes or restricting cash payments will prevent terrorist attacks. The study finds that targeting cash as a terror financing mechanism misidentifies the problem.

“Curtailing cash will do little when criminals already make use of a diverse portfolio of payment technologies and types,” she says. "Increasingly, electronic forms of transmitting and converting value are just as essential, if not more so, in supporting criminal as well as terrorist activities.”

In addition, she argues that legal tender – in the form of cash – is a public good that guarantees ease of use, accessibility, a certain level of privacy, and many other unique qualities.

“Restricting cash payments entails the criminalization of legitimate payment activities when reliable data on the full scope of cash usage of any kind is scarce,” she says. “More research on payments and cash usage is therefore essential.” 

Key findings include the importance of the interplay between multiple payment tools and jurisdictions. People use diverse payment methods together, and the movement of value across jurisdictions is subject to different regulatory environments and payment cultures. Targeting cash in isolation does not take into account this interplay, and risks displacing criminal activities involving cash to other tools and jurisdictions. Multiple methods of interdiction are therefore needed to address money laundering and terrorist financing.

Drawing upon a range of institutional, legal, scholarly, policy, news media and other sources, in collaboration with experts drawn from criminology and terrorist financing, banking, industry, and the social sciences, the report documents how digital forms of payment are also subject to abuse and do not necessarily guarantee transparency in accounting that many believe could aid in the tracking of financial crime. In addition, the shift to digital away from cash exposes people to new risks. Researchers studying the impact of demonetization in India and capital controls in Greece are observing that cash restrictions entail new social and economic burdens and are shifting the costs of making payments onto small businesses and disadvantaged groups in society.

Findings from this study have been entered into a EU-wide consultation to be used by the European Commission in Brussels to determine the policy implications of cash restrictions.

Dalinghaus concludes that there is little to no evidence that limiting cash will effectively target the financing of crime and terrorism.

“IMTFI research around the world has consistently demonstrated the complex interplay of different forms of money and payment, so we shouldn’t be surprised that the bad guys also take advantage of diverse payment options. Criminalizing cash therefore won’t solve the problem,” says Bill Maurer, UCI anthropology and law professor and IMTFI director. “This new study also reminds us that criminalizing cash may criminalize the fact of being poor and living in a cash economy.”

Funding for this paper was supported by the International Currency Association (ICA) and its Cash Matters movement. 

Download the paper, Keeping Cash: Assessing the Arguments about Cash and Crime

Read Q&A with author here

About the Institute for Money, Technology & Financial Inclusion (IMTFI): Established in 2008 with funding from the Gates Foundation, IMTFI is a research institute based out of the University of California, Irvine. Its core activity has been supporting original research in the developing world on the impact of mobile and digital financial services, focusing on developing grounded, nuanced perspectives on people’s everyday financial practices and the impact of new technologies. To date, IMTFI has supported 147 projects in 47 countries involving 186 different researchers. These researchers have produced 12 books and 100+ articles in scholarly and other venues, and have been mentioned in the media 170+ times, in venues ranging from Bloomberg Businessweek and the Guardian to Forbes, India.

About the University of California, Irvine: Founded in 1965, UCI is the youngest member of the prestigious Association of American Universities. The campus has produced three Nobel laureates and is known for its academic achievement, premier research, innovation and anteater mascot. Led by Chancellor Howard Gillman, UCI has more than 30,000 students and offers 192 degree programs. It’s located in one of the world’s safest and most economically vibrant communities and is Orange County’s second-largest employer, contributing $5 billion annually to the local economy. For more on UCI, visit www.uci.edu. 

About the International Currency Association (ICA): Founded in 2016 as a not-for-profit organisation, the ICA represents the currency industry across the whole spectrum. It currently has 23 members and 5 associate members;  all members are suppliers of currency, or suppliers of products, technologies and equipment used in the design, production, handling and circulation of currency. The ICA is working to ensure that its members drive innovation and offer the best commercial and technical practices to their customers, promote the highest ethical standards, do everything in its members’ power to ensure that cash is secure, efficient and effective  and support and promote currencies worldwide as universal and inclusive means of payment. For more on the ICA visit http://www.currencyassociation.org/.  

Cash Matters, an ICA movement: Cash Matters is a pro-cash movement, funded by the ICA, which supports the existence and relevance of cash as an integral part of the payment landscape now and in future. Cash Matters will support and initiate campaigns on a global level, taking current issues and upcoming legislative changes into account. The Cash Matters website offers authoritative and to accessible facts, figures, and news for consumers, journalists and industry experts alike. For more on the Cash Matters visit www.cashmatters.org. 

Original post by UCI School of Social Sciences can be accessed here.

Diverse Strategies of Banking Fraud in Nigeria

By IMTFI Fellows Oludayo Tade and Oluwatosin Adeniyi

A major snag since the introduction of Nigeria’s cashless policy is pervasive electronic banking fraud (e-fraud). Although the policy was aimed at encouraging electronic transactions, reducing physical cash in the economy and thereby reducing the risk of cash related crimes, fostering transparency, curbing corruption/leakages and driving financial inclusion, the perpetration of fraud threatens the cashless ecosystem. The implications of rampant e-fraud are enormous, not only for the banked population adopting e-banking as a secure platform but also for the obstacles it poses to effectively capture the unbanked populace. Initial investigations show that with the prevalence of fraud and subscriber victimization, there is a growing fear of migrating to and using electronic banking, while those defrauded are altogether opting out of e-banking. The Nigeria Deposit Insurance Corporation (NDIC) annual report stated a total of 3,756 fraud cases in 2013 involving N21.79billion, which represented a 21 percent increase from 2012. Curiously, about half of the actual loss occurred within the first three months of 2013. Looking between these aggregate pictures, the NDIC 2013 report also offers an elaborate list of fourteen major fraud channels - automated teller machine (ATM) fraud being the leading source. In a climate of mounting complaints from e-banking customers/subscribers, we investigated the dimensions of e-fraud in Nigeria’s cashless ecosystem. We collected data in Oyo, Ogun and Lagos States and employed qualitative methods of in-depth and key informant interviews with fraud victims, bank officials and fraud investigators at the Economic and Financial Crimes Commission (EFCC).

Opportunistic Kith and Kin

ATM fraud has continued unabated due to the breach of trust between account holders and fraudsters. Most ATM fraud was carried out by persons very close to the victim including spouses, boyfriends, and friends (Tade and Adeniyi, 2016). Often, online fraud is successful through selective identification and exploitation of victims’ vulnerabilities by dexterous and savvy offenders. In a case reported to us at a new generation bank in Nigeria of a lady and her fiancée, the man had taken the lady’s ATM card and made a withdrawal of about N300, 000. Getting the ‘surprise debit alert’, the lady lodged a complaint with the bank. The ATM custodian at the bank informed us that the lady threatened legal action against the bank. When the fraud alert was subject to internal scrutiny, it was found, through the Close Circuit Camera Television (CCTV) footage that it was actually her husband-to-be who made the withdrawal without her consent. According to the ATM custodian:

She was shocked seeing her man making the withdrawal. Her countenance changed and she felt sorry for raising her voice in the banking hall. She later left the banking hall to reconcile with her fiancée.

ATM withdrawals

In some instances, bank staff collaborates with fraudsters outside the bank. Outside fraudsters recruit people who have access and occupy sensitive positions within the bank such as sweepers and those in the Information Communication and Technology (ICT) unit. Not all participants are fully aware of their role or final purpose of their assignment. A fraud investigator we interviewed at the EFCC summarized a case as follows:

This fraud was huge. It involved the moving of about N400million ($2,010,050) naira from the account of the bank. It involved some bank staff in the ICT unit and those in the regular banking hall. They got a woman who sweeps the office of the branch manager and gave her a key-logger to insert in the computer to extract the necessary data they needed and security information. Through this, they were able to access the banks account and moved the money into about forty different accounts. They were strategic about their fraud. They waited for the day there was public holiday and then moved all the money and almost immediately withdrew from the different bank accounts. Before they could be stopped they had used more than three-quarter of the money to buy things online. It was the sweeper that eventually sold them out because as she claimed, she did not know that the things they gave her were to defraud the bank. 

Un-credited Lodgment

Un-credited lodgment is another type of fraud perpetrated by bank staff using their knowledge of banking operations and technicalities. We found that the compromised bank staff in the cashier section would collect cash lodgment but would deliberately fail to credit the customer’s account and later divert the money for personal business. This strategy was successful unless the account owner lodged a complaint for not receiving an alert regarding the payment he/she made. It should be noted that not all account holders subscribe to account transaction alerts that give them information about any transaction on their account. People often don’t want any deductions to be made on their account for subscribing to this service. Fraudsters, therefore, prey on this loophole.

A PhD candidate who shared his victimization experience on un-credited lodgment stated:

I had a nasty experience with this electronic banking. I went to make a lodgment of N50,000 ($251.2) into my bank account and I went back home. Two days later I did not receive a deposit alert.  I went to the Bank Manager to complain who asked me to come back. A lady cashier from the bank came to my house; apparently she traced the address through the Know Your Customer form I filled. She told me to come to the bank as I was the one who made mistake in the payment. I was angered by this and I told her what nonsense. She later told me she thought I was working with a businessman who benefits from uncredited lodgment which he uses to do a business for about two weeks and then payback before the account of the lodger of the funds will be credited. Two hours she left my house, I got the credit alert. 

This experience brings to the fore the issue of customer knowledge about banking operations and security features to help stop fraud. Those who do not subscribe to account alerts may have their monies un-credited and used for ‘arranged’ businesses by some compromised bank staff and their outsider accomplices.

Bank officials are also often associated with dormant account fraud (DAF). When an account has remained inactive for about 6-months, it is categorized as dormant until the account owner applies for its re-activation. In Nigeria, when a person dies it is difficult for dependents to access the bank accounts of their benefactors owing to many legal/institutional obstacles that can take months or even years to be resolved. Some family members are oblivious to the fact that the deceased even had a bank account. As a result, when the account holder dies, their funds become targets for bank official fraudsters, with insider knowledge, that then reactivate and withdraw money from the account.

'Kolo'- a trusted indigenous saving object being used to highlight fraud in the cashless ecosystem 

Weak Governance Structure in the Cashless Ecosystem

We also found that weak governance structure is responsible for electronic fraud in Nigeria’s cashless ecosystem. This weak governance is at the level of both banking institutions and regulating agencies. Our data indicated that there was poor supervision at the branch, regional and zonal levels of some banks where fraud, get perpetrated. A bank staff person stated:

There was a fund transfer fraud in which the best man we had for that job was involved in but rather than punishing him and sending the report to the regional head, the Branch manager decided to make it an in-house thing. They forced the man to fill a loan form where they were deducting the money he fraudulently made from customers account. They also moved him to another unit within the bank where he did not have direct access to money. The matter was resolved internally within the branch.

Such fraud neutralization strategies were adopted to cover the tracks of inefficient supervision, which kept compromised personnel within the banking system creating a weak governance and accountability structure. The Committee of Chief Compliance officers of Banks in Nigeria (CCCOBIN) at their meeting of October 29, 2015 also noted:

Banks in a bid to cut cost and increase profitability recruit contract staff and assign them to very sensitive areas of the Bank’s operations and because these categories of employees are poorly remunerated they are susceptible to all sort of vices, including fraud.

Due to increasingly neoliberal policies being adopted in banking operations, the majority of bank staff is not full-time but casualised and the NDIC’s 2014 fraud report stated that contract/casual staff perpetrated 64% percent of frauds committed in banks.

The strategies used in perpetrating fraud, such as un-credited lodgment, fake job scam, ATM card swapping and compromise, fund transfer fraud, phishing emails/BVN fraud, and dormant account fraud among others, indicate that fraudsters are exploiting the loopholes of the cashless ecosystem. The results of this study point to the need for financial literacy education in Nigeria and improvements in the security infrastructure with a view to building confidence in the formal banking sector as well as e-banking. Furthermore, banking products/services should be designed with security features that take into consideration the peculiar characteristics and vulnerabilities of their customers.

All names of banks, institutions and participants are pseudonyms as they were assured of their anonymity when they agreed to participate in the research. 

Reference
Oludayo Tade  and Oluwatosin Adeniyi (2016), "On the limits of trust: characterising automated teller machine fraudsters in southwest Nigeria", Journal of Financial Crime, (2016) Vol. 23 Iss: 4.

Read more in Oludayo Tade and Oluwatosin Adeniyi's Final Report.

Trust Funds: Session Four of the 2016 Conference

"In _____We Trust: The Contingencies of Social and Financial Protection" with discussant Kate McKee of Consultative Group to Assist the Poor (CGAP) began the session by polling participants about their trust relationships with banks, insurance companies, credit card companies, and spouses. She also built on earlier discussions about the differences between "knowing how" and "knowing whether" by pointing to issues about lack of choice, the disconnect among clients with efficiency discourses from industry, the "layering" of digital effects, and the understanding that the continuing "role of the state is quite important" as an entity that can "drive" efforts.

“The role of mobile money in social protection networks in two rural areas of Colombia" by Maria Elisa Balen and Andrea Beltrán from the Universidad Externado de Colombia started with an explanation of how sixty years of conflict had produced over six million internally displaced people. Using the analytical triad of market, state and family, the research team focused on "social protection practices" in two field sites: Montes de María in the north and Putumayo in the south. The northern region has been suffering from a decline of tobacco production, and in the south the ups and down of illegal coca crops have been disruptive. Thus the family has to "reconfigure over a large distance." Two additional features are significant: "the state has become more present," and "mobile money becomes an interesting object of study."

The methodology of the study, which used snowballing ("someone who knows someone") and different entry points, avoided "normative perspectives of what family is" and was structured around "two decentralizations." Researchers looked at practices from a past-present-future perspective (including accounting for "how they think the future will be" and "how they want the future to be") and viewed money with "an approach allowing for diversity in conflict zones" and in the context of "other goods and services." The research team used tools like storytelling, drawing (including family maps), and workshop participation.

Participants faced a number of challenges in an environment in which regulation is designed to protect a platform being open to everyone but has yet to be enforced. Often bank intermediaries change very often, and the distribution of cash transfers also changes. When populations in those environments "don't know who they are dealing with and what they have to do to be more stable," the resulting volatility can be very relevant. Regional differences matter as well. For example, in the north the availability of cash transfers for two or three years has shaped uptake patterns. Researchers also looked at how participants treated different amounts of money differently. Among their major findings, researchers found 1) the amount of money in circulation changed in both directions, 2) money is often part of a wider web of exchange, and 3) mobile phones are present in family practices but don't appear to be influencing "technological spillover."

"Dimensions of Electronic fraud and Governance of Trust in Nigeria’s Cashless Ecosystem" by Oludayo Tade of University of Ibadan and Oluwatosin Adeniyi of University of Ibadan looked at "what trust means" and "how trust-building can be done" by examining financial fraud in the digital sector and how it might be facilitated by the trust fostered by intimate ties. They also observed a generational dimension in opportunities for deviant behavior in this "peculiar ecosystem," because of the existence of a "huge population of young people" that is "also dynamic" in which Nigerian youth may "deploy their energies" for "the right and wrong reasons." In considering the dimensions of e-fraud and how trust issues may stymie adoption of new technologies, they reminded the audience that the "internal dimension" in which a conspiracy by staff of the bank may compromise the data of the bank or improperly use technical know-how to make cash transfers. With 21.69 billion lost to 3,756 fraud cases in 2013 alone, policies pushing cashlessness can stimulate greater anxiety. Wen "trust underlies customer-bank relations," breaches cause avoidance behaviors and disrupt financial ecosystems. Fraud strategies may also involve love/fiancee, wife/husband, and son/father dyads, although transaction alerts can foil schemes, particularly for ATM card withdrawal fraud.

At this stage of the primarily qualitative study, content analysis has been done and crime narratives have been analyzed. For example, they presented The Eatery Case as an instance of "un-credited lodgment." Many scams promise to return money in two weeks time and are facilitated through text messages. They also note the "other side" of fraud in terms of governance, and how from the side of business and government, access to subscription services can be compromised

In the question and answer session the team emphasized the importance of specific context in "what you mean when you think about the unbanked." Insights from the field indicated that people were deeply invested in formal banking, and that the rhythms of life in "normal local markets" were still structured around the informal collection of daily contributions from traders. They noted that in making trade-offs, an incentive for becoming banked might be to avoid being susceptible to "increased physical attacks" and "robbery at home," in which victims would lose not only their property but also their lives. Transferring risks to a formal banking center could limit this danger. Additionally, they pointed to the affordances of existing programs for students to open accounts, which "enables you to receive money from home." They also observed that as people travel "we need to design packages that addresses customer characterizations."

"Intermediaries, Cash Economies, and Technological Change in Myanmar and India" by Janaki Srinivasan of the International Institute of Information Technology Bangalore (IIITB) and Elisa Oreglia of SOAS at the University of London examined why intermediaries might be valuable rather than vilified.

"We have most of our fieldwork ahead of us," Oreglia admitted and expressed her enthusiasm for IMTFI critique, because she and Srinivasan were "looking for feedback." She began with a story of a tea trader from the northern part of Myanmar. "In many ways she is the kind of intermediary who is portrayed as the 'bad guy' in markets." Enthusiasts for disintermediation might see her as taking "advantage of farmers who may be ignorant of prices or unable to travel" and morally compromised by her assumptions that "farmers are really dumb." In a system in which traders may "give money and clothes" that create obligations from farmers who "have to sell to us because they are indebted to us" she appears as a suspect character. But Oreglia argued that the story is "much more complicated," particularly when "cash persists as do intermediaries" despite the potential "escape" offered by mobile money. Yet "even when the same operation would be cheaper and faster" if done directly by the farmer himself, many prefer existing social, cultural, and economic norms.

Srinivasan noted how "markets that are dominated by cash" raise interesting questions about the role of intermediaries and "what value are they bringing to the market," "what value do these transactions brings to the idea of value as situated in a place," and "what constitutes value in two different places." She emphasized the importance of how different countries manifest different patterns of adoption: "mobile money is about to take off in Myanmar," but in India "mobile phones has been around for a while, but mobile money is relatively recent." Although she granted it can be challenging to map how intermediaries are able to add value or disrupt value in a summer of fieldwork, she will be looking at a site that she has worked at previously in in Kerala in a study "which is itself a revisit" of an influential study by Robert Jensen who did survey work over the course of five years. (IMTFI blog readers can peruse the article for themselves from this link to "The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector and read an account of Srinivasan's first IMTFI presentation with Jenna Burrell and Richa Kumar here) 

Srinivasan believes that terms like "producer" or "seller" may actually be more complicated categories characterized by differences of investment, size of fishing crafts and operational costs, and even various types of fish. Thus "the story of a sardine" may be different from the story of another fish. In particular, the role of the auctioneer may be important as well as issues of religion and gender that differentiate Janaki's field site in the Christian south and Jensen's in the Muslim north. Although the middleman is "the person that everyone wants to remove," she asserts that collective organizations can have more benefits than autonomous entrepreneurs and that the rise of co-ops in the sixties and seventies had undermined the power of the previous"fairly exploitive relationship." Using an auctioneer who was paid by the co-op was often valued "to get the best prices for the fish," although a system of transparent auctioning facilitated that, because it was "a system that people have come to recognize and trust." In asking "what does this have to do with technology," she noted that "the auctioneer always had a mobile phone." Accounts were settled daily and sometimes settled weekly. Of course, in 2012 there was "no mobile money to speak of," so Srinivasan was looking forward to revisiting to "see how the intermediary deals with" the new platform.

Oreglia noted three previous financial crises in Myanmar and instances of demonetization. She explained that the field site was in an area of ethnic minorities and small market towns with Burmese-Chinese and Burmese-Indian residents, as well as tribal people, so ethnicity could also play a role not only in trust but in loyalty. The region might "trade with the rest of the country," as well as with China and Thailand, using its economic base in agricultural products. In the illustration above she shared the roughness of field notes, in trying to map out how money travels, including on bus networks. and the many financial movements of small traders who tended to borrow money from financial traders. Unlike the Kerala case, co-ops were used mostly by women traders. Goldsmiths who were all around the market and tended to be Chinese, Those of Chinese ethnicity "did business with everyone," although she emphasized the fact that "loyalty is not necessarily trust." Her tea traders relied on farmers not having many choices, but the technology that has proved to be most transformative is not mobile money. Rather she claimed that cheap motorbikes from China were offering now access to other lines of credit, because farmers could travel to other villages much more easily. Nonetheless most "still rely on these traders," and "ethnic ties have big part to play."

Bothe researchers said they strove to "rescue intermediaries from distain" and the "contempt they are held in." To learn more about the disintermediation debate, you can visit this profile of Janaki Srinivasan to read an extended interview with her and see images from her Kerala field site.

Betting Against the House: Chance, Risk and Fraud

The only all-male panel at the IMTFI focused on risky monetary behaviors.  The presenters led off with a talk about "Gambling and Mobile Money Payments: A Case Study of Sports Betting in Uganda" by Bruno Yawe and Kizito Ssengooba that focused on how value creation and value destruction might be interrelated in the field. They observed that 25% of sports betting shops were licensed (37 out of 104 enterprises) and that mobile money was used for twenty-four hour betting, which was especially popular among working class participants.  (Football was apparently the number one sport for betting activity, according to the researchers.)  

They focused their attention on six online betting shops and on questions about the regulatory environment, the addictive nature of betting, possible links to youth poverty, and mechanisms for redress in rigged and one-way gambling operations.  Some of the most dramatic narratives involved students missing graduation after tuition money had been gambled away.

"Challenges Facing the Uptake of M-Insurance Loyalty Based Life Insurance Schemes: A Case Study of the yuCover Microinsurance scheme in Kenya"  by Nelson Karani Nyachiro and Cyrus Isaboke focused on services offered by yuMobile in partnership with Jubilee Insurance and Micro Ensure,  The yuCover insurance scheme rewarded subscribers with renewable monthly life and disability coverage.  Nonetheless researchers found that belief and culture propagated biases that insurance was for old men and the owners of motor vehicle owners, and even one of the researchers confessed to being among the uninsured.

The final panel on "Automated Teller Machine Fraud in South-West Nigeria: The Shoe-Wearer's Perspective" by Oludayo Tade and Oluwatosin Adeniyi opened with a recap about the fun of participating in a conference in which economists used to crunching numbers could also hear about sorcery and comic books.  Their study focused on the life chances of victims after ATM fraud and emphasized Victims Precipitation Theory (VPT), Lifestyle Theory (LT), and Routine Activity.  The methodology mainly adopted a snowballing approach.  They discovered that the fraudsters identities tended to be kin, lovers, children, and friends, although non-kin third parties could also be victimizers.  Victims often had 2-5 ATM cards and were plagued by illiteracy, illness, or old age and weak constitutions, although even an economics professor had been victimized, according to the researchers.  Despite the protections of PIN numbers and daily limits, there was no shortage of sad story, including the tale of a man who needed help with pushing buttons who was cheated and five young people finishing national service who found their accounts emptied. Such fraud could have particularly destructive effects on students.  It could also lead to business collapse, as well as undermining the entire purpose of saving among community members.  A culture of blaming victim or of officials being unwilling to use footage from CCTV to catch perpetrators could worsen the situations.  It was also interesting to hear about the appropriations and improvisations that banks and users deployed, which included constructing screens to block views of PIN entry.

Discussant Jan Chipchase of frog design asked presenters to reflect about how their own life practices had been changed by their research.  He also pushed the question of whether "exploring topics that are taboo in shape or form or touching on taboo topics" might require researchers "to get participants' perspectives" by joining in  He even suggested that it might be "an obligation to go down that road."