Lack of liveness detection costs Nigeria’s financial institutions millions of Naira in fraud

The Nigeria Inter-Bank Settlement System (NIBSS) has revealed that the country’s financial sector lost around 52.26 billion Naira (US$34.8 million) in 2024 to fraudsters, some of whom enrolled fake identities for Bank Verification Numbers (BVNs). These incidents, observers say, evoke the need for liveness detection systems to secure biometric identity verification by banks and financial institutions in the country.

Specifically, about 329 million Naira (US$219,000) from this total amount was directly lost to fraudsters using static images of BVNs to activate financial transactions, NIIBSS said in its latest report on financial fraud trends in Nigeria.

According to Punch, the NIBSS report indicates that the BVN fraud scheme was facilitated by some enrollment agents registering still images as if they were live, allowing ill-intentioned individuals to use those fraudulent BVN records to open bank and mobile money accounts to carry out transactions. Liveness or presentation attack detection is not always used for in-person biometric enrollments, but if not the integrity of enrollments can be undermined by the kind of collusion observed in these incidents.

Per the report, many of the fraudulent BVNs were given Nigerian names to dissipate any strong suspicion, but the fake accounts were eventually discovered and deleted with the suspects tracked down for arrest and possible prosecution.

An additional N400 million ($270,000) in fraud was carried out with stolen identities in the past year, according to 21st Century Chronicle.

Nigeria introduced the BVN system in 2014 with the idea being to strengthening banking security. It has since been an official requirement for anyone opening a bank account or carrying out a banking transaction. The federal government insists that all bank accounts must be linked to the biometric bank ID number. Last year, Dermalog said it now ensures BVN use for over 64 million Nigerian bank account owners.

“Still images of Asians and Nigerians are taken and enrolled for BVN by recalcitrant agents. An estimated N329m being proceeds of fraud was received into some of the accounts opened with the BVN generated with these still images a few days before the fraud,” Punch quotes the NIBSS report as stating.

The report offers insights into other fraud indicators, noting for example that the 52.26 billion Naira lost to fraudsters in 2024 is a massive jump from the 11.6 billion Naira loss recorded four years earlier. Paradoxically, there were more fraud cases reported then than in 2024.

In the face of the growing financial sector threats and scams, actors in the industry are of the opinion that stronger response measures need to be taken, in terms of strengthening the regulatory frameworks.

Fintech expert and CEO of Digital Finance Solutions, Adaora Eze, tells Blueprint newspaper that “the regulatory landscape needs to evolve in response to these emerging threats” and that “financial institutions must implement stricter compliance measures, and the government should introduce more stringent policies to ensure accountability.”

“Without these interventions, fraud losses will continue to rise,” she opines.

NIBSS released a similar annual fraud landscape report in 2023 in which it also noted high levels of financial sector fraud in the country.

Article Topics

Africa  |  banking  |  biometric liveness detection  |  biometrics  |  digital ID  |  fraud prevention  |  identity verification  |  Nigeria