Evaluations: Closing Regulatory Gaps In Security Of Electronic Banking Transaction In Nigeria – Finance and Banking


It is no longer news that Nigerian banks are continually looking
for better ways to improve their service delivery to customers,
thereby making banking transactions easy, efficient and more
secured. Recent initiatives include the launch of
ALAT’ (touted as Nigeria’s first digital
bank) by Wema Bank Plc, ‘OCTOPUS’ (reported as an
app designed to digitize and consolidate most of the customer’s
daily activities across multiple devices) by Heritage Bank and many

Despite recent innovations, it was reported that fraudsters
have, between 2007 and 2017, stolen about N237 billion from
Nigerian banks through various electronic and mobile platforms.2 According to the Nigerian
Electronic Fraud Report 2016
, Nigerians lost N2.19 billion to
fraudsters through electronic channels in 2016 fiscal period, with
19,531 reported cases, compared to 10,743 in 2015.The Report also
analysed the fraud and the value of losses recorded: Across the
Counter Transaction (ACT) accounts for N511.07 million, Automated
Teller Machine (ATMs) N464.5million, internet banking N320.66
million and mobile banking transactions, N235.17 million. This
shows that losses from ‘traditional’ channel (ACT) pales
into insignificance against its e-counterparts; the trend is likely
to be on the increase with greater internet penetration.

With the increased volume of e-payment transactions across
Nigeria, there is an urgent need for the Central Bank of Nigeria
(CBN) and Financial Institutions (FIs) to constantly evolve
measures of ensuring adequate security for such transactions to
minimize prospect and actual incidences of e-banking frauds.

This article reviews different forms of e-banking, the need to
have robust e-banking regulation in Nigeria and associated issues,
including data privacy in the financial sector.

Forms of E-Banking in Nigeria

The various forms of e-banking used by Nigerians includes:

  1. Online/Internet Banking: This refers to any
    banking transaction that can be conducted over the internet,
    generally through a bank website under a private profile. These
    transactions include services that are traditionally offered at
    local branches without having to physically visit a branch.
    Customers can perform financial transactions like paying bills,
    transferring money from one account to another, etc.

  2. Mobile Banking: This allows an individual to
    perform the same activities using a smart/mobile phone or a tablet.
    Mobile banking versatility includes using a mobile app, text
    message banking (Unstructured Supplementary Service Data (USSD)).
    Virtually all banks are making their sites more mobile banking
    friendly, via mobile apps and making upgrades to such apps also to
    accommodate the needs of customers.

  3. Automated Teller Machine (ATM): Interaction
    with cash dispensing or deposit machines is perhaps the most used
    form of e-banking in Nigeria and it requires a Personal
    Identification Number (PIN).

Regulatory Bodies and Legal Provisions for E-Banking in

The CBN, the banking sector regulator, is saddled with the
responsibility and power to promote and facilitate the development
of efficient system for settlement of transactions including the
development of the e-payment systems by
2(d) and 47(2) CBN Act, Cap C4 LFN,

Other regulators include Nigerian Inter-Bank
Settlement System (NIBSS)
which inter alia
provides mechanism for same day clearing and settlement of
inter-bank transfers and payments; initiating and developing an
integrated nationwide network for the electronic or paperless
payment, fund transfer and settlement of transactions.

There is also National Information Technology
Development Agency (NITDA),
mandated to foster the
development and growth of Information Technology (IT) in Nigeria
and the Nigerian Electronic Fraud Forum
comprising various stakeholders such as the
law enforcement agencies, payment service providers,
telecommunication companies, banks, etc. The
NEFF is to: educate and inform all banks
and other stakeholders on various electronic fraud issues and
trends; proactively share fraud data/information amongst banks and
service providers to enable prompt responses to prevent fraud
losses; and formulating cohesive and effective fraud and risk
management strategies. The NEFF is also to define key requirements
relating to e-payment security on behalf of the industry.

The Nigeria Deposit Insurance Corporation
supervises banks so as to protect depositors;
foster monetary stability; promote an effective and efficient
payment system and promote competition and innovation in the
banking system.

In order to ensure the protection of customers’ rights in
e-transactions, in 2003 the CBN issued Guidelines on
Electronic Banking in Nigeria (Guidelines)
. The
Guidelines sought to address amongst others: information and
technology standards on security and privacy, monetary policy,
legal guidelines on banking regulators and consumers’ rights
protection, and regulatory and supervisory issues.

Recently, there has been calls to revise the
Guidelines due to its outdated
provisions, given the significant subsequent developments
especially with regards to electronic data.

One of its shortcomings is that the
Guidelines did not provide for sanctions
on proven violations of its provisions. As part of effort to fill
such gaps, in 2015 the Cybercrime
, Prevention,
) (CPPA)
2015 was enacted and specifically imposes duties
on FIs regarding customers’ e-banking protection:
sections 37-40 CCPA. For instance,
section 37 CCPA mandates FIs to put in
place effective counter-fraud measures to safeguard customers’
sensitive information. Any FI that makes an unauthorized debit on a
customers` account shall upon written notification by the customer,
provide clear legal authorization for such debit to the customer or
reverse such debit within seventy-two (72) hours. Failure to
reverse such debit within 72 hours, is an offence; the defaulting
FI would be liable on conviction to restitution of the debit and a
fine of N5 million.

This provision has been reportedly observed more in breach by
FIs. An example is where a customer unsuccessfully attempts to
withdraw money from an ATM, but the customer is debited. There are
instances where a customer writes a letter informing the bank of
the unauthorised debit and the bank tells the customer to come back
in four (4) working days which is approximately ninety-six (96)
hours. There have also been instances of debit reversals taking up
to two (2) weeks or more, in clear breach of the timeline

Further, section
19(3) CPPA
makes reference to the fact that the customers have the
responsibility of proving FI’s negligence, where a financial
breach occurs. This is a herculean task given that the evidence of
proving same is within the control of the bank. It is comforting
that the Consumer Protection Framework
(CPF) 2016 (para. 2.6.1(5)) provides that
if a breach occurs as a result of the bank’s negligence, the
bank has to compensate such customer. With the emergence and
widespread acceptance of e-banking, associated litigation are also
being recorded, especially on unauthorized withdrawal of money from
customers’ accounts.

An example is Agi v. Access Bank
3The Appellant, a
business man, maintained a current account with the Respondent at
its Markurdi Branch in Benue State. The Respondent issued the
Appellant with an ATM debit card. The Appellant activated the card
and changed its number to his own secret PIN and used it
exclusively. On 3rd October 2009, the Appellant
travelled to Onitsha to purchase goods. He drew a cheque of N70,000
payable to himself out of his credit balance of N95,518, but he was
informed that he had no funds in his account. He was further
informed that the money in his account was withdrawn through ATM
transactions at the Respondent`s Fontana Service Station, Enugu.
The Court of Appeal held that where a person has custody of an
item, it implies that the person in custody is in care and control
of it for inspection, preservation and security. In the instant
case, the Appellant`s ATM card was in the Appellant`s custody.

Similarly in UBA Plc v. Wasiu Bakare4 the Respondent paid N140,000 into an
account with the Ijebu-Ode branch of the Appellant bank on
2nd June 2008.The Respondent approached the same branch
two days later (4th June 2008) for transfer of the money
in payment of the school fees of his son, whereupon the Respondent
was informed by an employee of the bank that there was no money in
the account. At the conclusion of trial, the trial court found that
the Appellant failed to substantiate the allegation that it was the
Respondent himself or the person he directly or inadvertently
revealed his personalised PIN to that transferred the money. The
onus of proving PIN misuse was on the Appellant; and this was not
discharged. This case is presently on appeal.

Paragraph 1.5 of
Guidelines on Automated Teller Machine Operations in
Nigeria 2016
(GATMON) makes
it clear that “where the user of an ATM blocks his
image for camera capture, the ATM shall be capable of aborting the
Though this is a laudable
provision, its enforcement is in doubt. There have been instances
where people with head and facial covering have successfully used
the ATM for transactions. How then do we create a measure of
balance in cases of religious and traditional coverings? It would
be apposite to introduce Iris based biometric ATM which is
presumably more secure than the conventional PIN based ATM due to
the fact that it requires biometric verification which is not
easily copied, stolen or cloned. Although it impacts the capital
expenditure of banks, its use in Japan has reportedly curbed
fraudulent activities.5

(para. 2.6.1(4))
addressed the issue where an employee aids in the commission of
such crime by stating that: “Financial
institutions shall enforce disciplinary action against employees
involved in fraud and report same to the regulator. Where required,
the CBN shall blacklist such employee from further employment
within the industry.”
On its own part,
section 20 CCPA
stipulates seven (7) years imprisonment for such an offence.

The Guidelines for Card Issuance and Usage in
(GCIU) made reference to the destruction
of ATM cards in para. 4.5.0 stating that
any trapped card in the ATM shall be rendered
unusable (by perforation) by the Acquirer and returned
the Issuer on the
next working day.
A practical
example is if Mr. A has a card issued to him by Bank Y, and he then
decides to use it in Bank Q’s ATM, if the card gets trapped, he
is required by law to get a new card. Although this move was
necessitated to increase ATM Card’s security, its application
has caused untold hardship on users, given that ATM networks in
most rural areas are weak. Rather, card owners should be allowed to
retrieve their cards after showing means of identification and the
banks can further verify such user through the Bank Verification
Number (BVN) database.

Data Privacy in the Banking Sector

Developments in the area of ICT has made private information a
valuable commodity, which if not carefully protected, can be used
for unlawful purposes. The global financial sector is in possession
of significant customers’ data in respect of their financial
activities especially e-banking transactions therefore leading to a
high risk of these information being breached.6

In 2014, the CBN introduced the BVN and the idea was to have a
unique biometric identity which will be assigned to every account
holder. While this was initiated to reduce cyber-crime, there was
no specific regulation for BVN until 2017 when the
Framework for BVN Operation and Watch list for the
Nigeria Financial System

(FBOWNFS) was issued. Although electronic
fraud is prevalent, it was reported to have drastically reduced by
38% over the last two years.7 The
FBOWNFS provides for security and data
protection of banks customers alongside
CPF`s in Paragraph
in Paragraph 1.8(i -
) states that: “Parties involved
in BVN operations should put in place secured hardware, software
and encryption of messages transmitted through the BVN network; BVN
data are to be stored within the shores of Nigeria and not to be
routed across borders without CBN’s consent; Users of BVN
information should establish adequate security procedures to ensure
the safety of its information”.

The FBOWNFS might be a step in the
right direction for FIs, but there are no specific provisions in
relation to the acceptable eight (8) principles for data
protection.8 An example is the
principle that the institution collecting data should ensure that
it is adequate, relevant and not excessive. Thus, when a customer
is opening a savings account, the FI should not seek employment
information as this will only be relevant if the customer is
seeking credit facilities.

One of the major gaps in FBOWNFS can
be seen in Paragraph 2.3.2 where a bank
is given the option to continue/ discontinue banking with those on
the watch list. Arguably, this should not be the case. Once an
individual’s name appears on such list, then the individual
should not be allowed to transact any business with that bank
whatsoever; and if the person was erroneously put on the list, then
such an individual ought to be adequately compensated. This would
arguably instil due diligence in the banking sector.


The laws and regulations touching on security of e-banking
transaction in Nigeria have to some extent achieved its aim.
Relevant stakeholders (sectoral regulators, FIs, law enforcement
agencies, etc.) and government must forge mutually beneficial
initiatives to stem the tide of fraudulent activities in the
e-banking system. This would further bolster the confidence of many
unbanked Nigerians and could serve as a springboard for
accelerating financial inclusion across Nigeria.


3. [2014] 9 NWLR (Pt.
1411), 121

4. [2017]4 NWLR (Pt.
1555), 318

8. Banking And
Payments Federation Ireland: Data Protection Guide May
states the eight principles which includes
obtaining and processing data fairly, processing it only for one or
more specified, explicit and lawful purpose, use and disclose it
only in ways compatible with the purposes for which it was obtained
,keeping it safe and secured, keeping it accurate, complete and
up-to-date, ensuring that it is adequate, relevant and not
excessive, retaining it no longer than is necessary for the
specified purpose, give a copy of his/her personal data to an
individual on request.

Originally published June, 2018

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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