In a bold move to fight fraud in Nigeria’s financial sector, the Central Bank of Nigeria (CBN) has instructed the Nigeria Inter-Bank Settlement System (NIBSS) to directly debit the settlement accounts of commercial banks that receive fraud proceeds. Effective January 2025, this policy shift places greater responsibility on banks, pushing them to strengthen their fraud detection and prevention measures.
According to industry insiders, this directive is part of the CBN’s broader strategy to enforce stricter compliance measures among banks and fintech firms. Financial institutions that fail to properly screen incoming transactions or detect fraudulent activity will now face immediate financial penalties once such activity is reported.
The new policy is designed to encourage stronger Know Your Customer (KYC) compliance and due diligence protocols, which the CBN has repeatedly emphasized as critical to securing Nigeria’s financial landscape. “This policy means that banks and fintechs are now fully accountable for the funds they receive,” said Adedeji Olowe, founder of Lendsqr. “KYC has always been the foundation of responsible banking, not just in Nigeria, but globally.”
While the official implementation date is January 2025, the directive has been enforced informally since December 2024 when a leading commercial bank suffered a ₦7 billion fraud loss. During that period, NIBSS debiting the settlement accounts of the fintechs involved in processing the fraudulent funds, reportedly without prior explanation.
As regulatory scrutiny intensifies, fintech firms have been under increasing pressure since early 2024 to tighten compliance standards. The CBN and NIBSS have yet to provide official statements regarding the directive, but industry insiders suggest that banks and fintechs will be forced to adopt stricter transaction monitoring mechanisms to avoid penalties
The financial sector’s fraud crisis has reached alarming levels, with Nigerian banks losing ₦42.6 billion to fraud in the second quarter of 2024, according to a report by the Financial Institutions Training Centre (FITC). However, due to concerns over reputational damage, many financial institutions fail to report fraud incidents.
A NIBSS report revealed that in 2023, only 60 out of 163 financial institutions disclosed fraud cases, highlighting the low transparency levels within Nigeria’s banking industry. A banking executive, speaking anonymously due to the sensitivity of the issue, stated; “The CBN is serious about holding financial institutions accountable. If a bank permits a fraudulent transaction to pass through its system, it will bear the financial consequences.”
With this policy now in force, Nigerian banks are taking proactive measures to avoid financial penalties. At least two major commercial banks have reportedly introduced stricter monitoring of high-value or unusual transactions, according to industry sources.
As the CBN’s directive takes full effect, its long-term impact on fraud reduction and financial security in Nigeria will be closely monitored. While the policy is expected to increase consumer confidence, it also places significant pressure on banks and fintechs to revamp their fraud prevention frameworks or risk substantial financial losses.
